Study: Soda Tax Leads to Drop in Sales

In an effort to curb the obesity epidemic, Berkeley, Calif., became the first U.S. city to implement a "soda tax," which went into effect in 2015, according to NPR. Now, a study released this week conducted by the University of California Berkeley, shows the tax has had a noticeable impact. The Berkeley News, a university operated news outlet, reports that the law in Berkeley has effectively contributed to a 21% drop in the drinking of soda and sugary beverages.

From the the report:

The “Berkeley vs. Big Soda” campaign, also known as Measure D, won in 2014 by a landslide 76 percent, and was implemented in March 2015. It covers such soft drinks as Coca Cola, Sprite and Dr Pepper, sweetened fruit-flavored drinks, energy drinks like Red Bull and caffeinated drinks like Arizona iced tea and Frappuccino iced coffee. Diet drinks and sodas are not subject to the tax because they use sugar substitutes.

The study also noted that residents surveyed indicated a 63% increase in water consumption, both bottled and tap. Neighboring Oakland and San Francisco also reported an increase in water consumption, at 19%.

Following in Berkeley's footsteps, Philadelphia passed a similar sugary drinks tax this year, becoming the first large U.S. city to do so. The money collected from the tax — $91 million annually is expected — will be used to support early childhood education, revitalize parks and other community initiatives, Philly.com reports.

According to Philly.com:

Philadelphia's tax will be levied on distributors. Only time will tell how much will trickle down to consumers. The tax could add up to 18 cents to the cost of a 12-ounce can, $1 to the cost of a 2-liter container, and $2.16 to the cost of a 12-pack. It will affect sodas, teas, sports drinks, flavored waters, bottled coffees, energy drinks, and other products.

It will be interesting to see how the tax will affect sugary sales in Philadelphia and if the initiative is a success, whether or not other large cities will begin to adopt similar laws. According to Jim Krieger, executive director at Healthy Food America, quoted in an article in The New York Times, San Francisco, Oakland, and Boulder, Colo., are among the group of cities considering similar taxes this year.

Packaging Perspective: Sugary beverages contribute a major percentage of the packaging for the beverage industry. But, as Fortune reported earlier this year, consumers are seeking other drink options at historic levels. If soda sales continue to wane and more cities implement taxes like Berkeley and Philadelphia, there could be significant implications for packaging. It will be gradual, but if the trend of health-conscious consumers continues, printers with substantial business stemming from sugary beverages may want to seek alternatives. The bottled water industry could be where that void is filled. As the Berkeley report indicates, since the tax was put into place, there has been a significant increase in water consumption. With several bottled-water brands providing everything from plain, purified water to flavored varieties with added vitamins, the potential is there for printers to pivot into other beverage segments.