KO Coca Cola Company

By Mike Esterl 

Consumption of soda and other sugary drinks fell by more than a fifth in low-income neighborhoods of Berkeley after the California city became the first in the U.S. to introduce a special tax last year, according to a study published Tuesday.

The peer-reviewed research is the first to measure the impact of the penny-per-ounce tax. It found that consumption declined 21% and many residents switched to water after the tax went into effect in March 2015, according to the study published online in the American Journal of Public Health.

The study states that the results "suggest" that the tax lowered consumption but acknowledged other factors also could have been at play, including increased awareness about the health impact of sugary drinks.

The American Beverage Association, an industry group, said the Berkeley study has flaws and there is no indication the tax has had a measurable impact on public health. Street surveys relying on people's recollections are "inherently unreliable," said Brad Williams, an economist who does consulting work for the association.

Even so, the study is likely to provide ammunition to public-health officials pushing for similar levies in other parts of the country.

The work focused on low-income neighborhoods because the researchers at the University of California, Berkeley say obesity and diabetes rates are higher, and price increases have a bigger impact on purchasing patterns.

The findings were based on comparisons of interviews with Berkeley residents in 2014 and then between April and August 2015. At the same time, soft and sugary drink consumption in low-income neighborhoods of San Francisco and Oakland rose 4%, according to similar interviews conducted in those cities.

Consumption of bottled water or tap water rose 63% in Berkeley during the period but a more modest 19% in San Francisco and Oakland, according to the study, which asked residents how frequently they drank different types of beverages.

The larger neighboring cities of San Francisco and Oakland are expected to vote on a penny-per-ounce levy on sugary drinks in November ballot initiatives, while Boulder, Colo., is weighing a 2-cent-per-ounce tax. Philadelphia's city council in June approved a tax of 1.5 cents per ounce on sweetened drinks, becoming the second U.S. city to pass such a measure.

Beverage giants Coca-Cola Co., PepsiCo Inc. and Dr Pepper Snapple Group Inc. have argued that it is unfair to single out sugary drinks because they represent less than 10% of caloric intake. The companies have spent more than $100 million to defeat proposed taxes in more than two dozen cities and states since 2009 and plan to challenge Philadelphia's planned tax in court before it takes effect in January.

U.S. regulators also increasingly are taking aim at sugar. The Food and Drug Administration announced new rules in May requiring nutrition-facts panels to list how much sugar has been added and the daily recommended maximum, which is about 30% less than in a 20-ounce bottle of Coke.

The long-term impact of special taxes on sugary drinks remains unclear. In Mexico, which introduced a roughly 10% tax in January 2014, purchases dropped 6% the first year from the average of the previous two years, according to a peer-reviewed study by Mexican health officials and the University of North Carolina. But soda volumes in the country began rising again in 2015.

Even without special taxes, U.S. soda sales volumes have declined 11 straight years and per-capita consumption is at a three-decade low, according to industry tracker Beverage Digest.

Residents might understate their consumption of sugary drinks in interviews because such drinks are seen as unhealthy, acknowledged Kristine Madsen, an associate professor at UC Berkeley's School of Public Health who co-wrote the study. But she noted 2015 was hotter than usual, which typically would increase consumption.

Consumption of regular soda dropped 26% in Berkeley's low-income neighborhoods after the tax, while energy drinks and sports drinks fell 29% and 36%, respectively. Sweetened fruit drinks, coffee and tea declined 13%.

The household median income in surveyed Berkeley neighborhoods was $59,000, compared with $65,000 citywide. The neighborhoods also skewed more heavily toward African-Americans and Latinos, who are bigger drinkers of sugar-sweetened beverages, according to previous studies.

Berkeley, a city of about 115,000 people, collected $1.4 million from the sugary drink tax in the first 12 months. Residents voted 75% in favor of the tax in a November 2014 ballot measure.

A bit more than half of San Francisco residents in 2014 backed a 2-cents-per-ounce tax on sugary drinks, but the ballot measure fell short of the required two-thirds support. This June, a federal judge put on hold a city plan requiring health warnings for sugary drink advertisements after the beverage industry argued the requirement violated free-speech rights.

Write to Mike Esterl at mike.esterl@wsj.com

(END) Dow Jones Newswires

August 23, 2016 18:09 ET (22:09 GMT)

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