Here’s why UK’s sugar tax spells disaster for Wilmar

It might become a worldwide trend.

Trouble is brewing for Wilmar International (WIL), as legislation against sugary drinks steadily gains traction across the globe.

According to a report by OCBC, the UK is soon joining the growing list of countries taxing excessive sugar levels in soft drinks.

In two years’ time, the UK intends to introduce a levy on sugar-sweetened beverages based on the volume of sugar contained in sweetened drinks either produced or imported into the country. Based on media reports, the levy could increase the price of a 2L bottle of soda by up to 80%.

Other countries that have rolled out similar initiatives include Finland, France, and Mexico; next year, South Africa is poised to unveil such a levy as well.

If the sugar levy becomes a worldwide trend in a bid to cut escalating childhood obesity levels, it could potentially crimp the sugar ambition of sugar producers like WIL.

Meanwhile, OCBC further notes that the recent spike in WIL’s share price may have been a “little too fast, too furious” based on current fundamentals.