Sugar crash for Philly Soda: Tax kills consumption

By Ed Zwirn

(originally published on March 5, 2017 in the New York Post. Read original)

If you live in Philadelphia, that bloated feeling you get from consuming carbonated beverages may be coming from the soda price itself. soda

Last summer, the city passed a Bloomberg-esque 1.5 cent per ounce tax on soda and other sweetened and diet beverages, a move opposed by beverage distributors and retailers.

Since this tax has gone into effect on Jan. 1, consumption of the sweet drinks is off by as much as 50 percent, according to retailers, and companies involved in getting these drinks to consumers are reporting huge losses and announcing layoffs.

Since it is a volume-based tax, its proportional impact on beverage bills vary wildly, with single-serve cans at supermarkets and restaurants being affected in a small way, while cash-pinched purchasers of cheaper store-brand 2-liter bottles are seeing prices nearly double.

Last week, PepsiCo blamed a 43 percent drop in business on the new tax and announced it would be laying off 80 to 100 area employees (out of 423) over the next few months. Similarly, Canada Dry gave pink slips, effective March 5, to 25 of its workers. Retailers are also feeling the pinch, with Jeff Brown, owner of Brown’s Super Stores, saying he expects to ax 300 employees at his company’s six Philadelphia ShopRite stores this spring.

On the plus side, the city reports that it raised $5.7 million, or more than double its forecast, in January alone, from the tax. Some of this money has been used to fund expanded pre-K, and the city fired back at the PepsiCo layoff announcement in part by pointing to the roughly 250 teachers and support staff jobs created under the program.

Anthony Campisi of the American Beverage Association, one of the major opponents of the beverage tax, says the economic woes brought on by the measure are enough to outweigh any benefits touted by the city. “Distributors like Canada Dry are off
about 50 percent year-on-year,“ he says. “The 20 percent increase in suburban sales we’re seeing (as shoppers cross city lines to save money) is far from enough to make up for that.”

City officials, for their part, are disputing both the consumption reduction and layoff figures and saying opponents of the tax may be trying to deter other big cities from trying to follow suit.

According to Mike Dunn, spokesman for Mayor Jim Kenney, the city had projected a 27 percent consumption decline as a result of the tax.

“We have no way of knowing if their sales figures and predicted job losses are anything more than fearmongering to prevent this from happening in other cities,” he says.

Ken Klein, one of the owners of Klein’s Supermarket — a 3,500-square-foot single-store operation in the city’s Fairmont neighborhood — points out that volume is down across the board, as are his customers, the vast majority of whom own cars, unlike in New York, and “drive out of town to save money on grocery bills.”

“So far,” he says, he’s been able to avoid laying off any of his 20 full-time and part-time help.

The rise in cost has hit hardest proportionally on customers buying cheaper store brands, with prices in many instances up nearly 100 percent.

“Personally, I think that the concept of funding pre-K is a good idea but the method of doing it is a bad idea,” says Klein, who adds that the tax has given sweetened carbonated beverages a “double whammy,” after health concerns have already put pressure on sales.


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About Ed Zwirn

Ed Zwirn is a journalist/editorial professional with a focus on financial trends and practices. He lives out in the woods in Bethel, NY, not far from where the Woodstock Music and Arts Festival was held in 1969. As a financial writer, his work has appeared in The Wall Street Journal, The New York Post, CFO Magazine and news services including Dow Jones Newswires and Informa Global Markets. Ed also spent three years in Ukraine, where he ran an English-language news service. He now divides his time between his freelance journalism, song and poetry writing, and barbequing and lawn-mowing on his 2.5 acre property.

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