Price elasticity of demand for ready-to-drink sugar-sweetened beverages in Brazil

Abstract

The taxation of sugar-sweetened beverages is a policy that has been adopted in many countries worldwide, including Latin American, to reduce sugar consumption. However, little is known about how taxation on these products may affect their demand. The present study aims to estimate the price elasticity of demand for sugar-sweetened beverages in Brazil. This study advances the literature by proposing a breakdown between ready-to-drink sugar-sweetened beverages and sugar-sweetened beverages that require some preparation before being consumed. With this disaggregation, it is possible to obtain more accurate elasticities for the group of products that will be effectively taxed. We estimated a Quadratic Almost Ideal Demand System (QUAIDS) model using the Household Budget Survey 2017–2018 microdata. The results show that ready-to-drink beverages is more consumed but less sensitive to changes in price than prepared beverages. The price elasticity of demand for ready-to-drink and prepared sugar-sweetened beverages was -1.19 and -3.38. Additionally, we observe heterogeneity in these price elasticities across household incomes, with a more elastic demand among lower-income households for ready to drink beverages. The findings suggest that taxing ready-to-drink sweetened beverages could potentially reduce sugar consumption directly through a decrease in the consumption of sugary drinks and this effect could be reinforced by reducing the consumption of other sugar-rich products. Therefore, the taxation police should effective contribute to minimize health risks associated to the sugar consumption.

Estimated reduction in obesity prevalence and costs of a 20% and 30% ad valorem excise tax to sugar-sweetened beverages in Brazil: A modeling study

“…Differences in the categorization of food and beverage items and in the caloric content of products could have also contributed to the reported divergences. Given the observed difference, we searched for independent assessments of elasticities in Brazil and found a recent report by Venson and colleagues [ 39 ] using the same dataset (the 2017–2018 Brazilian Household Budget Survey), a similar model (QUAIDS model) together with censored demand and household data [ 39 ]. Using the elasticities by Venson and colleagues, we found similar results to our analysis, suggesting that this more sophisticated approach concurs with our analysis.…”