Kombucha vs. Coke: Seattle's sugary beverage tax explained | KNKX

Kombucha vs. Coke: Seattle's sugary beverage tax explained

Aug 20, 2019

Standing in front of the chilled beverages at Metropolitan Market, it may seem like a simple task to say which drinks are subject to Seattle's soda tax. The local chain even makes it clear right on the price tag.

Coca-Cola, Pepsi, Sprite – all sugary beverages are taxed accordingly. Savvy consumers can probably guess that even more artisnal fare, such as DRY Soda or ginger beer, would see price hikes. It is all soda, after all.

But things start to get fuzzy once you hit the wall of kombucha.

Kombucha is a fermented tea drink. It has become trendy in recent years, in part because of its touted health benefits. But sugar is a key ingredient in the fermentation process. So in the eyes of Seattle's sugary beverage tax, most brands of kombucha are eligible for price increases just as high as the Coke down the aisle.

HOW IT WORKS

Seattle's sugary beverage tax is calculated based on fluid ounces of the drink, not the amount of sugar per beverage. A 20-ounce bottle of Coke is subject to the same tax rate as 20 ounces of kombucha, $0.0175 per ounce or about 35 cents per bottle.

The tax is paid to the city by beverage distributors. This structure can make the cost increases somewhat opaque to consumers. Distributers pass costs onto retailers, who then pass costs onto customers. 

Retailers ultimately decide what consumers see, whether it's a note on a price tag, a surcharge on a receipt, or just increased prices without any indication. There are no requirements that changes be communicated.

"The tax is between the city and the distributor," said Cyndi Wilder, a spokeswoman for the city's Finance and Administrative Services department, adding that distributors' and retailers' product prices are considered "a private business decision." 

Theoretically, distributors and retailers are not required to pass on costs. But in a report released early this year, University of Washington researchers found nearly all of the tax is being passed on to consumers.

WHAT COUNTS 

Most drinks with added sugar are subject to the tax. Major exceptions include alcoholic beverages, drinks with 100 percent fruit juice and milk drinks. 

But there are still some elements that can be confusing. Coffee drinks with syrup that are not primarily milk-based are subject to the tax, but the calculations can get complicated as retailers and distributors figure out how much syrup goes into those drinks. 

In the case of kombucha, most brands are subject to the tax because they contain sugar or honey. But there also is an exemption for drinks that are fewer than 40 calories per 12-ounce serving, which some brands meet. There also are special provisions for small manufacturers.

Jim Krieger, a UW professor and executive director of Healthy Food America, says there is no scientific evidence of the health claims for kombucha. That makes the drink different from exemptions such as chocolate milk, 100 percent fruit juice and even diet drinks, which have been shown to have other health benefits.  

"For products with added sugar, the scientific evidence is rock solid that those are associated with poor health outcomes," Krieger said.

IS IT WORKING?

The tax has been in place since 2018. But questions about whether it's working to reduce soda consumption surfaced again this year, as Seattle's mayor and city council fought over how to use the revenue.

The tax raised nearly $23 million in 2018, about $7 million more than what was initially projected when the council passed the tax two years ago. Seattle is on track to see a similar amount in soda tax revenue this year.

The steady revenue flow has prompted a question about whether consumption can be going down if people seem to be buying as much soda as they did last year. 

Krieger, who also co-chairs the community advisory board for the sugary beverage tax, says the city's initial projection vastly underestimated soda consumption. 

In Philadelphia and Berkeley, California, which have enacted similar taxes, there was a sharp decrease in soda sales after their taxes went into effect. Sales then leveled out, but at a lower rate. 

In other words, people in those cities are still buying soda, but not as much as they were before the tax.

The research team that looked at cost pass-throughs in Seattle will be releasing another report in a few months looking at pre- and post-tax sales data. That report will give a clearer picture about consumption.