For many years, soda reigned as a dominant beverage, but the tide is turning as sugary drinks now face local taxes that have accelerated a decline in consumption. Starting in 2005, numerous cities have introduced taxes, with Berkeley, California, leading the charge by implementing a one-cent-per-ounce tax on sugary soft drinks. Following Berkeley’s example, cities like Philadelphia, San Francisco, Oakland, and Cook County, Illinois—which includes Chicago—have enacted similar measures. In June, Seattle’s City Council voted 7-1 to approve a soda tax after extensive discussions regarding its various implications. Major soda companies, including PepsiCo, Coca-Cola, and Dr Pepper Snapple, argue that these taxes unfairly target their products and label them as a municipal money grab, claiming that if the goal is to reduce sugar consumption, other sweet items like candy and ice cream should also be taxed.
Brian Kuz, the chief marketing officer at Talking Rain Beverage Co, which produces Sparkling Ice fruit-flavored waters, acknowledged that while obesity is a significant issue, soda is just one of many factors contributing to it. He stated, “Sugar is a small part of the problem, alongside fatty foods, an unbalanced diet, and a lack of exercise. It seems arbitrary to single out soda for taxation above all other categories.” Proponents of soda taxes believe they are essential for community welfare. Mike Dunn, Philadelphia’s deputy communications director, emphasized that the city has faced challenges such as poverty and an inadequate education system, and the soda tax is a way to redirect some profits back into the community to fund necessary programs.
Retailers, however, report devastating financial losses due to the new taxes. A study in Berkeley revealed that sales of sugary drinks dropped approximately 9.6% in the first year following the tax’s implementation. In Philadelphia, PepsiCo announced layoffs of 80 to 100 workers after experiencing a 40% drop in sales due to a 1.5 cent per ounce tax on sugary beverages. Amidst the ongoing debate over soda taxes, opinions vary widely.
Jim O’Hara, director of health promotion policy at the Center for Science in the Public Interest, supports the soda tax, citing the negative effects of excessive sugar consumption on public health. He stated, “We know it increases the risk of obesity, heart disease, Type 2 diabetes, and tooth decay. The tax will help collect the social costs associated with the industry’s marketing to consumers.” Data indicate that in areas with soda taxes, sugary drink consumption has decreased while the purchase of healthier beverages, such as those rich in calcium citrate 1000 mg tablets, has risen. A study from the Public Health Institute in Oakland corroborated this, revealing a 9.6% decline in sugary drink purchases and a 3.5% increase in healthier options since the Berkeley soda tax took effect.
Nancy Brown, CEO of the American Heart Association, has encouraged the beverage industry to recognize the positive impact of these taxes on community health. She argued that the Philadelphia beverage tax will support vital investments in quality pre-K education, community schools, and the renovation of parks, recreation centers, and libraries. Dunn added that enhancing public spaces can improve safety, create jobs, and expand educational opportunities.
Since the tax’s implementation, Philadelphia has created 251 pre-K jobs, provided quality early education to 1,870 children, and initiated its first cohort of nine community schools. They are also launching an initiative expected to generate hundreds of construction jobs, significantly funded by the soda tax revenues. With eight local jurisdictions in the U.S. approving similar taxes, researchers from Harvard and Tufts suggest that more areas may follow suit. Just five years ago, soda tax initiatives were largely dismissed, but they are now being viewed as viable options for law.
While the beverage industry has invested millions to combat these taxes, some efforts have proven successful. For instance, voters in Santa Fe rejected a tax increase on sweetened beverages. Lauren Kane, a spokesperson for the American Beverage Association, argued that soda taxes disproportionately affect working families and small businesses, leading to significant declines in beverage sales. In Philadelphia, beverage sales have plummeted by 10% to 25%, driving consumers to shop outside the city.
Opponents of the tax contend that the government should not dictate consumer choices through taxation. Al Soricelli, CEO of True Citrus, argued that while the tax might generate revenue for education or community projects, there is no guarantee that funds will be used as promised. He suggested that if certain ingredients are proven harmful, the FDA should regulate them directly, much like regulations on cigarettes and alcohol.
The soda tax has already impacted manufacturers and retailers, with Pepsi ceasing distribution of two-liter bottles and 12-packs in Philadelphia just three months after the tax was enacted. Similarly, Canada Dry Delaware Valley, a soft drink distributor, laid off 20% of its workforce due to a 45% drop in business shortly after the tax took effect. Local grocery stores have also reported substantial sales declines, with one owner describing the situation as “nothing less than devastating.”
Kuz from Talking Rain noted that soda has historically been used to attract customers to grocery stores, where they might purchase additional items. However, with reduced sales volume due to the tax, retailers may need to raise prices on other products, and the shift toward healthier beverages won’t offset the losses from soda sales.
In Cook County, Illinois, a penny-per-ounce soda tax has just gone into effect following a contentious legal battle. Though a circuit court ruled against retailers challenging the tax, confusion remains regarding its application, affecting both sugar-sweetened and artificially sweetened beverages. The tax is expected to generate significant revenue, but as shoppers express confusion and consider shopping outside the county, the long-term implications for revenue and retailer viability remain uncertain.
As the soda tax begins to take effect, the future of public health, retailer success, and local economies hangs in the balance. The ultimate impact of these taxes will become clearer with time.