In the Minister of Finance’s recent budget speech, Pravin Gordhan indicated that sugar has officially transcended into the realm of “sin”. The penalty for such sin has come in the form of a sugar tax which will be introduced from 1 April 2017.

South Africa is a country with extremely high incidents of heart disease and diabetes and the sinful sweet stuff is one of the primary causes of these public health concerns which are straining our already stretched public healthcare system. A tax disincentivising consumers from buying these products which significantly exacerbate these issues is surely a good thing, right?

However, it is important to note that sugar is now categorised (from a policy and public health perspective) as being in the same class as tobacco and alcohol, both of which are already the subject of heavy sin taxes. In this context a punitive tax measure has typically been the precursor to further and more stringent regulation down the line; aligned in theory, with the related public health policy initiative i.e. disincentivising the consumption of that which is identified as not good for one.

In the context of tobacco, the plain packaging movement has started to pick up momentum globally, sin taxes are now no longer considered a sufficient deterrent, and hence the policy agenda has shifted to purportedly make the products less attractive. Unfortunately there is no concrete evidence that the appropriation of the brand owners’ distinctive trade dress does anything other than make the package plain. However, the policy makers that implement regulation of this nature do so under the rhetoric that they are being pro-active in the fight against self-inflicted public health woes like lung cancer, diabetes, heart disease and so on.

The question that has now been raised by the governments’ new policy initiative with regard to sugar is, “is a similar plain packaging movement the next policy step to follow on the continuum?”  What happens when the sin tax does not deter people from purchasing sugary drinks and, in order to credibly follow through on the wider policy objective, that is mitigating the public health risk, more extreme policies, like plain packaging, are resorted to?

In the context of tobacco, the negative consequences of such reactive policies are that counterfeiting becomes an easier task for scrupulous counterfeit manufacturers, as plain packages are simply easier and cheaper to replicate. Further, counterfeit goods do not enter the market through the traditional channels and therefore are not the subject of VAT and import duty, which in turn are major drivers of revenue for the South African fiscus.

Initial research has been done into the effects of plain packing on sugary drinks and other sugar-laden products and the results suggest that plain packaging on such products could increase rather than decrease consumption, a counterintuitive finding indeed. The finding is based on the premise that “deactivating the marketing components of an unhealthy snack packaging deactivates the inhibition system associated with it”. It suggests that education and public awareness around what is healthy and unhealthy (specifically in relation to sugar) has actually been somewhat effective and by removing branding, our associated concern with regard to these products is mitigated, and may result in consumers actually consuming more of these types of goods.

Of course an entire public health policy cannot be based on any one study, but the evidence suggests that the issues surrounding plain packaging, be it on cigarettes, alcohol or high sugar content items, requires more investigation and study before extreme regulatory steps are taken. These steps may be popular with voters and appear proactive and forward-thinking, but in each instance, there may be severe unwarranted knock-on effects that could lead to other unintended social ills. As suggested above, such knock-on effects may potentially be worse from a public health perspective than the original problem they were implemented to solve.

Ultimately brand owners of products in the “sin” categories need to watch this space as global policy is shifting toward removing their distinctive branding and trade dress in the name of public health. The question that remains unanswered is whether such steps are beneficial or whether they just trade one set of problems for another.

What is clear is that sugar is now officially on the agenda.

Gerald Bourne

Attorney
Trade Mark Department
Email geraldb@kisch-ip.com
Tel +27 11 324 3092