Why sugary drink taxes aren't effective -- and how to change that
Study finds price tags need to mention the tax to sway consumers

Date:
November 3, 2021
Source:
Ohio State University
Summary:
Several U.S. cities have instituted taxes on drinks with added
sugar in order to reduce consumption, but new research suggests
these policies currently have one fatal flaw. The study found that
sugary drink taxes only reduce purchasing if price tags at stores
mention that consumers are paying that tax when they buy the drink.



FULL STORY ========================================================================== Several U.S. cities have instituted taxes on drinks with added sugar in
order to reduce consumption, but new research suggests these policies
currently have one fatal flaw.


==========================================================================
The study found that sugary drink taxes only reduce purchasing if price
tags at stores mention that consumers are paying that tax when they buy
the drink.

"If cities want these policies to be effective, they need to regulate
how these sugary drinks are labeled at the stores where they are sold
-- and they currently don't do that," said Grant Donnelly, lead author
of the study and assistant professor of marketing at The Ohio State University's Fisher College of Business.

The findings suggest that price tags should mention the tax, but not
the amount, because consumers tend to overestimate how much the tax is, Donnelly said. If they know the true size of the tax, they are more
willing to pay it.

Among the cities that currently have a tax on sugary drinks are
Philadelphia, San Francisco, Seattle, and Boulder.

The study was published online recently in the journal Psychological
Science.



==========================================================================
The research included a field study at two convenience stores in San
Francisco, which currently has a tax on sugary drinks of 1 cent per
ounce -- an added 12 cents to a 12-ounce drink.

Researchers varied the price tags placed on the sugary drinks over the
eight- week study. There were three price tags that were rotated: One
that simply said the price for the 12-ounce drink ($1.52); one that had
the price and the message "Includes SF Sugary Drink Tax"; and one that
included the same message and added that the proceeds of the tax would
support local university student programs.

All non-sugary drinks, which were not subject to the tax, simply had
the price of the drink, which was $1.40.

The researchers compared sales of the drinks during the study period to
the two immediately preceding weeks. During this time, the sugary drink
tax was in effect, but there were no price tags on any drinks. They also compared sales to the two years preceding the tax.

Results showed that sales of sugary drinks were not lower during the
two weeks before the study began, compared to sales in the two years
before the tax. In other words, the tax itself did not reduce purchases
of sugary drinks.



==========================================================================
The researchers then looked at the effects of the three different price
tags during the course of the study.

Results showed that the share of sugary drinks bought when the tags
simply showed the price (47%) was not significantly different from the
two-week period before the study.

But the share of sugary drinks purchased did decline slightly (45%)
when the tags mentioned the price included the added tax.

Results showed that most consumers who chose to avoid sugary drinks with
the added tax chose a drink that was not subject to the tax.

"Consumers are averse to taxes, so when they learn that their favorite
drink has this sugary beverage tax, some are less interested in buying
it," Donnelly said.

"They generally substitute for healthier beverages, like bottled water. So
the taxes do not seem to hurt the stores that sell drinks." Tags that
noted where the taxes would be spent had no significant effect beyond
the tags that simply noted the added tax.

In a separate online study, the researchers asked participants who drank
sugary beverages to estimate what the tax would be on a 12-ounce can
of their favorite beverage that cost $1.52. The average estimate was 40
cents -- much higher than the 12 cents actually levied in San Francisco.

Another study found that when consumers were told the tax was only
12 cents, they reported they were much more likely to still purchase
the drink.

"People don't like taxes, but they think this tax is much higher than
it actually is," Donnelly said. "If you tell consumers the true cost of
the tax, it is no longer effective in reducing purchases." The bottom
line, he said, is that if cities want these policies to be effective at reducing consumption of unhealthy beverages, they must mandate that tags mention the added tax -- but not reveal how much it is.

Co-authors on the study were Paige Guge and Ryan Howell of San Francisco
State University and Leslie John of Harvard University.

========================================================================== Story Source: Materials provided by Ohio_State_University. Original
written by Jeff Grabmeier. Note: Content may be edited for style and
length.


========================================================================== Journal Reference:
1. Grant E. Donnelly, Paige M. Guge, Ryan T. Howell, Leslie K. John. A
Salient Sugar Tax Decreases Sugary-Drink Buying. Psychological
Science, 2021; 095679762110170 DOI: 10.1177/09567976211017022 ==========================================================================

Link to news story: https://www.sciencedaily.com/releases/2021/11/211103200435.htm

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