- With eight local U.S. jurisdictions approving taxes on sodas and other sugary beverages, it is likely others will adopt similar taxes, researchers from Harvard University and Tufts University said in a study published last week in the journal Food Policy.
- Researchers found several similarities in the jurisdictions that passed the taxes. They tended to be Democrat-dominated areas with significant financial support for the pro-tax measure. In addition, city or county leaders tended to support the initiative, and the message behind the tax was that it would help improve public health — not raise money.
- The ground is most fertile for the taxes to spread to other urban areas. According to statistics, 73 of the 100 largest cities in the United States have Democratic mayors, and 86% of the 100 most populous counties in the nation voted Democrat in the 2012 presidential election. It is currently not likely to be something that comes to a full state, as party politics and lobbying tend to sway what goes on there. Researchers are not optimistic that a nationwide soda tax will be enacted during the current administration and Congress.
Just five years ago, soda tax initiatives were roundly dismissed as colossal failures before any campaigning was done or votes were cast. According to the study, until the successful passage of Berkeley, California's soda tax in 2014, similar municipal measures had failed at least 40 times. Now, the taxes — like the one most recently passed by Seattle's City Council — are seen as having at least a fair shot of becoming law.
Though consumers have become more aware of the health problems posed by soda consumption in the recent past, this is only a part of the reason the taxes have been successful. The study looks at the way Berkeley city leaders were able to get the tax to pass, which did not involve a strict anti-soda campaign.
In neighboring San Francisco, proceeds of a proposed 2014 soda tax were formally earmarked to be spent on "nutrition, physical activity and health programs in public schools, parks and elsewhere." Berkeley's tax proceeds, on the other hand, were not directed anywhere in particular, but the law enacting it put in place a panel of experts to make funding recommendations for children's health programs. Because of the earmarked proceeds, San Francisco's initiative — which got 55% of the vote — needed two-thirds approval to be enacted. Berkeley's tax — which got 76% of the vote — did not.
According to the study, the only jurisdiction to have successfully approved a soda tax with earmarked proceeds is Philadelphia. A proposed tax in Santa Fe, which would have financed an effort to subsidize preschool, failed at the ballot box last month.
Aside from campaign strategy and how money is spent, the issue of taxing soda and sugary beverages has been bolstered by a success rate and health messages that go along with it. Last year, the World Health Organization endorsed soda taxes, claiming fiscal policies leading to a 20% price increase of sugary drink prices help to lower consumption, reducing obesity, diabetes and tooth decay.
In jurisdictions where taxes have passed, sales of the drinks has dropped. In Berkeley, CA, sales of affected beverages dropped about 9.6%, while those that were not impacted increased 3.5%, according to news reports.
However, reduced sales have impacted the soda industry as well. PepsiCo has reported a 40% drop in sales in Philadelphia since that city's soda tax took effect, and has said it will lay off 80 to 100 workers because of decreasing demand. Coca-Cola also has noticed a drop in soda sales, along with declines in tea and sports drinks.
"The consumer and the beverage companies will get our category to where the consumer wants it to be. What we don't need is shocking government intervention," Sandy Douglas, president of Coca-Cola North America, said at the Beverage Forum in April. "Taxing people and discriminating against businesses that create lots of jobs and retail stores in cities where there is already a dearth of fresh food, and you go out and take out a category that is very profitable for them — it takes you back in a really disruptive way."
As the wave of soda taxes is likely to spread — at least into more urban areas — manufacturers should take steps to prepare for how it may impact their sales and distribution. PepsiCo has adopted a strategy in Philadelphia that could work nationwide: shrinking the size of bottles and can multiples. Since many taxes are assessed by the ounce, this reduces the amount individual prices increase. Smaller cans were first introduced a couple of years ago as a "healthier" alternative to a full-sized drink, which is a strategy that works with today's consumer, regardless of taxes.
Large soft drink companies also are working to further diversify their holdings, gaining more better-for-you brands so that if sales of their namesake products continue to dwindle, their profits will be more solid.