The UK government announced two key changes to its soda tax last week. The lower threshold the levy kicks in at will be reduced from 5g sugar per 100ml to 4.5g sugar per 100ml. Meanwhile, milk-based drinks will now be included in the tax.
Reformulation, of course, is not easy: it’s a time consuming and costly exercise. But there are three bright spots. Firstly, businesses have until 2028 until the new rules come into play: giving them time to explore and test new recipes, products and formulations.
Secondly, support is available: much of the work needed is likely to qualify for R&D tax credits from the government.
And finally, R&D done today will set portfolios up for the future: as consumer expectations continue to evolve to demand healthier, better-for-you products.
Drive for reformulation
The UK introduced its Soft Drinks Industry Levy in 2018. Having announced its plans two years before, manufacturers reformulated many SKUs to avoid the tax.
And that’s been the key selling point of the levy: rather than being an instrument for gathering revenue, the aim has been on encouraging manufacturers to reduce sugar content and encouraging a shift change in the industry.
But behind the scenes, the R&D reality is far more complex than swapping sugar out for a like-for-like alternative.
Reformulation triggers a cascade of new ingredients, new processes - and new risks. Sourcing functional alternatives and redesigning processes all require significant technical investment.
“A reduction from 5g to 4.5g of sugar per 100ml may sound small: it’s just half a gram, which is about an eighth of a teaspoon,” explained Delphine Malarde, Manager and Food & Beverage Lead at innovation consultancy Ayming.
“But the significance lies not in the number itself, but what that number unlocks.”
Beyond the beverage
The reduction of the threshold exposes more products to the levy (see a calculation of the impact here).
Many British beverage manufacturers are frustrated that – having reformulated in the run up to the levy’s introduction in 2018 – they now have to go through the whole reformulation process all over again.
And the extension to milk-based drinks means that a whole host of new products will be subject to the levy: including milkshakes, RTD coffee, plant-based alternatives, yogurt drinks, and pre- and pro-biotic drinks.
But the sugar tax also has a large role to play in awareness.
“The proposed changes aim to shift public perception: sugar isn’t just in fizzy drinks,” explained Malarde.
“Many people associate sugar with sodas, not with their drinkable breakfast yogurt or that familiar probiotic yogurt shot you reach for during the winter. These are everyday items - often seen as healthy - but many sit well above the new sugar threshold.
“The levy extension is about raising awareness of where sugar really sits in our diets, and in doing so, it applies pressure to reformulate. That awareness is valuable.
“But reformulation is rarely straightforward, particularly as consumer demand has not fully caught up. Using the probiotic shot example: there is a level of satisfaction in that smooth, sweet, milky flavor. Most consumers are not quite ready to switch to the natural taste of fermented milk, which can be sour, bitter, slightly sparkly, and more viscous.
“This is where the challenge lies: manufacturers are being asked to balance health targets with taste expectations. That balancing act requires innovation and solutions that can bridge both worlds.”
“Nobody wants a biscuit that disintegrates before it reaches their tea, but without sugar, that’s exactly the kind of challenge teams are wrestling with”
The R&D challenge
The good news, of course, is that innovators are not starting at zero.
Manufacturers now have a wealth of alternative ingredients and processes to choose from, which all help reduce sugar while maintaining flavor, texture and shelf-life.
But these alternatives come with trade-offs; and will react differently in different products or concentrations or with other ingredients.
Sugar, explains Malarde, is not just about sweetness.
“Sugar plays multiple roles beyond flavor. In drinks, it contributes to sweetness balance, mouthfeel and viscosity, flavor release and aroma, and shelf-life and microbial stability.
“To achieve the same key aspects with reduced sugar, alternative ingredients or processes will need to be introduced such as sweeteners, stabilizers, thickeners.
“But these substitutes can behave very differently in the product, affecting texture (some milk drinks may feel thin or watery), taste profile (sweeteners can introduce aftertastes or mask other flavors) and stability (for example, separation or sedimentation over shelf life).”
'No quick fix' in dairy reformulation
Sugar in milk-based drinks is not just about taste. It also contributes to viscosity, shelf-life, and overall sensory experience. Reformulating these products means altering that balance, and often introducing sweeteners, stabilisers, and thickeners to compensate.
However, there's 'no quick fix' in dairy: new ingredients must be tested for how they interact with mlik-based products and how they affect the taste and quality consumers expect.
Consumers, however, will still expect the same taste and experience.
And they also have expectations when it comes to cost.
Product developers need to consider how (and if) new innovations can be scaled up on mass. Are ingredients available at scale? Are they more expensive? And if so - will consumers absorb the price increase... or not?
To reformulate or not to reformulate: That is the question
“Some manufacturers will reformulate, particularly in categories aimed at families and younger consumers, where affordability matters and raising prices isn’t an easy option,” says Malarde. “In those cases, the pressure to innovate is real, as companies work to reduce sugar while keeping products accessible.
“But reformulation comes with trade-offs. Sugar is not just about sweetness, it plays a key role in texture, shelf-life, and overall product experience. For brands focused on clean-label values - simple, recognisable ingredients with minimal processing - replacing sugar may mean compromising on the very principles that define their products.
“In those cases, some may choose to pay the levy rather than change the recipe.”
A new shift towards reformulation creates an opportunity for innovation. Beverage brands who want to dodge the sugar tax will be spurred into action: devoting more time and effort to reducing sugar.
R&D is costly: but Malarde notes that, for UK businesses, this shouldn’t necessarily be a deterrent as support is available.
“R&D tax relief is a UK government incentive that allows companies to recover a portion of the costs they incur while addressing technological challenges, such as reformulating a product to meet new nutritional targets without compromising quality,” she explained.
“In this context, companies undertaking sugar reduction projects may be eligible to claim back a share of their R&D costs as a cash credit paid by HMRC.”
Eligible costs can include staff time spent of reformulation trials and development work, as well as the sensory testing and iterative development aimed at achieving the right texture, flavor and shelf-life. The ingredients and utilities (energy and water) used in test production could also be eligible.
“This relief can make a meaningful difference,” said Malarde. “Reformulation often involves trial and error , and this incentive helps offset the cost of experimentation, encouraging businesses to test new ingredients and processes, even if not all attempts succeed. It’s a practical way to support innovation in response to evolving consumer and regulatory demands.”
A long journey
The extension of the UK’s sugar tax has brought the challenges of reformulation to the fore. Reformulation ultimately requires time, patience, research and trade-offs. While science teams might think they’ve created the drinks of the future, how consumers react is not always predictable.
Fermented profiles are gathering pace – and concepts like gut health are pushing consumers towards dairy products or fermented products. But tastes have been adapted to sweet profiles for decades: consumers aren’t necessarily ready to embrace new flavors without a little bit of sugar to make them more accessible and akin to what they’re used to.
“If we want to see long-term, sustainable change, consumer preferences need to evolve too,” says Malarde. “Until then, R&D will continue walking the tightrope between health targets, functional requirements, and taste expectations.”
