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Decomposing consumer and producer effects on sugar from beverage purchases after a sugar-based tax on beverages in South Africa

Maxime Bercholz, Shu Wen Ng, Nicholas Stacey and Elizabeth C. Swart

Economics & Human Biology, 2022, vol. 46, issue C

Abstract: Growing global concern about obesity and diet-related non-communicable diseases has raised interest in fiscal policy as a tool to reduce this disease burden and its social costs, especially excise taxes on sugar-sweetened beverages (SSBs). Of particular interest have been nutrient-based taxes to improve diet quality. These can incentivize producers to reformulate existing products and introduce healthier alternatives into their ranges. In 2018, South Africa adopted a sugar-based tax on SSBs, the Health Promotion Levy (HPL). Early findings suggest that purchases of higher-sugar taxable beverages fell and purchases of no- and lower-sugar beverages increased, alongside significant reductions in the sugar content of overall beverage purchases. However, underlying these changes are consumption shifts as well as product reformulation and changes in producers’ product portfolios. Drawing on a household scanner dataset, this study employed a descriptive approach to decompose changes in the sugar content of households’ non-alcoholic beverage purchases into producer factors (reformulation and product entry and exit) and consumer factors (product switching and volume changes as a result of price changes, changing preferences, or other factors). We look at these factors as the tax was announced and implemented across a sample of over 3000 South African households, and then by Living Standard Measures (LSM) groups (middle vs. high). The sugar content of beverage purchases fell by 4.9 g/capita/day overall, a 32% decrease. Taken in isolation, consumer switching and volume changes together led to a reduction equivalent to 71% of the total change, while reformulation accounted for a decrease equal to 34% of that change. Middle-LSM households experienced larger reductions than high-LSM households due to larger changes on the consumer side. For both LSM groups, reformulation-led reductions mostly occurred after implementation, and most changes came from taxable beverage purchases. As sugary drink tax designs evolve with broader implementation globally, understanding both supply- and demand-side factors will help to better assess the population and equity potential of these policies.

Keywords: Decomposition; Health Promotion Levy; South AfricaSugar; Sugar-Sweetened Beverages; Tax (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ehbiol:v:46:y:2022:i:c:s1570677x22000326

DOI: 10.1016/j.ehb.2022.101136

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