Source: USA Today

By Hadley Malcolm, USA TODAY

Some cities are singling out sugar-sweetened drinks for proposals to add taxes or warning labels, borrowing from the playbook used to largely stamp out smoking a generation ago.

The war on sugary drinks is being conducted by cities hungry for new sources of revenue that also see themselves as combating the perceived health risk posed by too much sugar in Americans’ diets.

While the moves are coming in relatively few communities so far, they are drawing a lot of attention and could spread, threatening to cut into sales of the mainstay products of giants like Coca-Cola and PepsiCo.

“They’re bleeding a slow death,” says Joe Agnese, senior industry analyst at S&P Global Market Intelligence, about the growing movement against carbonated soft drinks.

The latest battlegrounds include:

• San Francisco: Advertisements for sugar-sweetened drinks will have to start carrying warning labels starting in July.

• Philadelphia: The City Council is expected to vote in June on a proposal to tax all sugar-sweetened beverages at 3 cents an ounce, tacking 60 cents in additional taxes on to a 20-ounce bottle. An economic consultant for the beverage industry, Kevin Dietly, estimates that if every cent of the proposed tax in Philadelphia is passed on to customers, it will result in a 60% average increase in price and a 73% decline in demand for sugary drinks.

• Oakland: Voters will decide in November whether to add a penny per ounce fee to sweet drinks.

• Boulder, Colo.: A ballot measure in the works could let voters decide this fall whether to impose a soda pop tax.

Berkeley, Calif. — adjoining Oakland and across the bay from San Francisco — passed a tax on beverages with added sweeteners in 2014. Two states, Arkansas and West Virginia, have excise taxes on carbonated soft drinks and other sugary beverages that have been in place for decades.

And apart from new taxes, sugary soft-drink sales are on the decline. Sales volume fell 1.5% in 2015, 1% in 2014, 3.2% in 2013, Beverage Marketing reports. “You have a lot of headwinds for the category,” says Gary Hemphill, managing director of research. Consumers have cut back as concerns have grown over the health impacts of a beverage with such a heavy amount of sugar.

But passages of these tax measures is far from assured. Since 2008, taxes on sugary drinks have failed to gain enough votes from the public or local lawmakers, or have been repealed, 43 times in different cities and states, according to the American Beverage Association, which represents bottlers, including Coca-Cola and PepsiCo, both of which declined to comment for this story.

In Philadelphia, Mayor Jim Kenney proposed the tax as an efficient way to fund early childhood education and other community initiatives. He says he isn’t trying to attack soda on the merits of its nutrition. “We’re not doing this from the perspective of trying to discourage people from drinking soda,” says Lauren Hitt, a spokeswoman for the mayor’s office. The tax would apply to soda pop, fruit drinks that aren’t 100% juice, sports drinks, flavored water, energy drinks, pre-sweetened coffee or tea; and cocktail mixers.

Rather, she says, sugar-sweetened beverages are a target because there are a limited number of distributors, making it easier to audit tax collections, and the drinks are “not an essential product.” Taxing all products containing sugar  would be more difficult to administer, she says. The tax would not apply to diet sodas.

Opponents say the sugary drink tax would disproportionately affect small businesses that won’t be able to absorb a potential price uptick, and besides, given the downward trend in soda consumption, it’s “not a reliable source of revenue,” says Larry Ceisler, whose firm Ceisler Media & Issue Advocacy works with the local Philadelphia coalition against the tax.

It’s difficult to predict exactly how much customers will change their buying habits around soda if prices rise or warning labels become more prominent. One study done in Berkeley after the city passed its soda tax found that about 70% of the penny-per-ounce tax was passed on to shoppers, but didn’t look at whether shoppers bought less soda. After Mexico put a tax on sugar-sweetened beverages in 2014, one study found that consumption dropped 6% that year, compared with expected consumption if the tax wasn’t in place.

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