Regulatory repertoire 2023: Five need-to-know policies set to impact the APAC food and beverage sector this year

Singapore’s Nutri-Grade to further inspire sugar reduction​

Singapore’s Nutri-Grade labelling scheme for sugar-sweetened beverages finally made its official debut in December 2022 after several implementation delays attributed to the COVID-19 pandemic.

The scheme, which introduces labels with four different grades - ‘A’ (dark green), ‘B’ (light green), ‘C’ (yellow) and ‘D’ (red), going from lowest to highest sugar content, is mandatory for Grade C and Grade D beverages and has already seen positive impacts in terms of many beverage companies actively reformulating products to cut sugar content.

One of these has been Asian beverage giant Yeo’s which acknowledged Nutri-Grade as an important catalyst towards its efforts to reformulate its entire portfolio to Grade A and B so as to avoid the dreaded Grade C and D labels.

“The pandemic has brought about a renewed focus in dietary and sugar intake with many countries in APAC imposing various forms of measure to mitigate the risks associated with sugar intake such as diabetes – in Singapore, this was the introduction of Nutri-Grade,”​ Yeo’s Singapore CEO Angela Lu told us previously.

All of Yeo's beverages will fall into categories A and B in 2023.

“We have adapted our beverages to include less than 5% of sugar or zero sugar - For example, our Chrysanthemum tea was reformulated to include less and zero sugar versions," ​Yeo's CMO Ang Chong Lee told FoodNavigator-Asia​.

“Cutting sugar altogether works well for herbal drinks, [and] we have also taken the opportunity to enhance our Asian drinks portfolio by using healthy botanical ingredients like wolfberry and luohanguo (monkfruit).”​

The pressure to avoid Grade C and D labels is also high to avoid negative consumer perception, as according to Singapore’s Imperfect Drinks this could have significant influence on purchasing decisions.

“What happens is that when you have a C rating or D rating on the label of the product, what will happen is that a consumer will automatically have a shift in perception of it,”​​ Imperfect Drinks Founder and CEO Andrew Lim told us.

“So what’s likely to happen is that this product, say an orange juice, is going to go from something they thought was very healthy and drinking it daily, to something that they think twice or more times about before they even want to drink it when they see that label.​”​

Suntory, another major household beverage name, concurred with this and stressed that these regulatory influences will increasingly work to accelerate product reformulation and innovation efforts in the region.

“There is mounting pressure to reduce the sugar levels of products sold in APAC, which has led to countries imposing sugar taxes on sugar-sweetened beverages (SSBs),”​ Suntory Beverage & Food Asia Pacific (SBFAP) Chief Supply Chain Officer Alan Smith added.

“This is because diabetes continues to be a growing concern for governments in the APAC region, as according to the International Diabetes Federation, this was responsible for 2.3 million deaths here in 2021 which is the highest across all regions, and the number of people with diabetes in the region is also estimated to increase 27%, to reach 260 million by 2045.​

“[The Nutri-Grade] mandatory scheme for pre-packaged beverages kicked in from 30 Dec 2022, so stepping into 2023, analysts will be looking at how these measures have helped reduced sugar intake in APAC and how that directly affects diabetes and obesity issues.​

“Firms in the beverage industry will thus need to be mindful of these incoming curbs and measures imposed on sugar-sweetened beverages and take forward-looking steps by investing more into research and development to produce healthier, less-sugar beverages and yet delivering the taste that consumers enjoy and are familiar with.”​

Thailand salt taxes not yet enforced but looming pressure catalysing reformulation​

Moving to salt, yet another ingredient commonly perceived as unhealthy if overconsumed, in Thailand discussions over the implementation of taxation for high-sodium foods are still in progress, but the food industry is already fervently seeking out alternative solutions in preparation for this.

The Thai government has been looking to implement salt taxes since 2018, but this was also delayed several times due to the pandemic as well as industry and academic concerns over its technical feasibility.

“Earlier, it was still expected that a high salt tax would be coming in 2021 for certain categories such as instant noodles and snacks, but this was delayed as authorities wanted to be cautious in the implementation,”​ Food Science and Technology Association of Thailand (FoSTAT) Chairman Asst. Professor Anadi Nitithamyong told us.

“So at present there are no regulations yet as things are still in planning, and together both industry and government are looking more closely at other options that might be better such as creating a better environment for consumers to choose and adapt to lower salt products including product reformulation by manufacturers.​

“It is definitely a technical challenge to remove salt as this is needed to provide taste, preservation and shelf life amongst other functionalities, but the reduction is for the sake of public health.”​

That said, she also stressed that taxation is unlikely to be the best way forward as its impacts would be minimal compared to the impacts the government is hoping to make.

“It must be remembered that Thai consumers’ main intake of salt is actually via channels such as street food, foodservice and home cooking – not packaged foods,”​ she said.

“Only 20% to 30% of their sodium intake comes from processed or packaged foods, so only levying taxation on this sector would not make much of a difference.​

“That said, the sector is also working hard at reformulation in preparation for any eventuality, but the reduction of salt use will need to be gradual such that consumers can accept it.”​

Cultivated products see official term set in English, more signs of incoming regulatory approvals​

In 2022 the Asia Pacific cultivated products sector signed a Memorandum of Understanding (MOU) to align on the term ‘cultivated’ as the preferred English-language descriptor for food products grown directly from animal cells.

According to sector representatives from multiple regional bodies - including the Good Food Institute, the APAC Society for Cellular Agriculture, China’s Cellular Agriculture Alliance, Cellular Agriculture Australia, the Japan Association for Cellular Agriculture, and the Korean Society for Cellular Agriculture – this term was chosen as the ‘most effective at fostering consistently positive responses’ from consumers, and is expected to push industry growth to the next level.

“Nomenclature and regulatory harmonisation are vital for the long-term success of the cultivated foods industry and this MOU establishes a regional precedent that can be replicated in other markets around the globe,” ​APAC Society for Cellular Agriculture President Dr. Sandhya Sriram said.

In addition, regulatory processes appear to speeding up for the industry with many cultivated meat and seafood firms having submitted applications for commercialisation in various markets including Singapore, which saw the world’s first approval granted to GOOD Meat in December 2020 for the sale of cultivated chicken.

Flash forward to today, GOOD Meat was also approved for sale in 2022 in a Singapore butchery, moving the sector forward into the retail sector for the first time from an exclusively foodservice environment previously; and another industry leader Upside Foods also made further regulatory progress in late 2022 with a world-first FDA ‘no questions’ letter of approval certifying the food safety status of its cultivated chicken.

“The past two years have certainly shown that from a regulatory perspective the cultivated meat industry has moved from an ‘if’ to a ‘when’,”​ Upside Foods COO Amy Chen told us.

“We [have now shown that] the industry will be able to establish the food safety required, and now it is just the process of getting there, getting to a point where both regulators and consumers feel the most comfortable.​

“Of course we would love for the process to be accelerated, and are eager for the green light so that we can manufacture at scale and more consumers can have access to cultivated meat – but there is also something of a good ‘side effect’ coming from this very long and thorough process, which is that a lot of consumer concerns about safety will already have been addressed once products hit the market. ​

“The thorough vetting process [to attain approval means] that once approved we will already have the answers regarding the data, the safety analyses, the third party reviews, the regulatory certifications and so on to prove that the products are safe and consumers have nothing to worry about.​”​

ASEAN food regulations harmonisation – no more than a pipe dream?​

The harmonisation of food regulations within the South East Asian region was in talks since long before the COVID-19 pandemic hit, and faced severe challenges reaching any sort of consensus even without the current pandemic-induced economical and other geo-political challenges.

Given the troubles of recent times, this harmonisation now seems even further out of reach than before – and indeed industry experts now seem to be lowering their expectations for attaining this.

“At this point, I feel that harmonisation has become too strong of a word to be used here,”​ Prof Nitithamyong said.

“I would say that now what I am hoping for is alignment – reaching that is enough of a challenge in itself, and is very much in the same trend of what we hoped to achieve all along.​

“In order to do this, there needs to be the recognition amongst member countries that each other’s regulations are good enough for certain purposes so we can be aligned in trade terms – going beyond that to harmonisation would need recognition that certain aspects are not good enough [so certain changes need to be made] and right now it would be an enormous challenge to reach that stage.” ​

ASEAN food harmonisation efforts have been in discussion – and in flux – for many years, with official documentation surfacing since as far back as 2013. Unfortunately not much practical progress has been made on this in the past decade, and given the economical and inflationary challenges predicted to have continuous impact on the region in the coming year, it appears unlikely that much more progress will be made in 2023 either.

More price hikes, economic instability expected as a result of EU Deforestation Law​

In September 2022, the European Union (EU) approved its controversial Deforestation Law mandating all companies to ensure goods sold inside the EU are ‘deforestation-free’ and have ‘not been produced on deforested or degraded land’ - essentially banning many products originating from producers without the economic means to afford the EU’s preferred certifications from entry.

Although there have been many protests voiced, particularly by producer countries as well as the palm oil sector, the EU looks unlikely to budge on this stance any time soon, given its strong belief in the sustainability prospects of this regulation.

Though well-meaning, experts now predict that this regulation is likely to culminate in further all-round price hikes for products that contain any of the commodities on the regulation’s ‘hit list’ which includes many common items from palm oil to coffee to cocoa – and consumers are the ones likely to be hit by this.

“​It is highly likely that the deforestation regulation will drive up prices for [the commodities including] palm oil”​ palm oil industry expert and Senior Policy Advisor for the American Association of the Indo-Pacific Khalil Hegarty told us​.

“One major reason for this is the costs of compliance - Although on paper the traceability and due diligence needs to be submitted by European firms to European authorities, it is going to be the producers and exporters that will need to provide that information. ​ ​

“Firms will have to prove that they haven’t deforested and this will take time and money so like any non-tariff barrier, the nature of compliance and regulation which makes trade more difficult is going to drive up costs and consumers will be the ones seeing the impact.​”

“Furthermore, regulation is going to distinguish between high-, low- and no-risk countries for deforestation. Developing and tropical countries that have higher levels of ‘deforestation’ will end up having higher compliance costs compared to EU member countries, or a country like Canada.​

“So for vegetable oil for example, ASEAN palm oil (likely to be considered high-risk) will have to compete with sunflower that is mostly either grown within the EU or in Ukraine (not high-risk) – and ASEAN markets will end up having to pay more as a result.”​

Given the rising costs of food and inflation in many markets, these impacts and instabilities are likely to be felt much more keenly in the coming year as producer markets have to learn to deal with the rising costs of production and possibly losing the EU as a major import destination, consumers to deal with higher food prices, and the EU to potentially have to deal with a loss of stable, affordable commodity import supplies.