The global beverage industry is undergoing a seismic transformation as more countries adopt sugar taxes. With 117 countries and territories—representing over half of the world’s population—now taxing sugar-sweetened beverages (SSBs), companies like Coca-Cola and Pepsi are racing to expand their zero-sugar portfolios, while demand for alternative sweeteners is soaring.
The World Health Organization (WHO) has been urging governments to implement sugar taxes since 2016, citing obesity and type 2 diabetes prevention. In 2023, the WHO launched its “3 by 35 Initiative,” which calls for member states to increase the real prices of tobacco, alcohol, and sugary drinks by at least 50% by 2035. The agency estimates such measures could prevent 50 million premature deaths and generate $1 trillion in additional revenue over the next 50 years. WHO Assistant Director-General Jeremy Farrar described health taxes as “one of the most efficient tools” available, cutting consumption of harmful products while creating resources governments can reinvest in healthcare, education, and social protection.
The United Kingdom’s Soft Drinks Industry Levy (SDIL) is often cited as the most successful example of this approach. Introduced in 2018, it imposed tiered rates based on sugar content, prompting companies to reformulate their products rather than pass the tax on to consumers. Within three years, sugar content in taxed beverages dropped 46%, while low- and no-sugar drinks gained an 89% market share. Mexico, which pioneered a nationwide sugar tax in 2014, saw sugary drink sales fall 7.6% within two years, with the steepest declines among low-income households. In the United States, research covering five cities showed that two years after taxes were imposed, sugary drink prices rose by 33% and sales fell by nearly the same margin.
Contrary to early predictions of collapse, the beverage industry has used these regulations as a catalyst for reinvention. Coca-Cola’s Zero Sugar line has become its strongest growth engine, posting a 14% global sales increase in the second quarter of 2024. The company also streamlined its portfolio, cutting 200 underperforming “zombie brands” and redirecting resources to high-potential categories. Its quarterly results showed 5% organic revenue growth and a 34.7% operating margin. Pepsi has also leaned heavily into its zero-sugar offerings, recording $22.7 billion in revenue in the same quarter and launching global campaigns such as the “Pepsi Zero Sugar vs. Coke Zero Blind Taste Test.” Both companies now openly state that low- and no-sugar products will be the future of their growth.
This industry-wide shift has sparked a boom in the alternative sweetener market, which is projected to grow from $27.2 billion in 2024 to $42.6 billion by 2032. Natural sweeteners such as stevia, monk fruit, and allulose are at the forefront of this trend. Mergers and acquisitions have further concentrated the market: Ingredion acquired PureCircle, the world’s largest stevia producer, while Tate & Lyle bought Sweet Green Fields. These companies now dominate not only production capacity but also key patents covering extraction, refinement, and taste-masking technologies. Allulose in particular is seen as a “game-changer,” delivering 70% of sugar’s sweetness with virtually no calories and excellent baking properties. Approved for use in the United States, Japan, and South Korea, production is limited to a few firms, notably Samyang in Korea and Matsutani in Japan. Monk fruit, by contrast, faces geopolitical risks as most supply originates in China, making it vulnerable to trade disputes.
Investors have taken notice. Venture capital is flowing into food-tech startups focused on synthetic biology and precision fermentation to produce novel sweeteners and rare sugars. Global investment in synthetic biology startups reached $6.9 billion in 2023, and Wall Street firms such as Morgan Stanley and Goldman Sachs are flagging the sector as one of the most promising investment themes for the next five years.
South Korea remains one of the few advanced economies without a sugar tax, despite strong public support. Nearly 60% of respondents in a 2023 survey said they favored the measure, and more than 80% supported tobacco-style health warnings on sugary foods. Industry resistance has stalled legislation, but companies are moving ahead on their own. Lotte’s Chilsung Cider Zero sold 100 million cans in its first year, while HiteJinro launched Terra Zero beer sweetened with allulose. On the supply side, Samyang has built Korea’s largest allulose plant, with annual capacity of 13,000 tons, while Daesang has also begun large-scale production.
From London to Mexico City, evidence shows sugar taxes reduce consumption. Instead of sinking the beverage industry, they have pushed companies toward healthier, more profitable portfolios while creating a booming market for alternative sweeteners. As the WHO intensifies its campaign and investors pour money into biotech-driven food innovation, the future of the global beverage sector looks increasingly sugar-free.
JULIE KIM
US ASIA JOURNAL
