Danish excise duties on confectionery, ice cream and soft drinks have been raised in 2013, making it "very difficult" to be a Danish food and drink company, according to leading domestic confectioner Toms.
In Denmark, there are excise duties on chocolate, candy, ice cream and soft drinks - commonly referred to as a “sugar tax” – intended to curb obesity. The excise levy is not to be confused with the Danish “fat tax” placed on foods high in saturated fats that was introduced in 2011 but scrapped last year.
The “sugar tax” is based on the weight or volume of the product and not on the content of sugar. The current rates are DKK 24.61 (€3.57) per kilo of chocolate and sweets, DDK 6.61 (€0.89) per litre of ice cream and DKK 1.64 (€0.22) per litre of soft drink.
Jesper Møller, managing director of Toms Gruppen, Denmark’s leading confectioner, said: “It is making it very difficult to be a Danish producer…From what we produce in Denmark, the government gets a lot of revenue.”
He said the levy has led to higher prices for consumers who were tempted to travel across borders in search for cheaper options and had incentivised companies to move production volumes out of Denmark.
Scandinavia’s largest confectioner Cloetta recently reported a 20% fall in earnings for 2012 and cited the “sugar tax” in Demark as a contributing factor.
Three levy hikes in four years
The Danish tax on chocolate and candy was introduced in 1922 and has undergone three hikes in the past four years.
In 2010, it was upped from DKK 14.20 (€1.90) to DKK 17.75 (€2.38) per kilo and a reduced rate of DKK 14.20 (€1.90) was introduced for products containing less than five grams of sugar per kilo.
In 2012, the levy on chocolate and candy was raised again to DKK 23.75 (€3.18) or DKK 20.2 (€2.71) for low-sugar products and again in 2013 to DKK 24.61 (€3.57) or DKK 20.93 (€2.81) for low-sugar items.
There was a proposal last year to extend the levy to other products high in sugar, but the proposal was never introduced in parliament.
Price increases to offset levies
According to Euromonitor International, Danish consumers have been putting less in their baskets and are buying smaller portions, leading to volume sales declines in levied categories such as ice cream and confectionery, which have also seen higher unit prices.
Møller said that all companies, big and small, had been forced to add the cost of the levy to the retailer invoice, which affected relationship with retailers wanting to have low price points and ultimately hit the consumer.
He said that the high prices stimulated consumers to import cheaper options themselves from Germany and Sweden.
Møller added that the more difficult the home market became for Danish food and drink manufacturers, the more firms would look elsewhere to increase volumes.
In April last year, Toms concluded a lease of a 10,000 m² facility in Leszno, Poland, to wrap chocolate products for the Danish market and for export.
Møller added that the levy had been a factor in flat Danish exports sales and a leakage of industrial production jobs to Germany.
Toms had lobbied for a discounted 15% discounted levy for products that contain less than five grams of sugar per kilo. “We argue that’s not enough,” said Møller.
Toms recently launched wine gums and licorice that substituted sugar with stevia and fibres. Møller said these types of products were much more expensive to produce and consumers would get around 40% less volume per kilo, and would pay substantially more for the privilege.
Reformulating chocolate is also a challenge since fat remains even after sugar is removed, he added.
He said there should be more incentive to produce products with reduced calories.