Philadelphia’s tax on soda and other sweetened beverages has been in effect for nearly a year. As city officials, business owners, and beverage industry lobbyists continue to debate the controversial, 1.5 cent-per-ounce tax – and other cities watch closely – researchers have scrambled to study its impact.
All agree sales of soda and other taxable beverages have decreased under the tax, and prices have risen. But has the tax had a negative impact on businesses’ bottom lines? The answer to that question, it turns out, depends on which study you consult, and maybe even who paid for it.
Here is a roundup of the current findings, and when they were released, about the first beverage tax of its kind in a major U.S. city.
University of Pennsylvania (November)
What it was: Penn researchers analyzed beverage prices at stores and restaurants in Philadelphia and outside the city to determine how much of the 1.5 cents-per-ounce tax was passed to consumers.
What it found: Stores passed an average of 1.19 cents per ounce on to customers after the tax went into effect, while restaurants hiked prices an average of 1.52 cents per ounce. The greatest proportional increase was for 2-liter bottles of soda, which cost 47 percent more than before the tax. Twelve-packs jumped 41 percent, and 20-ounce bottles,19 percent.
Who paid for it: Penn funded the research internally.
What supporters of the tax say: Mike Dunn, a spokesman for Mayor Kenney, said the study is scientifically sound and is noteworthy because it includes restaurants – a portion of the beverage sector that industry-funded studies have ignored. “The bottom line is that some stores are choosing to absorb some of the cost of the tax, a behavior that we fully expect to continue and perhaps even increase amid strong competition among dealers,” Dunn said.
What opponents of the tax say: Economists with knowledge of food merchandising are better fit to study the tax’s impact than public health professionals, said Anthony Campisi, a spokesman for the Ax the Bev Tax campaign, which is funded by the American Beverage Association. But Campisi said the findings support the beverage industry’s arguments that the tax is causing prices to shoot up and is, in turn, hurting businesses.
Harvard, Penn, and Johns Hopkins (November)
What it was: A separate group of researchers from the three universities have launched a two-year study examining the impact of the tax by comparing beverage sales in Philadelphia, outside the city, and in Baltimore, which has no tax on soda.
What it found: Sales of soda and other sweetened beverages have dropped 57 percent in volume since the tax went into effect. But overall sales at chain stores in Philadelphia have not suffered, suggesting that stores’ bottom lines are not hurt by the tax.
Who paid for it: The research is funded by Bloomberg Philanthropies, through which former New York City mayor Michael Bloomberg has poured millions of dollars into advocating for taxes on soda across the country.
What supporters of the tax say: Kenney’s administration has touted this study as the first scientific look at the tax. A city spokesman said that the preliminary findings were great news for both public health and the city’s economy, because it showed that people are drinking less soda but that overall store sales have not been hurt.
What opponents of the tax say: They cast doubt on the findings because the research is funded by Bloomberg, and because the anti-tax group has its own take on some of the data used by the researchers, which comes from market research company IRi. “They’re sort of talking about preliminary data in a vacuum” because no findings have been formally published, Campisi said.
St. Joseph’s University (September)
What it was: John Stanton, a professor of food marketing at St. Joe’s, studied sales before and after the tax at five grocery stores of the same supermarket chain in Philadelphia and four stores outside the city.
What it found:
The tax has contributed to an overall decrease in sales. Philadelphia grocery stores typically see a decrease in beverage sales between November and February, but the average loss was $82,000 steeper after the tax began compared to those months one year earlier. Also , total store sales decreased by an average of more than $300,000 in Philadelphia grocery stores. Stores outside the city, meanwhile, saw increased sales, on average, between November 2016 and February – a reversal from the same span the previous year.
Who paid for it : The American Beverage Association.
What supporters of the tax say: The mayor’s office questioned the credibility of the study because the beverage association paid for it, and noted that grocery store sales account for less than half of the total beverage sales in the city.
What opponents of the tax say: Campisi said this study attaches real numbers to the complaints of supermarket owners in Philadelphia and shows that they are experiencing a negative impact from the tax.
Oxford Economics (September)
What it was: Oxford Economics, an international consulting firm, used data from market research company IRi to analyze sales from January through mid-April at 27 grocery stores in Philadelphia and 36 outside the city.
What it found: Beverage dollar sales declined in Philadelphia chain grocery stores by 28 percent, compared to the same time period in 2016. Beverage sales by volume decreased 24 percent. Total store sales, the analysis found, declined 9 percent compared to 2016. The study concluded that consumers are leaving the city to shop.
Who paid for it: The American Beverage Association.
What supporters of the tax say: Using only grocery store data is not an accurate reflection of the tax’s impact. “We believe a far more accurate picture of the impact of the beverage tax is attained by looking at all chain retailers, not just a subset,” Dunn said. The city also took issue with the conclusion that shoppers are leaving the city for groceries. “It appears that cross-border shopping for beverages may have taken place initially after tax implementation, but not for other groceries.
What opponents of the tax say: Oxford Economics was asked to focus only on grocery stores because grocery store owners have been the most vocal about the impact of the tax. “What we’re saying also makes some common sense –beverage sales declined. I think that’s something that in the city at least everybody agrees on,” Campisi said.
What it was: A review of sales data at nearly 1,000 stores in the Philadelphia region by Catalina, a Florida-based digital marketing firm.
What it found: Soda sales at franchised grocery and drug stores dropped 55 percent inside the city in the first five months after the tax went into effect, while sales spiked by 38 percent at stores just outside the border.
Who paid for it: Catalina, which works with retailers and claims to be an independent third party with no stake in the tax in Philadelphia. It said it used its existing data and took no funding from any clients.
What supporters of the tax said: Kenney’s office questioned the study, saying that supermarkets account for less than half of beverage sales. Restaurants, universities, hospitals, and non-supermarket stores were not included in the study.
What the soda tax opponents said: The Ax the Bev Tax campaign said Catalina’s findings were consistent with its argument that the tax hurts retailers and drives consumers to shop outside of the city.
Philadelphia’s outgoing controller, Alan Butkovitz, who has spoken out against the tax, surveyed business owners and found that a majority claim the tax is hurting them. The mayor’s office has used wage tax data to suggest that the beverage industry has not lost jobs to the tax. Various other groups have conducted opinion polls. A Drexel professor is studying the tax’s impact on consumption and expects to release written results in 2018. And the Penn, Harvard, and Johns Hopkins study will update its results in 2018.