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Under soda tax, beverage sales at chain stores in Philly dropped 51%, new study finds

Laura McCrystal, The Philadelphia Inquirer on

Published in News & Features

PHILADELPHIA -- Sales of soda and other sweetened beverages have declined by 51% at chain stores in Philadelphia since the city's controversial tax on beverages took effect in 2017, according to a study released Tuesday, one week before city primary elections in which the tax is a key issue.

Total sales of beverages, food and household products decreased by 8.1% at supermarkets, said the report in the Journal of the American Medical Association.

"Part of this is not at all surprising," said Christina Roberto, the lead author on the paper and an assistant professor of medical ethics and health policy at the University of Pennsylvania's Perelman School of Medicine. "There's a mountain of literature from economics that if you raise the price of something, people will buy less. We've all been curious how beverage taxes actually play out in the real world."

While beverage sales in the city dropped, the study found that sales outside the city increased by more than 24%. Because that increase does not fully offset the sales reductions in the city, Roberto said, it is evidence that the tax resulted in less sweetened beverage consumption -- a good outcome in the view of public health advocates.

Supporters and opponents of the tax -- which funds pre-K, community schools, and improvements to parks, recreation centers and libraries -- interpreted the findings differently.

The stakes are high for both sides in the debate. Mayor Jim Kenney, who touts the 1.5-cent-per-ounce tax as the signature achievement of his first term, is facing two Democratic primary challengers who oppose the tax. Candidates for City Council are split on the issue, according to their responses to a Philadelphia Inquirer survey.

The research was funded by Bloomberg Philanthropies, through which former New York City Mayor Michael Bloomberg makes charitable contributions. Bloomberg supports soda taxes; he recently donated $1 million to a political action committee supporting Kenney's reelection effort.

Bloomberg's contributions to Kenney are "an effort to thwart the will of Philadelphians who want this unfair tax eliminated, and now, thanks to this study, we have even more data to support the need for it to be repealed," said Anna Adams-Sarthou, a spokesperson for the Ax the Bev Tax Coalition. The coalition has maintained that the tax hurts businesses and consumers.

Mike Dunn, a spokesperson for Kenney, said the tax is achieving its goal of funding important programs, and that the city had predicted a decline in beverage sales after the tax went into effect. He said the study is a good way to increase transparency about the tax. He added that the study shows distributors and retailers do not have to pass the full tax through to consumers, because it found varying price increases on taxed beverages.

"We have no doubt that the beverage industry will spin this study to be more than it is," Dunn said. "That is a false narrative."

The American Beverage Association has spent millions of dollars fighting the tax in Philadelphia and similar taxes proposed or passed in other cities. Its political action committee spent more than $1 million on Philadelphia elections between April 2 and May 6, according to campaign finance filings.

The authors of the new study -- a group of researchers from the University of Pennsylvania, Harvard University and Johns Hopkins University -- said Bloomberg Philanthropies had no role in designing or conducting the study. Its findings are generally consistent with other studies, which have also found that beverage prices increased and sales decreased after the tax took effect, while sales outside the city increased.

The study is one of the only peer-reviewed studies on Philadelphia's beverage tax and uses the largest set of data; researchers analyzed sales data from 291 stores, which they estimate accounted for 25% of beverages sold in the city in 2017.

It examined Philadelphia sales at chain supermarkets, pharmacies, and mass merchandise stores such as Target or Walmart in 2016 compared to 2017. They also compared sales in Philadelphia to those in Baltimore, which has no such tax, and examined sales in stores outside of Philadelphia but near its border.

Here are more of the study's findings:

 

-- Overall sales at supermarkets did decrease, but mass-merchandise stores and pharmacies did not have reductions in combined sales of food, beverages and household items. This is different from preliminary results -- based on six months of sales data rather than a full year -- presented at a conference in 2017. Then, researchers said that beverage sales had declined but that overall store sales had not suffered as a result.

-- Researchers found beverage prices increased 0.65 cents per ounce at supermarkets in Philadelphia, 0.87 cents per ounce at mass merchandise stores, and 1.56 cents per ounce at pharmacies.

-- The price increases also varied by beverage size and type. Sugar-sweetened beverage went up 0.61 cents per ounce; artificially sweetened beverages, 0.80 cents.

-- There were also small price increases for beverages at stores outside the city. "This may be because stores on the border, facing reduced competition from Philadelphia, increased their prices," researchers wrote.

-- Supermarkets had larger volume decreases than other store types ? maybe, researchers said, "because they displayed more in-store signage about the tax" or because changes in shopping behavior varied by store type.

City Council voted in March to commission its own study of the tax's impact. Any study is unlikely, however, to resolve the debate between supporters and opponents of the tax about its impact on jobs in the city.

The beverage industry said the new study is more evidence that the tax is hurting businesses and causing job losses. The industry has highlighted layoffs by PepsiCo and Coca-Cola Co. after the tax went into effect, as well as work-hour reductions for employees at some supermarkets and the closing of a ShopRite in Overbrook as evidence that the tax is hurting residents and businesses.

The Kenney administration, meanwhile, noted that the study does not make any conclusions about jobs or store profitability. Dunn also pointed to strong wage-tax collections from retailers in the city, a study that looked at unemployment collections in industries affected by the tax, and the opening of new grocery stores in the city as evidence to counter the industry's claims.

Roberto, the lead author, said her main takeaway is that soda taxes are effective at reducing consumption.

"It's a public health no-brainer," she said.

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