Walk into a grocery store in New York, pick up a single-serving bottle of water, and you’ll notice something at the checkout: a five-cent deposit tacked onto your bill. Return the empty bottle later, and you get your nickel back. It sounds simple enough. But does this kind of policy, known as a “bottle bill,” quietly change what shoppers buy and what retailers charge?
That question drove a new investigation published in the Journal of Marketing. The researchers found that after New York expanded its bottle deposit law to cover plain bottled water in 2009, retailers raised shelf prices on the affected bottles by about 4%, while total volume sales in the water category dropped by 6%. Shoppers didn’t stop buying water. Many of them just started buying it in bigger containers.
The question behind the research
Plastic waste has doubled over the past two decades, and less than 10% of it gets recycled globally. Bottle bills are one of the most common tools governments use to push recycling rates higher. States with bottle bills tend to have recycling rates near 70%, compared with under 30% in states without them. The environmental case is fairly settled.
The economic case is messier. Beverage industry groups argue that bottle deposits hurt consumers and retailers. Environmental advocates argue the opposite. Until recently, the academic record had surprisingly little to say about what actually happens to prices and sales after a bottle bill takes effect.
Kristopher O. Keller, an assistant professor of marketing at the University of North Carolina at Chapel Hill’s Kenan-Flagler Business School, teamed up with Jonne Y. Guyt of the University of Amsterdam to take a detailed look. They wanted to answer three questions: Do prices change for bottles covered by the law? Do sales change, including for bottles not covered? And what might explain any shifts they found?
How bottle bills differ from soda taxes
Before getting to the findings, it helps to understand what a bottle bill is and what it isn’t. A soda tax is a charge added to the price of sugary drinks, usually collected from distributors, designed to discourage consumption and raise revenue. A bottle bill, by contrast, adds a refundable deposit, typically a nickel per container, that consumers pay at checkout and can get back by returning the empty bottle.
In principle, the deposit is supposed to be neutral: if you return the bottle, you get your money back. In practice, return rates hover around 70%, and returning bottles takes time and effort. So some consumers may perceive the deposit as something closer to a price increase.
New York’s 2009 expansion covered plain bottled water in containers smaller than 128 fluid ounces (one gallon). Larger jugs were exempt. That distinction set up a natural experiment: some package sizes were hit by the new rule, others weren’t.
Tracking every bottle, week by week
The researchers used weekly sales data from NielsenIQ’s Retail Measurement Services, covering 110 unique bottled water products sold across 1,415 stores in New York. They compared sales and prices for the 52 weeks before the law took effect with the 52 weeks after. For a comparison group, they used the same products sold by the same retailers in stores located in states that did not have bottle bills, excluding neighboring states to avoid cross-border shopping effects.
To analyze the data, they used a technique called synthetic difference-in-differences. In plain terms, this method builds a weighted “synthetic” version of what New York’s sales would have looked like without the law, based on patterns from control states. Comparing actual New York sales to this synthetic version isolates the effect of the policy.
What the numbers showed
The pattern was clear and consistent. For bottles covered by the law, retailers raised shelf prices by an average of 4%, with the biggest jumps on the smallest bottles. Prices on 8-ounce and 11-ounce containers went up by 12% to 13%. Prices on the popular 16.9-ounce size rose by about 5.5%. Prices on bottles not covered by the law, the 128-ounce and 320-ounce jugs, barely moved.
Sales told a matching story. The 16.9-ounce size lost about 15% of its volume. Meanwhile, larger sizes, including the uncovered gallon and 2.5-gallon containers, gained roughly 10%. Net category sales dropped 6%.
The team replicated these results using a similar bottle bill introduced in Connecticut around the same time, and the patterns held.
Three explanations for the shift
Why would consumers move toward larger sizes and retailers raise prices mostly on smaller ones? The researchers tested three possible explanations.
The first was ideological aversion. Some consumers dislike government regulation more than others. Using voting patterns from the 2008 presidential election as a rough gauge, the researchers found that in markets leaning Republican, the shift toward larger bottles was more than 2.7 times stronger than in markets leaning Democratic, even after accounting for housing size and storage space. Consumers less receptive to the policy appeared more willing to sidestep it by buying uncovered sizes.
The second was price sensitivity. The idea here is that when consumers move to larger sizes, the shoppers still buying small bottles might be less price-sensitive, giving retailers room to raise prices. The household-level analysis didn’t find strong evidence for this mechanism.
The third was retailer costs. Stores have to install bottle return machines, pay staff to manage them, clean up spills, and front the deposit money on their inventory. The researchers found that retailers with more water products on their shelves, and those for whom water made up a larger share of beverage sales, raised prices on covered bottles more than retailers with less operational exposure.
What this means for the bigger picture
One concern raised by industry groups is that bottle bills could paradoxically increase plastic waste if consumers shift to larger, uncovered containers that use more plastic overall or aren’t recycled at the same high rates. The researchers ran a scenario analysis combining their sales estimates with data on plastic weight per package and typical recycling rates. They found that the shift toward larger sizes has a small effect on total plastic sold, but the jump in recycling rates from 30% to 70% for covered bottles reduces overall plastic waste by about 44%.
For retailers, the takeaway is that bottle bills are not sales-neutral. The price increases help offset added handling costs, but whether they fully cover them depends on margins and operational scale. For policymakers, the findings suggest that if the goal is to avoid passing costs to consumers, reimbursement for retailers may need to be generous enough to cover the real operational burden, which varies from store to store.
One caveat: this research covers still water in two states that already had bottle bills for other beverages. Effects could look different in places adopting bottle bills for the first time or expanding them to new categories.
