For many years, soda reigned as a dominant beverage, but it is now facing local taxes that have accelerated a decline in its consumption. Since 2005, numerous cities have introduced taxes, starting with Berkeley, California, which implemented a one-cent-per-ounce tax on sugary soft drinks. Similar taxes have been enacted in Philadelphia, San Francisco, Oakland, and Cook County, Illinois, which includes Chicago. Recently, Seattle’s City Council voted 7-1 in favor of a soda tax after months of discussions regarding its details. Major beverage companies like PepsiCo, Coca-Cola, and Dr Pepper Snapple, which stand to lose millions in revenue, have protested against these taxes, labeling them as unfair municipal money grabs that target their products specifically. They argue that if the goal is to reduce sugar consumption, other sugary items like candy and ice cream should also be taxed.
Brian Kuz, chief marketing officer of Talking Rain Beverage Co, producer of Sparkling Ice fruit-flavored waters, acknowledged that while obesity is a significant issue, soda is not the sole contributor. He stated in an email to Food Dive, “Sugar is a small part of the problem, along with other fatty foods, an unbalanced diet, and a lack of exercise. It is arbitrary to single out soda for taxation above other food categories.” Proponents of soda taxes argue they are essential for community welfare. Mike Dunn, deputy communications director for Philadelphia, highlighted the city’s struggles with poverty and education, stating that the soda tax is a means to alleviate these issues by redirecting some of the industry’s profits into community programs.
Retailers, however, are suffering considerable losses due to these taxes. A study in Berkeley found that sales of sugar-sweetened beverages fell by approximately 9.6% in the first year of the tax. In Philadelphia, where a 1.5 cent per ounce tax was introduced, PepsiCo announced plans to lay off 80 to 100 employees after experiencing a 40% drop in sales. Amid the ongoing debate over the necessity of soda taxes, Jim O’Hara, director of health promotion policy for the Center for Science in the Public Interest, emphasized the public health implications of excessive sugar consumption, which has been linked to obesity, heart disease, Type 2 diabetes, and tooth decay. O’Hara noted that in areas with soda taxes, there has been a reduction in sugary drink consumption alongside an increase in healthier beverage purchases.
A Public Health Institute study corroborated his claims, revealing a 9.6% decline in sugary drink purchases following the Berkeley soda tax, while healthier beverage consumption rose by 3.5%. Nancy Brown, CEO of the American Heart Association, urged the beverage industry to recognize the positive effects these taxes can have on community health. In Philadelphia, the soda tax is helping fund vital investments in quality pre-K education, community schools, parks, recreation centers, and libraries, with a total of $300 million allocated for these projects. Since the tax was implemented, Philadelphia has created 251 pre-K jobs and provided quality early education to 1,870 children.
With eight local jurisdictions in the U.S. adopting taxes on sugary beverages, researchers from Harvard University and Tufts University suggest that more areas may follow suit. Just five years ago, soda tax initiatives were dismissed as failures before any campaigns or votes took place. However, they are now viewed as having a reasonable chance of success. The beverage industry has invested millions to oppose these taxes, with some victories; for example, voters in Santa Fe rejected an increased tax on sweetened beverages in May.
Lauren Kane, spokeswoman for the American Beverage Association, argued that soda taxes disproportionately affect working families and those living paycheck to paycheck. She also pointed out the negative impact on small businesses, particularly in Philadelphia, where beverage sales at Shop Rite locations have dropped by 10-25% since the tax’s introduction. Some businesses argue that the government should not influence consumer choices through taxation. Al Soricelli, CEO of True Citrus, stated that if certain ingredients are deemed harmful, the FDA should regulate them rather than impose taxes.
Soda manufacturers and retailers are feeling the strain of the soda tax. Three months after the tax was implemented in Philadelphia, Pepsi ceased distributing two-liter bottles and 12 packs of soda to local retailers, leading to layoffs of up to 100 workers. Canada Dry Delaware Valley, a local distributor, was forced to cut 20% of its workforce after business plummeted by 45% in the first few weeks of 2017. One grocer reported a 15% drop in sales within just over a month, describing the impact as “devastating.” Kuz from Talking Rain noted that soda has long been used as a loss leader to attract customers to grocery stores, where they would buy other items. However, with a tax in place, sales volumes decrease, leading to reduced profitability and potential price hikes in other product categories.
In Cook County, Illinois, a soda tax recently went into effect after a contentious legal battle. The penny-per-ounce tax, approved by the county council in November, faced challenges from the Illinois Retail Merchants Association and various grocers. Although a circuit court judge ruled against the retailers, the tax took effect on August 1. The tax applies to both sugar-sweetened and artificially sweetened beverages, creating confusion among consumers. Some shoppers have already started avoiding taxed products or shopping outside of the county.
As the soda tax is collected, Chicago-area consumers are expressing confusion over the prices, and some have stopped buying taxable products altogether. The long-term effects of the tax on the local economy, retailers, and public health remain uncertain. As for the soda tax’s ability to address Chicago’s financial challenges, time will reveal its true impact.