Does a Spoonful of Sugar Levy Help the Calories Go Down? An Analysis of the UK Soft Drinks Industry Levy

84 Pages Posted: 10 Jul 2021

See all articles by Alex Dickson

Alex Dickson

University of Strathclyde

Markus Gehrsitz

University of Strathclyde; IZA Institute of Labor Economics

Jonathan Kemp

affiliation not provided to SSRN

Abstract

This study evaluates the effects of the 2018 UK Soft Drinks Industry Levy on soft drinks prices, sales, reformulation activities, and consequently calories consumed. We combine novel electronic point of sale data that cover most of the UK soft drinks market with longitudinal nutritional information and a variety of event-study specifications. We document that all but a few global soft drinks brands reduced sugar content and hence avoided the tiered levy. For brands that maintained their original sugar content, the levy was on average over-shifted resulting in substantial retail price increases. Consumers responded by reducing their consumption of levied drinks by around 18% which is indicative of an inelastic demand response, especially in the drink-now and energy drink segments of the market. We also document substitution into diet drinks in response to the tax. In total, the levy is responsible for a reduction in intake of just under 6,500 calories from soft drinks per annum per UK resident. More than 80% of reductions were due to manufacturers' reformulation activities and occurred in the two years between the announcement of the levy and its implementation.

JEL Classification: H21, H23, H51, I12, I18

Suggested Citation

Dickson, Alex and Gehrsitz, Markus and Kemp, Jonathan, Does a Spoonful of Sugar Levy Help the Calories Go Down? An Analysis of the UK Soft Drinks Industry Levy. IZA Discussion Paper No. 14528, Available at SSRN: https://ssrn.com/abstract=3883804

Alex Dickson (Contact Author)

University of Strathclyde

16 Richmond Street
Glasgow 1XQ, G1 1XQ
United Kingdom

Markus Gehrsitz

University of Strathclyde ( email )

Department of Economics
199 Cathedral St
Glasgow, G4 0QU
United Kingdom

HOME PAGE: http://www.markusgehrsitz.com

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Jonathan Kemp

affiliation not provided to SSRN

No Address Available

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