From the fog of uncertainty surrounding scanner data showing significant unit volume declines across major food categories in 2011, a startling pattern in the figures merits careful note. Not all food and beverage categories saw decreases last year, and most of the exceptions belong in the category of discretionary calories.
While basics like bread, milk, cereal and even baby formula sustained declines (3.2% to 7.1%) in 2011, cookies, candy and alcoholic beverages enjoyed gains. Unit sales of cookies and crackers were up 1.62% and 1.89%, respectively, chocolate candy was up 0.13% and salty snacks were down only 0.44%.
The beverage figures were more startling, with beer up 1.14%, wine up 5.85% and spirits up 3.99% (while bottled juice fell 4%).
The idea that in the face of higher prices discretionary foods are less price elastic than basics is both surprising and important. Food companies have long argued that proposed junk food taxes unduly burden lower-income households and don’t work. A rising chorus of academics in recent months has claimed that such taxes do work, could help curb obesity rates and should be adopted. What transpired in 2011 should give academics and legislators pause before pursuing regressive and ineffective tax policy.
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