Citywide sugary drink tax associated with consumer spending changes
medwireNews: Research shows that a tax imposed on sugar-sweetened drinks sold in the Californian city of Berkeley was largely passed on to consumers, and was associated with reduced sales of the taxed beverages.
Barry Popkin (University of North Carolina at Chapel Hill, USA) and colleagues found that pass-through of the tax to consumers varied among the 26 stores studied, with supermarkets and gas station stores most likely to increase prices, particularly of taxed beverages, whereas independent stores and gas stations did not appear to adjust prices after the tax implementation.
Detailed sales data from two large supermarket chains showed that even in these stores the tax – which was 1 cent per fluid ounce – was incompletely passed through, with the entirety of the increased costs passed to customers for fizzy/soda and energy drinks, but not for other beverages attracting the sugar tax.
The researchers note that this is consistent with findings from Mexico and France, and suggest it “may have been due to confusion on what products were taxed, and how distributors and retailers responded to the tax based on market shares of their beverages.”
Despite incomplete pass-through of the tax, the volume of sugar-sweetened beverages sold in the supermarket chains fell by 9.6% in the 13 months after implementation of the tax, while sales of untaxed beverages rose by 3.5%. This significant effect occurred despite Berkeley having relatively high education and income levels, and low sugar-sweetened drink consumption, by general US standards, making it initially “unclear whether the tax would be high enough to change demand.”
Sales of diet soft drinks and energy drinks fell by 9.2%, despite not attracting the tax, whereas sales of water rose by 15.6%.
Overall store revenue fell slightly during the study period, but by no more in Berkeley stores than in six stores outside of but relatively close to the city, which “appears to belie, at least in the chains studied, beverage industry arguments that such policies will raise grocery bills in general or that they will hurt local business,” Popkin and team write in PLOS Medicine.
However, sales of taxed beverages rose by 6.9% in stores outside of Berkeley, implying a shift toward purchasing outside of the taxed area, although this was not reported in a telephone survey of 613 Berkeley residents.
“When taxes are implemented in very small geographical areas such as Berkeley, shifts in shopping location may be a greater risk,” the researchers observe.
Nevertheless, they say that the tax raised US$ 1,416,973 (€ 1,324,831), or around $ 12 (€ 11.22) per capita, in its first year, which is being diverted into child nutrition and community health programs, showing that such taxes “can provide significant revenue for prevention or other societal goals.”
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