Several sugar-sweetened drinks are packed with calories, which provide little to no nutritional value and can lead to chronic diseases, including obesity, heart disease, cancer, tooth decay, and type 2 diabetes. Further, higher consumption of sugary beverages has been associated with an increased risk of premature death.
According to a 2020 study published in the Journal of the American Heart Association, even one serving daily of a sugary soft drink is linked with a higher risk of cardiovascular disease.
Reducing Consumption of Sugar-Sweetened Beverages
Nearly nine U.S. jurisdictions and over 50 countries have implemented some form of consumer tax on sugar-sweetened drinks, particularly by taxing distributors who then pass the cost along to consumers, said Author Scott Kaplan, an assistant professor of economics at the US Naval Academy in Annapolis, Maryland.
Some U.S. cities have enacted taxes on sugary drinks at checkout, typically at the rate of 1% to 2%, Kaplan added. Other cities tax those beverages by the ounce, which increases the overall price of the product.
“Maybe you spend $1 on a 12-ounce can of soda,” he said. “If it’s a 2 cent per ounce tax, that’s an additional 24 cents on your dollar.”
The analysis, published Friday in JAMA Health Forum, evaluated per-ounce tax plans by ZIP code in Boulder, Colorado; Oakland, California; Philadelphia; Seattle; and San Francisco. The study analyzed how consumers change their consumption in response to price changes.
According to this new analysis of restrictions implemented in five U.S. cities, increasing the price of sugar-sweetened sodas, coffees, teas, and energy, sports, and fruit drinks by an average of 31% lowered consumer purchases of those drinks by a third.
“For every 1% increase in price, we found a 1% decrease in purchases of these products,” Kaplan said. “The decrease in consumer purchases occurred almost immediately after the taxes were put in place and stayed that way over the next three years of the study.”
William Dermody, Vice President of Media and Public Affairs for the American Beverage Association, told CNN that such taxes are “unproductive” and hurt consumers, small business, and their employees.
“The beverage industry’s strategy of offering consumers more choices with less sugar, smaller portion sizes and clear calorie information is working – today nearly 60% of all beverages sold have zero sugar and the calories that people get from beverages has decreased to its lowest level in decades,” Dermody added.
4 Beverage Stocks Which Might Be Vulnerable in the Aftermath of Raised Sugary Drink Prices
The Coca-Cola Company (KO), a world-famous beverage company, could face the heat after the impact of the sugar tax. Evolving consumer preferences with an enhanced focus on health and wellness coupled with sustainability have pushed soda makers across the globe to de-emphasize diet branding as they sharpen their focus on zero-sugar offerings.
KO sells its products under the Coca-Cola, Diet Coke/Coca-Cola Light, Cola Zero Sugar, Fanta, Sprite, and other brands. The company is constantly transforming its portfolio, from reducing sugar in its drinks to bringing innovative new products to the market.
Consumers worldwide are also turning to sparkling water as the low-sugar, low-calorie substitute for soda and other sugary drinks. On October 26, 2023, KO announced that its 500 ml sparkling beverage bottles in Canada will be made with recycled plastic by early 2024. This marked the first time sparking drinks will be sold in bottles made from 100% recycled plastic across the country.
Coca-Cola paid a dividend of 46 cents ($0.46) to shareholders on December 15, 2023. The beverage company has raised its dividend for 61 consecutive years. Its annual dividend of $1.84 translates to a yield of 3.08% on the current share price. The company’s dividend payouts have increased at a 3.4% CAGR over the past five years.
KO’s trailing-12-month gross profit margin of 59.14% is 75.4% higher than…
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