Sales of sugary drinks plunge 33% in cities taxing those beverages, study finds

Dive Brief:

• An increase in the price of sugar-sweetened beverages [SSB] by about 33.1% led to a drop in consumer purchase volumes of those drinks by a third, according to an article published in the JAMA Health Forum. 
• The study, led by Scott Kaplan, an assistant professor of economics at the U.S. Naval Academy, looked at taxes in five cities — Boulder, Colorado; Philadelphia; Oakland; Seattle; and San Francisco. It found prices increased and volumes decreased immediately following tax implementation, and both outcomes were sustained in the months after. As of November 2022, eight U.S. jurisdictions and more than 50 countries have implemented some form of sugar-sweetened tax.
• Proponents for the tax said it helps raise revenue for area schools or other public services, while at the same time helping consumers cut back on sugar. But big beverage makers have blasted the tax as unnecessary and bad for area retailers, most notably small stores, and workers.

Dive Insight:

Unlike most studies that have typically looked at the impact a tax had on one city, the JAMA report reviewed multiple cities collectively to understand how it would affect other areas if it was put in place locally or even nationally.

“This estimate, though imperfect, also better informs the potential effectiveness of a nationwide tax, which was recommended by a recent federal commission on diabetes and is especially relevant considering the beverage industry’s recent efforts to preempt localities from levying SSB taxes,” the study found. It went on to note that “scaling SSB taxes nationally could yield substantial public health benefits.”

The JAMA study also addressed an inconsistency that has appeared in prior studies: whether sales of sodas, sports drinks, juices and other sugary beverages rose in cities adjacent to where the taxes went into place. It found no evidence of increased purchases following the tax implementation. Other reports, however, have determined that residents went outside the city to avoid the tax.

The American Beverage Association said in a statement that the industry’s strategy of offering consumers more choices with less sugar, smaller portions and clear calorie information is working. The group, which represents Coca-Cola, PepsiCo and Keurig Dr Pepper, among others, said nearly 60% of all beverages sold today have zero sugar and the calories that people get from beverages have decreased to their lowest level in decades.

“A beverage tax has never been shown to improve public health or to reduce beverage calories in a significant way,” ABA noted.

Shoppers have been cutting back on the purchase of sugary foods and drinks in recent years as they look to increase their consumption of healthier offerings — a move that gained momentum during the COVID-19 pandemic. Excessive sugar intake has been associated with diseases such as diabetes, obesity and cancer.

Organizations such as the American Heart Association have said the taxes generate “substantial health gains” as well as lower health costs in the U.S. And the World Health Organization has called on other countries to tax sugary drinks to improve public health and to “encourage companies to reformulate their products to reduce sugar content.”