Health proponents hail them, and sweetened beverage makers demonize them: so-called "soda" taxes are popping up across the country, and they are creating waves in the food industry. However, the question of whether or not the taxes on sugar-sweetened beverages (SSBs) are effective remains to be seen.
We've previously reported on the early results from Philadelphia's soda tax. Between January and February, the city raised about $12.2 million via the tax. It's too early to say whether or not the tax is providing a tangible health benefit for the city, but it is clearly generating revenue for the local government.
A new study published in PLOS Medicine may help shine a light on the issue by focusing on the first U.S. municipality to institute one: Berkeley, CA.
To start, the study authors noted that "evaluation of taxation in jurisdictions with more typical SSB consumption, with controls, is needed to assess broader dietary and potential health impacts." So, even a few years in, scientists and researchers are still unclear on the health benefits provided by such a tax.
However, they do have plenty of information on sales, and this information will likely put grocery retailers at ease: the study authors found that consumer spending per transaction (read as: average grocery bill) did not increase, but store revenue did not fall in Berkeley when compared to other cities. Many grocers feared the taxes would impact sales, but in the early going, it appears that consumers are simply switching their purchasing habits, not abandoning them completely.
During the time frame, sales of SSBs rose 6.9% in comparison cities, while they fell by 9.6% in Berkeley when compared to predicted sales. Untaxed beverages rose 3.5% in sales, and on the whole, beverage sales climbed. The study authors noted:
"The findings of this study, while limited by its observational design, suggest that SSB taxes may be effective in shifting consumers to purchase healthier beverages without causing undue economic hardship and while raising revenue for social objectives."
So, grocery retailers shouldn't be feeling the impacts of the tax like they expected, but what about sweetened beverage producers? It turns out, they are already pivoting to meet consumer demand. In October 2016, PepsiCo pledged to cut the calorie counts in its beverages by 2025, reported CNN. Rival The Coca-Cola Co. also noted it would be lowering calorie counts the same month to meet rising consumer demand, reported Business Insider.
To be fair, Berkeley isn't your average American town. However, the study indicates major beverage producers can leverage new sales by offering low-calorie drinks, water products and nutrition-focused beverages. Grocery retailers can still get their sales, just on different products. Although the sales tax was largely passed on to consumers, it doesn't appear to change their spending habits all that much. And local governments can raise funds for social programs for the benefit of all.
Sounds like a win-win-win-win scenario to me.
In The Food Institute's recent webinar "Achieving a self-sustaining business model: Top 3 trends companies need to think about post-COVID-19," Greg Wank, CPA, CGMA, partner and leader of Anchin's food and beverage group, as well as David Eben founder and CEO of Carrington Farms, discussed how to have a more successful business while burning less capital and attaining self-sustainability. The following summarizes the salient points highlighted during the webinar.read more
Chris is a business writer and market analyst that focuses on the Markets, Legal and Washington sections of the Food Institute Report. In addition, he assists in compiling data for various Food Institute publications throughout the year. He invites you to contact him via email at firstname.lastname@example.org to talk about anything food-related.
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