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Report: Berkeley Tax Reduces Sugary Drink Sales while Untaxed Drink Sales Go Up

In the year since the nation’s first-ever municipal sugary drink tax was implemented in Berkeley, California, sales of sugary drinks dropped 9.6 percent in the city, while sales of all other drinks rose, according to a new study released Tuesday.


sugarydrinks.jpgThe drink tax went into effect on March 1, 2015, imposing a penny-per-ounce levy on all sugary drinks. In a new study that examined the economic impact of the tax, researchers found that while sales of sugary drinks dropped significantly, sales of untaxed beverages rose by 3.5 percent during the same period examined. In particular, bottled water sales jumped by 15.6 percent in Berkeley, while untaxed fruit, vegetable, and tea drinks increased by 4.37 percent.

The study also compared the sales of sugary drinks in Berkeley stores to neighboring cities and found that while the taxed drinks dropped by 9.6 percent in Berkeley, sales of the same beverages actually rose by 6.9 percent elsewhere.

Researchers also did not find any evidence that the soda tax led to higher consumer spending, nor a loss in store revenue in relation to comparison sites. Both issues were cited as concerns by the beverage industry, which opposed the drink tax, arguing it would raise grocery bills and hurt local businesses.

“The Berkeley tax is a home run – it helped residents make healthier choices, it raised revenue for promoting health, and we saw no evidence of higher grocery bills for consumers or harm to local business revenue,” said the study’s lead author, Lynn Silver, MD, MPH, of Oakland California’s Public Health Institute, which conducted the study with the University of North Carolina’s Gillings School of Global Public Health.

“These findings confirm that sugary drink taxes make health and economic sense at a time when obesity and diabetes epidemics are sweeping our communities, and health care spending is threatened,” Silver said.

In November 2014, Berkeley voters made the city the first in the country to adopt an excise tax on drinks with added sugars. Unlike a sales tax, which shoppers see when they check out, an excise tax usually gets incorporated into the price of an item. In this case, beverage distributors were responsible for paying the drink tax. They could then pass on the extra charge to retailers and, ultimately, consumers.

The new report released Tuesday found that Berkeley’s drink tax was not always passed through to consumers.

For example, the study determined that 67 percent of the tax amount was passed on to customers across all sugary drinks, although the full amount of the tax was passed through for carbonated sugary drinks and energy drinks. This is similar to initial evaluation results of sugary drink taxes in Mexico and France.  Researchers on Berkeley’s tax said this might have been because of confusion on what products were supposed to be taxed or how distributors and retailers responded to the tax based on the market share of individual beverages.

The study also found that beverage distributors also “more than fully” passed on the drink tax to Berkeley’s chain grocers and gas stations, but they only partially passed it on to pharmacies, and gave a pass to corner stores and small independent gas stations.

In the new report, researchers used three sources of data to compare pre-tax figures with those reflecting the first year of taxation. They examined beverages prices at 26 Berkeley stores. They also combed point-of-sale scanner data on 15.5 million checkouts for beverage prices, sales and store revenue for two supermarket chains, covering nine large stores in and adjacent to Berkeley. Researchers also conducted a phone survey of 957 Berkeley adults about their beverage intake.

Health advocates support sugary drink taxes as a way to reduce consumption of such beverages, which are associated with diabetes, obesity and other diet-related chronic diseases.

Although Berkeley was the first to impose a drink tax, the effort to limit soda and other sugary drinks has been embraced at other locations throughout the country, including the Navajo Nation, Philadelphia and Cook County (in Illinois). 

Last fall, voters in Boulder, Colorado, approved a 2-cents-per-ounce tax that will be the steepest soda tax in the nation once implemented.

Berkeley’s neighboring cities of San Francisco, Oakland and Albany also passed a drink tax last Election Day, but at a 1-cent-per-ounce rate.

Voters in Santa Fe, New Mexico, will decide on May 2nd whether to add a 2-cent per ounce tax to sugary drinks in that city. 

“I urge the beverage industry to pay attention to this growing evidence and embrace these policies that benefit the health of communities, local businesses, their company employees and the very customers they serve.  By doing so even more communities, and especially children, will experience a lifetime of health benefits,” said Nancy Brown, American Heart Association CEO, calling attention to the beverage industry’s efforts to counter sugary drink tax campaigns.

“Spending millions to fight local citizens working tirelessly to improve their community puts the beverage industry on the wrong side of health and history,” Brown said.

Barry Popkin, PhD, co-author of the study released Tuesday, called the large sales impact from Berkeley’s drink tax remarkable because the highly educated and more affluent residents living in that community already consume fewer sugary beverages than many people in the nation.

While the national per-capita consumption of sweetened drinks is about 131 calories per day, in Berkeley, it’s only 45 per day, noted Popkin, a distinguished professor of nutrition at University of North Carolina’s Gillings School of Global Public Health.

“This suggests we will see a much larger tax impact in other U.S. cities with similar or higher tax levels but with significant lower income populations with greater health needs,” he said.