Last month, the united kingdom government published draft legislation for a tax on sugar-sweetened drinks, which is set to start from April 2023. The speed has yet to be set but it's hoped the move can help tackle the nation’s obesity problem.
What is clear, however, is that the drinks market is trying to make any levy as low as possible when in fact it must be high in to change pricing behaviour in a meaningful way.
Our paper, published within the Journal of Business Research, conveys a very important point that's fundamental to public policy making in this area but that has been entirely overlooked. This really is the current grounds for intervention to limit the excessive volume of sugary drinks rests entirely on the premise this will be great for the health of consumers along with a cost saving to society from reduced healthcare costs.
However, you will find good economic reasons as well as health good reasons to possess a sugary drinks tax as a way to curb excessive consumption of calorie-laden sugary drinks and encourage more effective pricing. A soft drinks industry levy needs to be set high enough to ensure that the retailers are discouraged from imposing a surcharge on smaller drinks sizes, which penalises moderating consumption to be able to steer consumers towards consuming excessively through relative discounts and multi-buy offers on large drinks sizes.
In one recent example of the kind of temptation that value size pricing offers consumers, a leading supermarket retailer selling a sugary carbonated drink was offering the following prices before Christmas: buy two 1.75 litre bottles for lb2 (1470 kcal at 2.3 pence per teaspoon of sugar), one 1.75 litre bottle for lb1.66 (735 kcal at 3.8 pence per teaspoon of sugar) a treadmill 0.5 litre bottle for lb1.25 (210 kcal at 9.9 pence per teaspoon of sugar). The unit cost of the second small size bottle was a lot more than 4 times greater than around the multi-buy offer on the large size bottle.
Similar incentives to 'go large' exist at restaurants, fast-food outlets along with other eateries where for a few extra pence or cents consumers can supersize their sugary drinks and have free refills.
It is no wonder that many consumers feel compelled to take benefit of the size discount after which consequently overconsume. Equally, those consumers sticking with the small size can feel aggrieved at being penalised if you are paying a high price for his or her discipline in restricting their consumption.
It is the exploitation of these disciplined consumers which puts off other consumers from restricting their purchase sizes towards the temptation of grabbing a supposed bargain due to the way the offer is couched like a 'discount', much more fact, it's the small size which suffers a 'surcharge' from which the retailer can handsomely profit.
Policy measures which dissuade retailers from using such pricing tactics to drive higher volumes of sugary drinks are thus justified on health insurance and economic grounds.
Containing big soda: Countering inducements to buy large-size sugary drinks', Paul Dobson, Ratula Chakraborty and Jonathan Seaton, is published in the Journal of Business Research.