Brief

Pepsi lays off 80-100 workers in Philadelphia, blaming soda tax

Dive Brief:

  • PepsiCo Inc. said it would need to lay off 80 to 100 workers in Philadelphia, blaming the city’s new sugar-sweetened beverage tax, according to Reuters.
  • On Jan. 1, the city of Philadelphia enacted a tax of 1.5 cent per ounce on sugary and diet drinks in an attempt to combat rising obesity and diabetes.
  • Since the tax was imposed, PepsiCo saw a decrease in sales by 40% in Philadelphia.

Dive Insight:

The 1.5-cent-per-ounce tax on sweetened beverages instituted in Philadelphia in 2017 has been a huge drain on the soda market, with some analysts estimating sales have dropped by as much as 50% year over year.

Philadelphia soft drink distributor Canada Dry Delaware Valley — which is laying off a fifth of its workforce — said business plummeted 45% in the first five weeks of 2017. Other distributors have seen similar figures.

Right now, other cities are considering a similar tax on sugary beverages —Seattle and Santa Fe among them. Soda sales were dwindling before this tax took effect because of consumer preferences shifting to healthier, better-for-you options. This could be another strike against soda sales, causing deeper declines in the near future.

However, these moves in Philadelphia seem somewhat atypical. Berkeley, CA imposed a one-cent-per-ounce tax 2015. Researchers found retailers chose not to pass the entire tax on to consumers. And while soda sales were down 21% in Berkeley last year, there have been no reports of job losses in the soda industry in the San Francisco Bay Area, where several other towns nearby passed soda taxes last year.

Some may think the announcement could be a way to draw attention to the tax so that consumers fight to change the law. After all, soda companies fought the hardest against the tax, with the American Beverage Association spending $10.6 million to oppose it in Philadelphia, even unsuccessfully taking the city to court. Others feel that soda companies and distributors could be severely affected, and this is only the beginning. If the latter is the case, more layoffs could happen and sales of soda could continue to decline.

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Filed Under: Manufacturing Corporate Beverages
Top image credit: PepsiCo