January 20, 2016
When we have to make a choice between two or more foods certain things may determine our decision: Which one do we think tastes better? Which one fits our diet? More times than not, the choice comes down to which items cost less — whether subconsciously or intentionally.
Low income consumers in particular are looking for the best priced products. They also tend to be the most susceptible to obesity. However, even the smallest of price differences can sway the consumer to purchase the product. What does this have to do with weight management and obesity? In two words: “Fat Tax.”
Fat Tax is a theory that adding additional charges on unhealthy food and drinks may help slow the rising rates of obesity. To test the validity of the tax’s effects, researchers conducted a study consisting of data spanning over six years and 1,700 nationwide supermarkets.
The focal point of the research was milk and its varying prices. At some stores there was no price differentiation of milk across all fat content; however, at some stores, the milk was priced higher based on contents of fat. Therefore, whole milk was the most expensive and skim milk was the cheapest.
How did the price range effect milk sales? The slightest difference of 14 cents showed substantial deviation from the higher fat options to the lower-fat options, particularly in lower income areas. Even though the results were significant, it still may not indicate how effective a Fat Tax would fare. More measured assurances about how the tax would perform are needed before it is implemented.
“The general perception is that these taxes need to be substantial, at least 20 percent and often as high as 50 percent, to have meaningful impact,” says Vishal Singh of New York University. “Here, we have compelling field-based evidence that such taxes don’t need to be high to be effective.”
He may have a point. The price shift of the items was minimal (as much as 10 percent), and yet the difference in what was sold considerable, and performed best in low income areas where obesity is at its highest risk.
What do you think about a Fat Tax? Do you think it’s something that should be implemented in America?
Source: Institute for Operations Research and the Management Sciences
Blog written by Marcus Miller/Robard Corporation