Higher retail prices of sugar-sweetened beverages 3 months after implementation of an excise tax in Berkeley, California

Falbe et al. Am J Public Health. 2015;105:2194–2201.

In March 2015, Berkeley, CA became the first locality in the nation to implement a 1-cent-perounce excise tax on sugary drinks. In order for such a tax to reduce consumption, a substantial portion of the tax must be passed on to the consumer. Falbe and colleagues present evidence that Berkeley’s sugary drink tax is passed through to the customer via higher shelf prices for sugary drinks

To assess whether the tax is leading to higher shelf prices for sugary drinks, the authors collected price data on drinks with and without sugar both before and after the tax was imposed, from a variety of retailers in Berkeley and in two comparison cities, Oakland and San Francisco. The retailers represent a mix of centrally located chains and stores in lower-income, minority neighborhoods. The authors assessed the prices of the same beverages in the same stores pre- and post-tax and compared changes in Berkeley with changes that occurred in the comparison cities. The authors assessed relative price changes by several variables, including by beverage category, type of sugary drink and nonsugary drink, brand, sugary drink relative to nonsugary drink, and by retailer.

Overall, prices increased roughly a half cent more per ounce in Berkeley than in the comparison cities, a pass through rate of 47%. Pass through varied by type of sugary drink. The tax was passed through at 69% for soda, 47% for fruit-flavored beverages, and 32% for sweetened teas. The prices of sugary drinks overall increased relative to non-sugary drinks by 0.46 cents per ounce more in Berkeley. Pass through also varied by retailer, ranging from 42% in small grocery stores to 97% in liquor stores.

Limitations: The authors were not able to assess all beverage types and sizes. The results may not represent pass through in neighborhoods not included in the study. Price data were collected 3 months after implementation of the tax although before all distributors were required to be compliant with the law; additional pass through may occur in the future.

Implications: At 69% pass through, the price of a 20- ounce soda increased by an average of 8%, from $1.75 to $1.89. Most experts agree that the price of a sugary drink should increase by at least 20% to meaningfully affect consumption patterns and health outcomes. These findings from Berkeley suggest a tax rate of 2 cents per ounce may be needed to raise prices sufficiently.

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