In many parts of the world, sugary drinks are getting cheaper in real terms. The World Health Organization (WHO) says that governments aren’t taxing them enough to tamp down consumption.
That could sound like a narrative purely about public health. It isn’t.
This is also a policy story for investors that can change the market share of drinks, especially for big companies such as Coca-Cola and PepsiCo. This is because the new tax game is becoming increasingly focused on one thing: sugar.
The WHO said that in 2024, drinks containing sugar were more affordable in 62 countries than they were in 2022, Reuters reported. In another study, the agency also said beer affordability increased in 56 other countries during the same period.
The WHO’s plan is simple: Raise “health taxes” to make these beverages cost more. Its “3 by 35” campaign asks governments to use taxation to raise the prices of sugary drinks, alcohol, and tobacco by 50% over the next 10 years. The WHO thinks this could generate $1 trillion by 2035.
Affordability of sugar-sweetened beverages and beer: numbers at a glance
- 62: Number of countries in which sugar-sweetened drinks such as soda were more affordable in 2024 than in 2022 (Source:World Health Organization)
- 56: Number of countries in which beer was more affordable in 2024 versus 2022 (Source:World Health Organization)
- 50%: The amount by which WHO proposes to raise the prices of sugary beverages and beer, through taxes, over the next 10 years (Source:World Health Organization)
- $1 trillion: The income WHO’s recommended taxes are expected to generate by 2035 (Source:World Health Organization)
The question in the market isn’t just “Will taxes go up?”
It also depends on how governments set up the tax collection process and whether it offers an edge to big brands that can adapt quickly.
PepsiCo and Coca-Cola may be in the crosshairs as governments crack down on sugar.
Taxes on soda impact consumption
The WHO says that the cost of unhealthy drinks is the most important issue. If taxes don’t keep up with wages and prices, it gets easier to buy such beverages and harder to stop people from consuming them.
In the U.S., although there are currently no state-level excise taxes on sugar-sweetened beverages, a few cities do levy them, including Boulder, Colo., and Washington, D.C., as well as Philadelphia, Seattle, and San Francisco, according to the Tax Policy Center of the Urban Institute & Brookings Institution. In addition, a Boston University School of Public Health study demonstrated that these local taxes effectively decreased consumption.
Still, there’s another layer to consider. Reuters says the WHO touts health taxes as a fund-generating strategy at a time when public debt is rising and development aid is falling.
That’s important, because “budget math” can speed up policy.
When I’ve looked at consumer staples equities over earlier regulatory cycles, the major changes don’t usually come from the headline itself. The true impact comes from how the rules are set up and whether businesses can handle demand in their portfolios without losing customers.
Trend toward more specific soda taxes could be key for PepsiCo and Coca-Cola
Many individuals still perceive soda taxes as crude instruments, akin to a one-time fee per bottle.
But policy is moving toward something more specific: taxes based on how much sugar a food or beverage contains.
An excise tax is usually added to the price of goods on the shelf after being charged to the producer or importer. Companies have a strong reason to change their recipes so that drinks fall into lower-tax groups when the excise tax is based on sugar grams.
Two recent examples show what the policy will do.
The sugar tax in the UK is increasing
Beginning in January 2028, the UK will stop giving pre-packaged milk-based drinks like bottled milkshakes and milky coffees a break from the sugar tax, Reuters indicated.
The government will also lower the threshold (from 5g to 4.5g per 100ml) for the amount of sugar a drink must contain before the tax kicks in, The Guardian reported. Starting in 2028, the measure is expected to bring in up to £45 million ($59 million) a year.
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The Guardian added more information that helps investors understand how it works: The tax is based on how much sugar is in the drink, with the rates ranging from 18p to 24p per liter.
This is key, because it shows that a “health tax” can be a reliable source of income, not just a one-time test of a policy.
The UAE just changed its tax brackets to sugar-based ones in 2026
The UAE is a good example of the tax-design transition, since it just switched from a flat excise tax to a sugar-tiered scheme.
The KPMG report says that starting on Jan. 1, sweetened drinks will no longer face a flat excise tax rate. Instead, they will have sugar-based categories. For low sugar, it will cost 0 AED per liter; for moderate sugar, it will cost 0.79 AED per liter; and for high sugar, it will cost 1.09 AED per liter.
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The UAE Ministry of Finance explained the model in a similar way, saying that the rates were based on how much sugar was in 100ml.
The UAE Federal Tax Authority made the limits very clear:
- Less than 5g of sugar per 100ml is taxed at zero.
- Moderate sugar level of 5g to less than 8g per 100ml faces a tax of 0.79 AED per liter.
- High sugar level of 8g or more per 100ml is taxed at 1.09 AED per liter.
Investors should pay attention to this pivot.
Excise taxes on sugar don’t just lower demand. They can also change people’s preferences by making them seek options with less sugar, and they can put pressure on competitors that don’t have the money to quickly change their products.
What sugar tax developments might mean for beverage stocks in 2026
Coca-Cola is the best anchor to consider, since governments are focusing on sugar grams instead of just “soda” as a category. Coke has established a portfolio that can keep customers in-brand as laws get stricter.
Coca-Cola said that in the third quarter of 2025, net sales rose 5% to $12.5 billion, organic revenue rose 6%, and price/mix rose 6%. The company also reported that Coca-Cola Zero Sugar sales climbed by 14% in all of its business areas.
These patterns are noteworthy because taxes on sugar might have two effects.
A defensive outcome might be that customers stay in the category but switch to smaller packs and products with less sugar. In a competitive environment, taxes act like a fixed cost by sugar band, putting pressure on cheaper high-sugar goods and giving companies that can quickly reformulate a bigger edge.
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PepsiCo is following the same path. It shared in a press release that sales of Pepsi Zero Sugar were up more than 30.8% year to date in 2025. This shows that the top companies recognize the same trend toward “less sugar” in both policy and customer behavior.
In the past, these levies have been shown to alter behavior. A BMJ study on Mexico’s soda tax found that people bought roughly 6% fewer charged beverages in 2014 than they would have without the tax.
A UK study on the Soft Beverages Industry Levy also found that the legislation led to people buying drinks with less sugar, even through reformulation.
Sugar taxes: what to watch next
- Whether countries start using sugar-tiered excise plans instead of flat taxes
- Whether earnings calls start addressing product recipe adjustments and “lower bands”
- Whether mix and price can compensate for any volume impact at Coca-Cola and PepsiCo as restrictions on sugar-sweetened beverages tighten