Non-alcoholic beverage demand across income groups and effects on sugary beverage taxation in Germany

Abstract Background Due to their high sugar content, sugar-sweetened beverages (SSBs) have been identified as an important contributor to the global epidemic of obesity which poses a large health and economic burden on individuals and social care systems. To reduce their intake, several countries have implemented taxes on SSBs. In Germany, the potential effects of SSB taxation on SSB purchasing across household income categories are unknown. Methods We used two waves of a nationally representative household consumption survey (2013 and 2018) to estimate the demand for six non-alcoholic beverage categories (flavored milk, plain milk, water, SSBs, juice, coffee & tea) in Germany across household income strata using an economic Almost Ideal Demand System. We estimated own- and cross-price elasticities that enable the prediction of changes in beverage consumption based on changes in beverage prices. Using these estimates, we simulated how beverage consumption would change under two scenarios: (1) 20% value added tax on SSBs, and (2) 20% value added tax on SSBs, fruit juice, and flavored milk. Results We find that the demand for SSBs, fruit juice, and flavored milk is sensitive to price changes, particularly among low- and middle-income households (p-values of own-price effects <0.001). A 20% added value tax on SSBs would reduce the average monthly amount purchased per household by around 3.4 liters. High-income households would only reduce their SSB purchases by 1.5 liters, while those with a low or middle income would reduce purchases by 4.0 and 4.8 liters, respectively. Including fruit juice and flavored milk in the tax would only lead to small additional effects. The financial burden of taxation was consistently twice as large for low- versus high-income households. Conclusions SSB taxation in Germany would be financially regressive but could help reducing health inequalities as sugar reductions are concentrated among low- and middle-income households. Key messages • German consumers across income strata are sensitive to changes in prices of unhealthy sugary beverages. • Taxation of sugar-sweetened beverages would particularly lead to fewer purchases among low- and middle income households, which could lead to a reduction of health inequalities.