Firms’ Advertising Strategies and Effectiveness of Traditional Advertising under Sugar Sweetened Beverage (SSB) Tax Policy

I estimate the causal effects of soda tax policy on firms’ advertising strategies and its effect on advertising elasticity in Berkeley across major diet and regular soda brands. Using weekly sales and advertising spending data from 2014 to 2015, I analyze the impact of Berkeley, California’s soda tax policy, passed on November 2014, on the advertising effectiveness for diet and regular soft drinks across major brands, as well as its impact on firms’ advertising expenditure. While existing literature provides evidence of advertising effectiveness across various products from a marketing perspective, I examine how this effectiveness changes under soda tax policies, a public health tool frequently used to mitigate the health risks of excessive sugar intake from soft drink consumption. I find evidence that advertising is less effective in the regular soda category under such policies in Berkeley compared to the beverage category, which was not taxed. I also find significant evidence that firms reduced advertising spending for regular soda by approximately 16.4% in the post-policy Berkeley. Additionally, firms adopted spatial marketing strategies, decreasing advertising spending near Berkeley while increasing it in more distant areas. These findings offer new insights into soda tax policies and have important implications for manufacturers’ pricing and marketing strategies, as well as for policymakers regarding public health outcomes.