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These new taxes may be great for your health but bad for these stocks

The share prices of alcohol, sugary products and junk food companies may come under pressure on a new medical report that found taxing unhealthy foods is not only great for your health but is good for the public hospital system too.

It’s sacrilegious to impose new taxes in this country and God be with the brave politician who would dare hint at this, but a report in The Lancet medical journal and carried on Bloomberg found that booze and sugar taxes push consumers to make healthier choices – and it’s the poor that benefits the most!

This is particularly important because it means that the wealthy will carry most of the impost of the new taxes, which can be funnelled into public health system which the disadvantaged are more reliant on. Talk about an equitable redistribution of wealth!

This double benefit will no doubt be vehemently attacked by lobby groups representing commercial interests linked to these industries and will be a drag on the likes of Coca-Cola Amatil Ltd (ASX: CCL), a company that is trying hard to expand further into healthier drink options as it battles declining sales of soda, and Treasury Wine Estates Ltd (ASX: TWE).

But our listed fast food groups like KFC franchisee Collins Foods Ltd (ASX CKF) and pizza chain Domino’s Pizza Enterprises Ltd. (ASX: DMP) should also be nervous for two reasons. Consumers do tend to consume sugary drinks when chomping on such foods and the research could prompt legislators to consider expanding the tax to include artery-clogging junk foods to discourage the poor from eating these foods.

The research looked at data from several countries like India and Chile and found that such taxes had little impact on the habits of wealthier consumers but had a significant impact on the less well off.

For instance, consumption of soft drinks fell 17% in Mexico when a soda tax was introduced. Parents like me with teenage kids rejoice!

It is also noteworthy that the United Kingdom is about to trial a sugar tax on Friday, although I am not holding my breath for Australia given how close the federal election is.

Any party even hinting of a new tax (on booze in particular!) is likely to be slaughtered at the ballot box. The earliest health advocates can hope for such a policy is probably 2020.

It’s rare times like these that China’s political system of one-man-rules-forever seems to have a small edge over ours.

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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Coca-Cola Amatil Limited and Treasury Wine Estates Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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