Ax the Tax, Or: How I Learned To Stop Worrying And Love The Philly Beverage Tax

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Ax the Tax, Or: How I Learned To Stop Worrying And Love The Philly Beverage Tax

https://www.forbes.com/sites/martinwhittaker/2017/04/05/ax-the-tax-or-how-i-learned-to-stop-worrying-and-love-the-philly-beverage-tax/#19b853cf303b

If the beverage industry were staring down its own “doomsday device,” it may very well be the soda tax, not unlike the one passed last year by the Philadelphia City Council.

In response to its soaring obesity numbers and in an effort to raise revenue for city programs, Philadelphia became the first major American city to impose a tax on sugar-sweetened beverages – including soda, flavored juices, bottled coffees and teas, sports drinks and diet beverages. At 1.5 cents per ounce, the tax has received push-back from industry leaders and local businesses, and has even led to conflict between the American Beverage Association and Bernie Sanders, who initially opposed the tax, suggesting it unfairly targets the poor.
PepsiCo, the JUST 100 leader in the food and beverage industry, has been at the forefront of the developing conversation. With products like Pepsi-Cola, Mountain Dew, Gatorade, Tropicana and Starbucks ready-to-drink beverages on store shelves, the company has a lot at stake.

By March, citing considerable losses, PepsiCo announced it would lay off 80 to 100 workers at distribution plants serving Philadelphia, a move that has raised some eyebrows and begged the question: can a city beverage tax can truly be the cause of such drastic action? Regardless, it’s not just PepsiCo that’s crying wolf – some soda sellers in Philadelphia said that beverage sales had dropped 50% so far in 2017, and local business owners have organized an Ax the Tax movement. The city of Philadelphia responded by sharing that it had raised more than $12 million in the first two months of the tax, revenue that’s going toward pre-K programs, community schools, and renovating libraries, parks and recreation centers.

While the tax has undeniably admirable goals, it has carried with it some significant consequences. Products have become unaffordable to local residents, beverage industry giants like PepsiCo are resorting to layoffs, and the small businesses that sell these products are also taking a hit. Even Temple University is planning to steeply increase the cost of its meal plan, citing the soda tax as the principal reason.

With so many Philadelphia stakeholders impacted by the tax, PepsiCo and other companies are at a crossroads – what aspects of their business must be prioritized as they determine next steps?