For many years, soda was a dominant beverage in the market, but recent local taxes have accelerated a decline in its consumption. Since 2005, numerous cities have adopted taxes aimed at sugary soft drinks, beginning with Berkeley, California, which implemented a one-cent-per-ounce tax. Similar measures have been enacted in cities like Philadelphia, San Francisco, Oakland, and Cook County, Illinois, which encompasses Chicago. In June, Seattle’s City Council voted 7-1 in favor of a soda tax after extensive discussions about its various implications. Major soda companies such as PepsiCo, Coca-Cola, and Dr Pepper Snapple—whose revenue is significantly affected—have protested these taxes, labeling them as unjust money grabs by local governments that unfairly target their products. They argue that if the goal is to reduce sugar consumption, then other sugary items like candy and ice cream should also be taxed.
Brian Kuz, Chief Marketing Officer at Talking Rain Beverage Co, which produces Sparkling Ice fruit-flavored waters, acknowledged that while obesity is indeed a concern, soda is not the sole factor contributing to the issue. He stated, “Sugar is just one piece of a larger puzzle that includes fatty foods, poor diet, and a lack of exercise.” He emphasized that singling out soda for taxation is arbitrary given the broader context.
Proponents of soda taxes argue that they are necessary for community welfare. Mike Dunn, Deputy Communications Director for Philadelphia, pointed out that the city has been grappling with issues like poverty and inadequate education. The soda tax aims to redirect some of the profits from the beverage industry—an industry that has historically profited from low-income communities—back into essential community programs.
However, retailers are experiencing significant losses due to these taxes. A study in Berkeley found that sales of sugary beverages dropped by approximately 9.6% in the first year after the tax was introduced. In Philadelphia, the city’s 1.5 cent per ounce soda tax led PepsiCo to announce layoffs of 80 to 100 workers after sales plummeted by 40%. With the ongoing debate surrounding soda taxes, the question of who is right remains contentious.
Jim O’Hara, Director of Health Promotion Policy at the Center for Science in the Public Interest, supports soda taxes due to the adverse effects of excessive sugar intake on public health, including increased risks of obesity, heart disease, Type 2 diabetes, and dental problems. He argues that tax revenue can help communities address the costs associated with these chronic diseases. O’Hara noted that in areas where soda taxes are implemented, there has been a reduction in sugary drink consumption alongside an increase in healthier beverage purchases. Supporting this view, a Public Health Institute study from Oakland indicated that since the Berkeley soda tax was enacted, sugary drink purchases fell by 9.6%, while healthier beverage consumption rose by 3.5%.
Nancy Brown, CEO of the American Heart Association, has urged the beverage industry to recognize the positive impact these taxes can have on community health. The Philadelphia beverage tax is expected to finance vital investments in quality pre-K education, community schools, and the renovation of public spaces such as parks and libraries. Dunn noted that enhancing public spaces can improve safety, increase educational opportunities, and create jobs in Philadelphia neighborhoods. Following the tax’s implementation, Philadelphia has created 251 pre-K jobs and provided quality early education to 1,870 children.
As eight local jurisdictions in the U.S. have approved taxes on sodas and other sugary drinks, researchers from Harvard and Tufts University suggest that more areas may follow suit. Just five years ago, soda tax initiatives were largely dismissed as failures before they even had a chance to be voted on. Now, they are viewed as having a legitimate chance of becoming law.
The beverage industry has invested millions to combat these taxes, with some successes. For instance, voters in Santa Fe rejected a tax increase on sweetened beverages in a recent election. Lauren Kane, spokesperson for the American Beverage Association, argued that soda taxes disproportionately hurt low-income families and small businesses, pointing out that beverage sales at Shop Rite stores in Philadelphia have dropped between 10% and 25% since the tax was enacted. She highlighted the broader retail impact, mentioning that consumers are increasingly shopping outside of Philadelphia to avoid the tax.
Opponents of the tax argue that the government should not dictate consumer choices through taxation. Al Soricelli, CEO of True Citrus, questioned the accountability of tax revenues, suggesting that if certain ingredients are proven harmful, they should be regulated like cigarettes and alcohol.
Soda manufacturers, grocers, and other stakeholders in the beverage industry are feeling the ramifications of the soda tax. For example, Pepsi ceased distribution of two-liter bottles and 12-packs to retailers in Philadelphia shortly after the tax was introduced, leading to the layoff of up to 100 workers. The Philadelphia soft drink distributor Canada Dry Delaware Valley cut a fifth of its workforce after witnessing a 45% business drop within the first five weeks of 2017. A supermarket owner reported a 15% decline in sales in just over a month, labeling the situation as “devastating.”
Kuz from Talking Rain noted that soda has historically been used to attract shoppers to grocery stores, where they would purchase other items. However, the tax-induced slowdown in soda sales may necessitate price hikes in other product categories to offset the losses. He expressed skepticism that the shift toward healthier beverages would compensate for the revenue decline from taxed products, leading to an overall loss for retailers.
After a contentious legal battle, the soda tax in Cook County, Illinois, took effect recently, despite challenges from the Illinois Retail Merchants Association and several grocers. Although a judge ruled against the retailers, they have appealed the decision. The tax, which was passed by the county council in November, is designed to stabilize the county’s finances and is projected to generate $67.5 million in 2017 and $200.6 million the following year.
The tax applies to both sugar-sweetened and artificially sweetened beverages, but not to homemade drinks. This has led to confusion among consumers. As the tax was implemented, shoppers in Chicago faced unexpected prices, with some opting to stop buying taxable products or to shop outside the county altogether.
The future remains uncertain regarding the appeal’s outcome and the tax’s effectiveness in alleviating Cook County’s budgetary issues. Studies indicate that soda taxes tend to reduce consumption, but the long-term impacts on retailers, manufacturers, and public health will unfold in the coming months. In the context of these discussions, it is also important to consider the calcium citrate indications and how they relate to consumers’ choices in beverages, as they might influence health-conscious decisions among the public.