Study: Beverage Taxes Don't Just Dampen Drink Sales

ST. PETERSBURG, Fla. — The beverage tax instituted in Philadelphia back in January has had a profoundly negative impact on sales, according to a recent study.

Catalina, a St. Petersburg-based personalized digital media company, conducted the research and found that Philadelphia’s sweetened-beverage tax has led to a 55-percent decline in carbonated soft drink sales. The study also revealed that outside of Philadelphia, sales of carbonated beverages have seen a 38-percent increase.

Energy drink, sports drink and ready-to-drink coffee sales also went down in Philadelphia, but experienced growth outside the city limits.

According to Catalina’s research, the sweetened-beverage tax, in addition to causing a decline in beverage sales in the Philadelphia market, has also caused declines in other categories.

"The sales of natural refrigerated juices, which are also not taxed, have declined, most likely because shoppers mistakenly believe they are being taxed," Catalina stated. "In the Philly core, the sales volume of taxed refrigerated juice drinks is down a whopping 47 percent."

While total shopping trips in the Philly core remained relatively flat in the first three months after the tax, the average basket size decreased by 5 percent, possibly due to the decline in sweetened beverages in the shopping cart, the Catalina report noted.

“For the period ending May 31, both trips and basket size are flat. Just inside the border, total basket size was down 2.1 percent as of May 31," the study reported. 

The findings in the report led Catalina to conclude: "Our data shows quite clearly that the tax is dramatically reducing sales of taxable beverages within the city, but that a significant number of shoppers are traveling outside of city limits to buy their favorite beverages."

Philadelphia retailers and merchants had campaigned to repeal the beverage tax earlier this year, but the measure was upheld by an appellate panel in June.

Retailers and merchants in Cook County, Ill., which saw a similar levy go into effect Aug. 2, also attempted to kill the tax to no avail. However, the Illinois Retail Merchants Association (IRMA) is continuing its efforts to have it repealed.

Click here to read more from Convenience Store News sister publication Progressive Grocer.