The UK Government is currently consulting on the potential extension of the Soft Drinks Industry Levy (SDIL) to include milk-based and milk substitute drinks. This move addresses the rising concerns regarding sugar consumption and its effects on public health.
What is the Soft Drinks Levy?
Introduced in 2018, the Soft Drinks Levy imposes a tax on pre-packaged sugary drinks containing at least 5g of sugar per 100ml. Specifically, drinks with sugar content ranging from 5 to 7g incur a standard rate of 18p per litre, while beverages with 8g or more are charged a higher rate of 24p per litre.
Remarkably, the scheme has achieved a 46% reduction in sugar content across its regulated beverages. Government analyses reveal that about 89% of soft drinks have managed to avoid the tax by reformulating their products.
Why Target Milkshakes and Lattes?
While the government acknowledges the nutritional benefits of plain milk, it recently expressed the need to reassess the impact of sugary pre-packaged milk-based drinks and alternatives on Britain’s obesity crisis. Initially, milk-based drinks were excluded from the tax due to concerns about calcium intake, especially among children. However, current Treasury data indicates that young people derive only 3.5% of their calcium intake from these drinks.
“It is also likely that the health benefits do not justify the harms from excess sugar,” stated the Treasury. “By bringing milk-based and milk substitute drinks into the SDIL, the government could create a tax incentive for manufacturers to enhance existing efforts to reduce sugar levels in their products.”
Should this initiative move forward, the Government estimates that approximately 203 pre-packaged milk-based beverages, which represent 93% of sales in this category, would be affected unless manufacturers adapt their formulas.
Coffee Community’s Response
Yusuf Amanullah, founder of Unconform Coffee, which recently launched a range of vegan cold brew ready-to-drink beverages, views this move as a positive step. “For too long, many mainstream iced coffees have disguised themselves as modern energy drinks, when, in reality, they resemble coffee milkshakes filled with hidden sugars,” he noted.
“Maybe it’s time that coffee producers consider more ‘ingredient considerate’ processes, which yield smoother flavors requiring fewer sweeteners. The method of soaking coffee beans for cold brew, as opposed to cooking them, results in a remarkably smooth flavor that only needs a trace of natural sweetener,” he added.
“At Unconform, we support the functional food and drink movement, which ensures modern beverages deliver positive outcomes. Sugar dependency feels like yesterday’s news!”
Skinny Food Co, another ready-to-drink coffee producer, has similarly voiced support for the proposed initiatives.
“We at The Skinny Food Co endorse initiatives that promote healthier choices. Our existing range of Skinny Lattes—and our forthcoming Milkshake Shots—are entirely sugar-free, providing consumers an easy and affordable way to enjoy indulgent flavors without the added sugar. For those looking to bypass the potential tax while savoring their favorite drinks, our offerings present a convenient alternative.”
Jonny Gagel, head roaster at Pact Coffee, added: “At Pact Coffee, nothing surpasses the taste of high-quality specialty coffee. If you find yourself adding 4g of sugar to every 100ml of your ready-to-drink can, it likely indicates inferior coffee quality. We previously ventured into the ready-to-drink market without introducing artificial flavors or sweeteners, proving brands can produce ready-to-drink options without excessive sugar while meeting the new levy requirements. A commitment to quality coffee is essential.”
Is the Lower Sugar Threshold Necessary?
The consultation will also evaluate the possibility of lowering the minimum sugar content threshold to 4g. Notably, over two-thirds of this market (73%) already operates below this threshold, suggesting the change could capture an additional 17% of sales volumes.
Julian Atkins, managing director at Global Brands—owner of brands like Franklin & Sons and Hooch—welcomed the opportunity for consultation but emphasized that reducing the threshold is unnecessary. “We strongly believe the proposed changes to the Soft Drinks Industry Levy (SDIL), particularly the reduction from 5g to 4g, should be reevaluated. HFSS currently mandates a sugar limit of 4.5g per 100ml for beverages. Thus, it would be prudent to align the SDIL threshold with HFSS to offer a consistent standard for drinks producers across both regulations.”
“Producers have already invested significant time and resources in reformulating their products to meet the 4.5g HFSS limit. If the Government decreases the SDIL threshold to 4g while HFSS remains at 4.5g, all these efforts and investments will be in vain, forcing producers to undergo another round of costly reformulation, including changes to packaging and labeling.”
“This decision comes at a time when the drinks industry is already facing challenges from additional legislation, including the EPR (Extended Producer Responsibility) packaging tax, increased National Insurance contributions, and reduced business rates.”
The consultation will close on 21 July 2025.
