Coca-Cola, PepsiCo Hit With Tax Wave As Cities Punish Soda
Coca-Cola Co. and PepsiCo Inc. are facing a wave of new soda taxes after four U.S. cities voted to pass the measures, part of an escalating war on sugary drinks.
Proposals to slap a 1-cent-per-ounce tax on sugar-sweetened beverages are poised to pass in the California cities of San Francisco, Oakland and Albany. In Boulder, Colorado, meanwhile, a 2-cents-per-ounce tax is leading. Cook County, which includes Chicago, also has a similar penny-per-ounce tax written into its proposed 2017 budget.
The levies bring fresh headaches to soda companies already coping with a shift in consumer tastes away from their core products. Per capita soda consumption in the U.S. fell to a 30-year low in 2015, according to data compiled by Beverage Digest, a trade publication. But Coca-Cola and PepsiCo both announced plans to deal with their sugar problems last month, including a move toward smaller beverage sizes.
The new taxes underscore the need to take more dramatic action, according to Ali Dibadj, an analyst at Sanford C. Bernstein & Co.
“It clearly accelerates it,” he said on Tuesday. “Soda taxes just add to the impetus for them to be mindful of price mix as an element of growth and innovations and other things,” rather than just focusing on increasing volumes.
The American Beverage Association, an industry trade group, said on Wednesday that it respected the decision of voters.
“Our energy remains squarely focused on reducing the sugar consumed from beverages -- engaging with prominent public health and community organizations to change behavior,” the association said in a statement.
Prior to the votes on Tuesday, Philadelphia and Berkeley, California, were the only U.S. cities to have similar measures on the books. Philadelphia became the first major city to pass such a tax in June after proponents changed tactics to focus on badly needed funding rather than health benefits.
Since 2009, there have been more than 40 attempts to enact a soda tax in cities across the U.S.
More than $40 million was spent on the battle over sugary drinks in the San Francisco Bay Area, $20 million of which came from the American Beverage Association, a trade group representing the big beverage companies, according to Bloomberg BNA.
Former New York City Mayor Michael Bloomberg gave more than $18 million to campaigns in support of the Oakland and San Francisco soda tax initiatives, finance records show. Bloomberg is the founder of Bloomberg LP, the parent organization of Bloomberg News.
The latest ballot victories mean a large swath of the Bay Area, with the bordering cities of San Francisco, Oakland, Berkeley and Albany all embracing a similar policy.
Sandy Douglas, president of Coca-Cola North America, said he disagrees with the approach.
“We believe there are better alternatives for encouraging moderation in sugar consumption than higher taxes,” he said in an e-mailed statement. “Across our portfolio, we are offering more drinks in smaller sizes. We also are reformulating and reducing sugar in a number of our existing beverages, and innovating to create more new low- and no-calorie product choices.”
The amount of industry spending makes it clear that the soda companies think the taxes put a lot at stake, according to Marion Nestle, a New York University nutrition professor and author of “Soda Politics: Taking on Big Soda (and Winning).” These taxes will also inspire other communities to follow suit.
“Why would you put millions and millions and millions of dollars into fighting this in every community that is coming up with one of these if you didn’t think it would make a difference and a big one,” she said. “It will have an enormous impact.”
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