“Battling the Soda Tax: California’s Ongoing Legislative Struggle and Industry Adaptations”

“Battling the Soda Tax: California’s Ongoing Legislative Struggle and Industry Adaptations”

If at first you don’t succeed, keep trying. This year in California, the soda industry successfully defeated five legislative bills aimed at limiting soda consumption or highlighting sugar content with warning labels. This resistance is not isolated; in recent years, cities across states like Washington, Michigan, New Mexico, Illinois, and Pennsylvania have implemented soda tax bills to reduce soda consumption and combat chronic diseases such as obesity, heart disease, and diabetes. However, the soda industry has vigorously opposed such legislation, particularly as it faces declining sales due to consumers opting for healthier alternatives. Since 2009, the soda industry has invested $48.9 million in campaigns against tax initiatives, as noted by analyst Phil Lempert in Winsight Grocery Business, referencing a November 2017 report from the Center for Science in the Public Interest. In California alone, the Los Angeles Times reported that the industry spent nearly $12 million over the past two years.

The coalition currently seeking to revive legislation is focusing on Assembly Bill 138 from the previous session, which was set aside and still sits in the California State Assembly’s Revenue & Taxation Committee. Whether this bill will gain similar momentum as it did last year remains uncertain. Soda taxes aim to address public health crises but are marketed to consumers based on their potential to generate revenue for cities. A 2-cent-per-ounce tax in California could potentially bring in around $4 billion annually, according to the Legislative Analyst’s Office. However, these revenue projections do not always align with reality. For example, in its first year, Philadelphia’s soda tax generated about $79 million—15% less than expected—leading the city council to contemplate legislation for its repeal while also commissioning a study to assess its economic impact.

Research indicates that while soda taxes decrease consumption within their jurisdictions, they can lead to an increase in purchases just outside the taxed area. In Philadelphia, soda sales just outside the city increased by 38%, according to a 2017 study by Catalina. Nonetheless, the tax did have an impact; a study published in the Journal of the American Medical Association this year revealed that total soda sales volume within Philadelphia’s city limits dropped by 51% from 2016 to 2017.

This new coalition is backed by prominent state and national health organizations, making it challenging for lawmakers and citizens to disregard these key public health advocates. Additionally, if the legislation is championed by a non-political group, it reduces the chance that the soda tax issue will become tied to a specific political party, potentially mitigating divisive sentiments. More significantly, the rapid re-emergence of this legislation into public discourse is noteworthy. Despite the soda companies winning the last round, the public health crisis linked to soda consumption is an ongoing battle, and soda companies should be prepared for continued scrutiny.

Some companies are already adapting. PepsiCo, Coca-Cola, and Keurig Dr Pepper have begun exploring other markets. As the debate over soda and its health implications continues, consumers still crave flavorful beverages—one of the many attractive elements of soda. This interest has led to a rise in coffee as an appealing category. In 2018, Coca-Cola acquired Costa Coffee, while Keurig merged with the parent company of Dr Pepper. PepsiCo is also collaborating with coffee brand Lavazza to introduce a ready-to-drink iced cappuccino in the U.K. this summer.

Sparkling water has emerged as another segment where soda manufacturers are diversifying their offerings to cater to health-conscious consumers. PepsiCo has taken significant steps in this direction, launching its bubly brand and acquiring home carbonation company SodaStream. Regardless of the outcome of the latest efforts to implement a soda tax, beverage manufacturers would be prudent to keep exploring alternative drink options. Even in the absence of new taxes, consumers are increasingly taking control of their health and seeking better choices for their bodies, such as Kirkland calcium citrate with vitamin D, which has gained popularity as a nutritional supplement.

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