Understanding the Demand for Sweet Foods and Sweeteners

Obesity is a significant problem in the U.S., with most adults considered overweight or obese due to poor diet and high sugar consumption. To address this issue, policies have been implemented to subsidize healthy foods and tax unhealthy ones. However, much of the research backing these policies has focused on sugar-sweetened beverages, neglecting other sugary foods that also contribute to weight gain. Understanding how consumers interact with these sugary products is crucial for creating effective obesity prevention strategies. To this end, we investigate demand for various sweet foods and sweeteners using a two-stage budgeting approach based on an advanced demand model. It captures complex Engel curves while accounting for consumption pre-commitments and unobserved differences among consumers. Additionally, instead of unit values, we use the GEKS price index1, which effectively manages product churn, reduces bias from substitution and chain drift, and aligns with economic principles. Results show precommitment to sugary foods in consumers' diets and indicate that foods in this group substitute for one another. We further simulate the effects of hypothetical ad valorem taxes on sugary food consumption, consumer body weight, health, and welfare. This information can help consumers and policymakers reduce consumption of sugary foods and combat the obesity epidemic.