A detailed analysis of Berkeley’s sugary beverage tax shows a near 10% drop in sales of sodas, energy drinks and other taxed beverages in the year after the tax started, according to a recent study by researchers at the Oakland-based Public Health Institute and University of North Carolina.
This indicates the tax is doing exactly what it was intended to do, said Lynn Silver, a lead author of the study, which was published in PLOS Medicine this week. “The exciting news is that the tax seems to be working,” said Silver, a pediatrician who lives in Berkeley.
And in a surprise to Silver, the study also showed Berkeley sales of healthier drinks such as water and milk increased after the tax.
In addition, overall grocery sales didn’t decline even if people were buying less soda, so the tax hasn’t been detrimental to business owners — a frequent concern voiced by tax opponents.
And people’s grocery bills didn’t jump, another prediction of many tax foes.
“It appears to be a home run on a public policy,” Silver said.
The three-part analysis looked at three studies conducted before and after the tax: 15.5 million scans of check-out data at three major Berkeley chain grocery stores; beverage pricing at 26 Berkeley stores, including large and small groceries, pharmacies and gas stations; and a telephone survey of 950 adult Berkeley residents.
Analysis included data from Bay Area control group stores outside of Berkeley, for comparisons. The names of stores involved in the research are confidential.
Pre-tax information was gathered before Jan. 1, 2015; post tax, between March 1, 2015 when the tax was implemented and Feb. 29, 2016.
Passed in 2014 by voters with overwhelming support, Berkeley’s soda tax, as it’s often called, imposes a penny per-fluid-ounce tax on a range of sugary beverages charged to distributors, not stores or customers. Taxed drinks include soda, energy drinks, juices with added sugar, and sugary syrups added to coffee drinks.
Study’s key findings
The study findings included:
- Sales (in ounces per transaction) of taxed drinks fell by 9.6% in Berkeley, while they rose by 6% in Bay Area stores without a tax.
- Sales of non-taxed healthier drink options such as water, 100% juice and milk increased by 3.5%, with water increasing by 15.6%, untaxed fruit, vegetable, and tea drinks by 4.4%, and milk by 0.63%
- Overall beverage sales in Berkeley increased. “That makes it unlikely there would be a negative job impact,” Silver said.
- Overall chain grocery revenues (store revenue per transaction) in the Bay area dropped slightly during the post tax study period, but Berkeley revenues declined by 18 cents less than non-Berkeley stores. (-$0.36 compared to $-0.54.) This same measure showed that average grocery bills paid by consumers did not go up.
Silver’s research found that the tax was passed on to consumers in higher prices in most, but not all stores.
In the 15.5 million scan supermarket chain study; about two-thirds of the tax charged to distributors was passed to shoppers; though it was fully passed on sodas and energy drinks. In the 26-store study, the tax was fully passed on in large and small chain supermarkets and chain gas stations; partially passed on in pharmacies, and not passed on in independent corner stores and gas stations.
Because the tax was phased in and didn’t affect independent stores until January 2016, compared to March 2015, this category of data is limited, Silver said. “Our study only captured the first two months of small stores; it’s possible they hadn’t adapted their pricing.”
Research doesn’t indicate much ‘border shopping’
When asked if she thinks Berkeley residents are stepping over the border to buy sodas from neighboring towns, Silver said maybe a little, but the research doesn’t indicate a major shift. She points to a few findings including the telephone survey, where 90% of people said they bought their beverages in Berkeley before the tax, and 94% after the tax, an insignificant difference.
She also noted that overall beverage sales increased in Berkeley during the study period. “People are unlikely to be increasing their beverage purchases in Berkeley and buying a lot outside of Berkeley,” she said.
But the study found a slight increase in sugary beverage purchases in the non-Berkeley control stores, “so some leakage is possible,” Silver said. Today, several neighboring towns have soda taxes including Albany, Oakland and San Francisco, which should curb “border shopping,” Silver said.
The study shows changes at grocery stores. But it will take time to document the health effects of Berkeley’s tax on health, Silver said.
Though she, and other health researchers supporting sugary beverage taxes, base their support on computer-modeled studies showing a significant link between lowering soda consumption and health benefits, she said.
“It will take more time to see those changes, but a number of researchers have modeled what we might expect to see,” Silver said.
American Beverage Association: Study shows tax is not impacting health
A statement from the American Beverage Association (ABA), a trade group that actively campaigns against soda taxes, including Berkeley’s, said Silver’s study shows the tax isn’t impacting health.
“This study acknowledges that taxes do not demonstrate a meaningful reduction in obesity rates,” the statement said. “A beverage tax that increases the price on certain beverages by more than 50% only yields a reduction of 6.4 calories per day.”
William Dermondy, vice president for policy at the association, pointed to a table in Silver’s study that estimated the mean caloric intake of taxed beverages dropped by 6.4 calories daily after the tax, based on the telephone survey, a number the study called not statistically significant. “That difference isn’t even measureable on a bathroom scale,” he said.
The association’s statement also said that Berkeley’s relative small size, high median income, and low baseline consumption “make it a challenging place to determine the true impact of a beverage tax.”
Dermonday said: “We all want the same thing, better public heath, we just have an honest disagreement with some that taxes are going to achieve it. They’ve never been shown to do that; we don’t believe they will.”
In response, Silver said the beverage association’s statement is seriously misleading.
Her study never intended to look at obesity rates, she said. “This study in no way acknowledges such a finding. The soda tax did what it set out to do, which was to lower the sales of sugar-sweetened beverages and to increase consumption of healthier beverages. It is far too soon to assess the impact of the tax on obesity and diabetes rates.”
And the statement’s reference “a more than 50% increase” in prices is bogus, Silver said.
She also took issue with the association’s claim that a study of Berkeley’s tax can’t gauge impact. “The Berkeley findings demonstrate that when an informed population shifts to healthier beverages, overall beverage sales can stay the same or grow, keeping local businesses healthy too,” Silver said.
“That’s exactly what we didn’t know when we set out to do the study, whether in a relatively prosperous town like Berkeley it would affect people’s choices, but it did,” Silver said. “It was a clear difference from the control communities.
The new study follows one conducted by UC Berkeley and released last summer which showed a 21% drop in the drinking of soda and other sugary beverages in Berkeley’s low-income neighborhoods.
Even with last year’s dip in soda sales, enough people bought sugary drinks to add $1.5 million to Berkeley’s general fund, earmarked for nutrition and obesity prevention.
Revenue to date is $3 million.
Indeed, if people in Berkeley spend less and less on sugary drinks, the sugar tax pot will also decrease. It’s the double-edged sword of a soda tax.
“The goal is to reduce consumption of sugar sweetened beverages. If no one is drinking sugar-sweetened beverages, that would be a victory for the city and for the community’s health,” said Matthai Chakko, city of Berkeley spokesman.