Pepsi Has a Very Specific Reaction to Philly Soda Tax

And Mayor Jim Kenney has a retort.

Mayor Jim Kenney signing into law a tax on sugary and diet beverages (AP Photo/Matt Rourke)

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Pepsi has sent letters to Philadelphia grocers stating that it will no longer distribute certain sizes — 2-liter bottles and 12-packs — in the city, citing the 1.5-cents-per-ounce soda tax that took effect in January.

Pepsi sent online news site Billy Penn a statement saying that it wanted to offer “products and package sizes working families are more able to afford. We believe this will give our retail and foodservice partners the best chance to succeed in this challenging environment and will minimize the chance of product going out-of-date. Our full portfolio of beverages in all package sizes will still be available outside the city.”

The tax, the first one passed in a major U.S. city, is expected to raise $91 million a year, which would go to funding Mayor Jim Kenney’s universal pre-K initiative, creating community schools, and improving recreation centers and libraries. It also would be used to offer a tax credit to businesses that sell healthy beverages. Berkeley was the first U.S. city to pass a soda tax in 2014, and after the Philadelphia tax cleared the ballot in June, four other cities — San Francisco, Oakland, Albany, California and Boulder, Colorado — passed similar legislation in November.

The American Beverage Association lobbied hard against the taxes, but the Philadelphia Inquirer recently reported that Pepsi’s purported reasoning in withdrawing the larger sizes doesn’t quite add up.

For one thing, Coke has said that prioritizing smaller sizes actually makes good business sense in Philadelphia — and not because of any tax.

Coke has moved to smaller sizes, “not because of cities passing beverage taxes, but because they’re what people want,” Fran McGorry, a spokesperson for Coca-Cola Refreshments, said in a statement to the Inquirer. That began before the tax was implemented.

“In 2016, 7.5-oz mini-cans grew 9 percent and 1.25 liter bottles grew 9.5 percent and they are still growing this year,” McGorry said.

Citing Coke’s numbers and other data (for example, Pepsi’s sales in the Philadelphia suburbs are up), the city of Philadelphia released a skeptical statement about Pepsi’s letter to grocery stores: “This tax is not causing the economic apocalypse the soda industry is claiming. … Consumers are switching to smaller sized soda which is better for their health and still supports soda industry jobs and desperately needed investments in quality pre-k, neighborhood public schools and parks, rec centers and library renovations.”

In campaign fights, soda tax opponents have labeled the measures as “grocery taxes” and claimed that they disproportionately affect low-income residents. Skeptics say such taxes are shaky funding sources because while a decrease in consumption might be better for public health, a dip means less money for the programs the tax is designed to pay for.

The union representing employees of Philadelphia’s soda industry is blaming layoffs on the tax — though the city questions how the company can spend so much on lobbying and advertising, but be unable to keep local jobs.

“The idea that they can afford to do that but ‘must lay off workers’ should make every Philadelphian very skeptical of whether these layoffs are actually due to the tax,” a city spokesperson told Philly Voice earlier this month.

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Rachel Dovey is an award-winning freelance writer and former USC Annenberg fellow living at the northern tip of California’s Bay Area. She writes about infrastructure, water and climate change and has been published by Bust, Wired, Paste, SF Weekly, the East Bay Express and the North Bay Bohemian

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Tags: philadelphiataxeshealthpublic schools

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