A consumer backlash has wiped tens of millions of dollars off the value of soft drink sales at Australia's major supermarkets, with demand plunging amid growing concern that sugary drinks are a major cause of diabetes and obesity.
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Should Australia get a sugar tax?
A soft drink tax is likely to make us less fat and might even help an ailing budget, but what will it do to price? The Age's Economics Editor Peter Martin explains.
Confidential scan data obtained by Fairfax Media reveals soft drink sales slumped 2.9 per cent in volume last financial year across the aisles of Coles, Woolworths, Foodworks and IGA supermarkets, reversing almost a decade of constant growth in the sector. The fall cost the major retail chains an estimated $80 million of lost sales.
According to global market intelligence company IRi, which has access to scan data taken directly from supermarket registers, 91 of the 182 supermarket grocery categories were in decline last year. IRi's report, sent to the major supermarkets and suppliers, does not quantify the dollar amount, but confirms the fall in soft drink sales made up one-fifth of all lost revenue across those 91 categories recorded by the big chains.
"Unprecedented negativity exists amid concerns that soda consumption is a big contributor to poor dietary habits and weight gain," wrote IRi in a report to clients.
The report notes that "public health messages commonly encourage people to abandon sugar-sweetened drinks" and "negative growth in bottled and canned soft drinks reflect the persistently challenging market conditions confronting soda suppliers".
Obesity is a major health problem in Australia, and increases a person's risk of developing type 2 diabetes, heart disease and cancer. About 28 per cent of Australian adults are obese, with a further 36 per cent classified as overweight. About 7 per cent of Australian children are obese.
The stunning reversal in soft drink sales follows four consecutive years of growth in the sector, which was worth $2 billion a year to the major supermarkets as recently as 2014.
The findings of the IRi report were supported by a senior industry figure. "You will see a major shift to sugar free-drinks and pushing of branded water in the next 12 months from the soft drink industry, and a major lobbying and PR push from the sugar industry," said the executive, who did not wish to be named.
The news is particularly bleak for the sugar industry. According to IRi's data, which is used by Australia's supermarkets and suppliers, five of the biggest "growth drainers" on supermarket shelves contain large amounts of sugar. Year-on-year sales of grocery categories bread and bakery snacks, longlife juice and drinks, breakfast cereals and muesli bars have all fallen significantly.
The fall in soft drink sales follows a number of scientific reports, health campaigns and documentaries that have exposed the negative health implications of adding refined sugar to food and soft drinks. A report prepared for the Grattan Institute found about 10 per cent of Australia's obesity problem is due to soft drinks, and roughly half the added sugar consumed by teenagers comes from drinks.
In 2014, actor and filmmaker Damon Gameau produced the documentary That Sugar Film, highlighting the health effects of sugar in processed foods. It is the most successful documentary in Australian history, having screened in 35 countries.
Gameau said he was "very delighted" to hear of falling soft drink sales. "We have heard rumblings about this, but to have something concrete is just brilliant," he said. "A legion of people, from health professionals to scientists, have worked for years to highlight the dangers of sugar. We played a very small role in taking their message a bigger audience. To get news like this is testament to their hard work." 
Stephen Duckett, the former secretary of the federal Department of Health who oversaw the Grattan Institute report, also welcomed the news. "If this data holds up over time, then this is a really good development," he said. "Sugary drinks contribute 20 per cent of the obesity burden in Australia, so this would mean that many thousands of people would be positively impacted in terms of their health."
In addition to the documented health concerns caused by high sugar consumption, obesity is also a significant cost to taxpayers. The obesity epidemic is estimated to cost the Australian economy between $8.6 billion and $9.7 billion a year.
Of that, welfare payments alone are estimated to be $392 million a year higher due to obesity. According to the Grattan Institute report, obese people can get the disability support pension if conditions linked to obesity impair their ability to work, and are more likely to be unemployed and receive the Newstart Allowance.
The Grattan Institute last year called for a sugar "supertax" in Australia, claiming it would add $520 million to the federal budget and cut consumption of sugary drinks by 15 per cent.
In the United Kingdom, a similar sugar tax has been drafted to help curb childhood obesity.
Losses for major players in the soft drink industry have been offset as consumers switch to bottled water.
IRi reports supermarket water sales are up 8.8 per cent on last year.
Twitter: @hawthornemark
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