IS THE EU SUGAR POLICY REFORM LIKELY TO INCREASE OBESITY?

National Health authorities recommend a decrease in the consumption of ’added’ sugar. At the same moment, a reform of the Common Organisation of the Sugar Market will lead to a decrease by more than 30% of the sugar price in the EU. Using the example of the soft drink industry, this paper investigates the impact of that reform on the consumption of sugar sweetened beverages. Because the soft drink industry as well as the retail industry are both highly concentrated, using structural econometrics model, we first estimate models of vertical relationships between the beverage industry and the retail industry. After selecting the ’best’ model of vertical relationships, we then simulate the impact of the decrease in sugar price on prices and consumption for different categories of consumers. We also study the impact of setting taxes on soft drink as it was recently proposed in order to counterbalance the impact of the sugar policy reform. Using French data on the Soft Drinks purchases, we find that this reform could decrease prices by 5% and increase market shares of regular products by 8% that would rise the consumption of regular soft drink by more than 1 liter per year and per person. The increase in per person consumption is larger in households composed of overweight and obese individuals. A tax of 6 cents on high sugar content products and 3 cents on low sugar content products might more than annihilate the effect of the sugar price decrease. In average, the combination of the sugar policy reform and the additional tax might provoke a decrease in the average consumption of regular soft drinks by and would fall the consumption of regular soft drinks by about 1.9 liters per person. The policy reforms have also some impact on the demand of diet products as there is some substitution between regular and diet products.vertical contracts, two part tariffs, competition, manufacturers, private labels, retailers, differentiated products, soft drinks, non nested tests, sugar CMO, passthrough, Agricultural and Food Policy, Consumer/Household Economics, Demand and Price Analysis, Food Consumption/Nutrition/Food Safety, Food Security and Poverty, Health Economics and Policy,