Supply Pricing Responses to Sweetened Beverage Taxes at a Large National Fast-Food Chain

More than one-third of adults consume fast-food daily, including sugar-sweetened beverages (SSBs) that contain more than the recommended daily allowance of calories from added sugars in one serving. Taxes on sweetened beverages are a promising solution to reduce the consumption of SSB and their potential contribution to obesity. However, these form of taxes must induce higher prices to reduce the demand for these products. This paper focuses on the passthrough of these taxes to prices of fast-food restaurants in five U.S. localities that implemented taxes between 2017-2018. Leveraging detailed national data from Taco Bell locations between 2015 and 2020 we estimate a synthetic control event-study design. Our results show an (almost) complete passthrough of the tax to single-serve beverages in cities taxing sugar- and artificially-sweetened beverages (Philadelphia, PA, and Cook County, IL). We find no significant price changes in locations taxing only sugar-sweetened beverages (Seattle, WA, Albany, CA, and Oakland, CA). Restaurant responses remained consistent into the second year post-tax in the four locations that retained the tax. These findings underscore the importance of the tax design of beverage to their potential success.