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April 19, 2017 | 3 minute read

Taxing sugary drinks leads to fewer sales, spurs more water purchases

There’s been a lot of news about taxing sugar-sweetened beverages as one way to improve people’s health and raise revenue that could be used for anti-obesity initiatives or other community programs. While controversial, many public health experts think this could be one way to encourage people to consume fewer sugary drinks and therefore help curb obesity in kids and adults.

AICR recommends avoiding sugary drinks because evidence shows they link to weight gain, overweight and obesity. Obesity increases risk for 11 cancers, including colorectal, pancreatic and endometrial, so strategies that help reduce Americans’ sugary drink consumption play an important role in cancer prevention.

Berkeley passed a penny per ounce tax on sugary beverages in 2014.

In the past couple of years several cities in the US have implemented these taxes. Now one study from Berkeley, California, found that a penny per ounce tax on these drinks led to fewer purchases of sugary beverages, but spurred sales of other drinks, especially water.

In the study, researchers gathered information both before and after the tax implementation on store price, supermarket sales, and individuals’ diet and shopping habits. For this Berkeley tax, it’s the retailer who pays up front. That cost is designed to be added to the price of the beverage – not as a tax added at the check-out.

The researchers wanted to know if the sugary drink prices actually did increase at Berkeley stores compared to those in nearby cities, whether Berkeley stores saw a difference in types of drinks sold, and how the tax affected their revenue from drinks.

The study found that costs of sugary drinks increased in most supermarkets about two-thirds of a cent per ounce. That would make a 12 ounce can of soda cost about 7 cents more. There were no price changes in non-sugary drinks.

The study authors obtained store scanner data from 15.5 million checkout receipts to determine beverage price, sales and store revenue.

After a year, the supermarket data showed that retailers sold 10% fewer of the sugary (taxed) drinks than the previous year. These supermarkets saw a 16 percent increase in water purchases. In the comparison stores (outside of Berkeley with no taxes), sales of sugary drinks increased by 7 percent.

Researchers also randomly surveyed Berkeley residents to see if they drank fewer sugary beverages after one year. They didn’t find significant differences, but the trend was toward consuming fewer calories from sugary beverages.

“Supermarket data showed that retailers sold 10% fewer of the sugary (taxed) drinks than the previous year. These supermarkets saw a 16 percent increase in water purchases.”

It is also interesting that supermarkets did not see any drop in their revenues during this time and consumers did not spend any more on groceries than the previous year. These have been arguments used against the tax, so these are important findings when communities consider pros and cons of such a tax.

This study has several limitations – it doesn’t establish cause and effect, and the long term implications aren’t known – but it does show potential for changing consumer behavior.

Berkeley residents consume much less sugary drinks than the US average; still, the city received almost 1.5 million dollars in tax revenue from the tax alone. The funds are being used for child nutrition and community health programs.

The study received funding from the Bloomberg Philanthropies, the Carolina Population Center and the National Institutes of Health 

2 comments on “Taxing sugary drinks leads to fewer sales, spurs more water purchases

  1. Rebecca Rolph on

    I am guessing, from the description, that some of those drinking the sugary beverages traveled from Berkeley where they were being taxed, to purchase them from the area outside Berkeley where they were not taxed. It’s easy enough to buy and transport sugared beverages by the caseload from a store in an area where the item is not taxed.

    Reply
    • Alice RD on

      Hello Rebecca,
      Thanks for your comment. Traveling to purchase untaxed beverages is a possibility. More robust data on residents’ sugar sweetened beverage intake over time would help shed light on that.

      Reply

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