Beverage Sales Fell in Philadelphia After Tax Took Hold

By Jennifer Maloney and Shayndi Raice Features Dow Jones Newswires

Data compiled for The Wall Street Journal show that Philadelphia's beverage tax had a significant impact on shopping patterns after it was introduced in January.

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Sales of beverages, excluding milk, fell 28% in grocery stores inside the city in the period from January through mid-April, compared with the same period a year earlier, according to same-store data from market-research firm IRI compiled by the American Beverage Association, an industry group.

The drop was sharper for drink categories affected by the tax: Soda sales in 27 Philadelphia grocery stores fell by 52% to $2.9 million. Meanwhile, powdered drink mixes and concentrates -- which aren't affected by the tax -- jumped 31% to $1.1 million.

Sweetened-beverage taxes are modeled after cigarette taxes, which have successfully reduced smoking rates in the U.S. But while tobacco taxes were imposed mainly by federal and state governments, beverage taxes have been imposed so far only on a municipal level, making it easier for people to travel outside the tax zones.

The IRI data from the Philadelphia area suggest that some shoppers are going outside city limits to avoid the 1.5 cents-per-ounce tax. Beverage sales rose 13% at stores that are outside the city but within about 5 miles of the border. Total sales in the Philadelphia grocery stores fell 9%, while stores outside the city saw growth of 2%.

There are signs a similar pattern may be developing in Cook County, Ill. Its beverage tax, which like Philadelphia's covers some diet drinks as well as sugary ones, went into effect Aug. 2.

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Deb Goldberg, a 47-year-old real-estate agent who lives in the Lincoln Park neighborhood of Chicago, said that to avoid the tax she has traveled twice to Costco stores nearly an hour away from her home to stock up on Diet Coke.

"It's the principle," she said. "We are taxed up the ying yang for everything. It's just ridiculous."

Public-health advocates note that the border-crossing effect could prove temporary, as has been seen in the past for municipal tobacco taxes. A spokeswoman for Philadelphia Mayor Jim Kenney said the drop in beverage sales is in line with the city's projections.

Write to Jennifer Maloney at jennifer.maloney@wsj.com and Shayndi Raice at shayndi.raice@wsj.com

(END) Dow Jones Newswires

September 01, 2017 14:08 ET (18:08 GMT)