Reporters Memo: Coke and Pepsi Play Hardball in Attempt to Prevent the Spread of Soda Taxes

Faced with a rising tide of data from the United States and around the world showing that soda taxes work to reduce consumption and improve public health, the soda industry is battling back hard with big-dollar bully tactics geared toward crushing local soda tax campaigns before they even get off the ground.

New tactics being deployed by the soda industry include state bills banning local soda taxes, broad statewide initiatives to ban all grocery taxes or require a supermajority before raising any taxes, and political spending geared toward bending state politicians to their will.

Soda, Like Tobacco, Has Serious Health Effects

The public health community -- pediatricians, dentists, the American Heart Association, and more -- is energized to take action as never before on soda and other sugary drinks because new data is showing that consuming sugar in liquid form increases risks of serious health conditions, such as heart disease, type 2 diabetes, nonalcoholic fatty liver disease, and obesity in a much more significant way than was previously known.

One Harvard study found that consuming just one to two sugary drinks a day increases your risk of developing diabetes by a whopping 26 percent. Another Harvard analysis showed that men averaging one can a day of a sugary drink had a 20 percent increased risk of heart attack. Further, more than three-quarters of American adults are considered overweight or obese, as are 30 percent of children, according to an international study published in The Lancet.

Soda Taxes, Like Tobacco Taxes, Work

Multiple studies, including a recent analysis by researchers at Drexel University, show that soda taxes work. Drexel surveyed consumers before and after the implementation of Philadelphia's tax and found that daily consumption of soda decreased by 40 percent and energy drink by 64 percent, while consumption of bottled water increased by 58 percent. Researchers at UC Berkeley's School of Public Health found that sugary beverage consumption fell 21 percent in Berkeley after that city's tax was implemented, while water consumption increased by 63 percent over comparison cities.

Many U.S. localities have implemented a soda tax to reduce obesity and related public health problems: Berkeley, CA; Philadelphia, PA; San Francisco, CA; Oakland, CA; Albany, CA; Boulder, CO; Santa Fe, NM (defeated 2017); Cook County, IL (repealed 2017); and Seattle, WA. In each locality, the American Beverage Association (ABA) has bankrolled a big-dollar PR campaign against the tax.

States with soda taxes include West Virginia (1951), Arkansas, Virginia, and Tennessee. And there are more than 30 countries with soda taxes, including France, Hungary, Ireland, Mexico, Norway, Philippines, South Africa, and the UK. Many other countries are pursuing such taxes.

Leading the Opposition: Coke, Pepsi, and the ABA

As cities and counties in the United States use the tools of local democracy to introduce modest soda taxes, they are facing sophisticated opposition spearheaded by the ABA, the blandly named trade association representing Coke, Pepsi, Dr. Pepper Snapple Group, and other sugary drink manufacturers. The use of the ABA name on websites and in anti-soda tax commercials effectively shields the brand-name companies from accountability and culpability for the harms caused by sugary beverages.

The ABA is a $125 million powerhouse bankrolled by the largest players in the soft drink industry. Coke brands include Fanta, Sprite, Fresca, Dasani, Honest Tea, and Minute Maid. PepsiCo brands include Gatorade, 7Up, Tropicana, and Mountain Dew.

In city after city, the ABA has fought grassroots campaigners seeking to implement a soda tax using front groups or big-dollar PR campaigns that spin the tax as a "grocery tax" and a burden on working families. You won't see the CEOs of Coke and Pepsi making the case against a soda tax. Instead we see sympathetic front men and women, like the African American "single mom" in Chicago who told the camera "We're being taxed out of Cook County. I'm a single mom. I can't afford this tax!" The ABA has consistently worked to deflect the conversation away from public health and to frame the tax as an unfair, unnecessary "grocery tax."

Preemption Strategy to Defeat Soda Taxes Borrowed from Big Tobacco

Municipalities have long played a valuable role as "laboratories of democracy" for important public policy innovations, including in public health. When U.S. cities began to regulate tobacco and create "tobacco free" work environments in the 1980s, the industry jumped into action.

"We could never win at the local level.... So the Tobacco Institute and tobacco companies' first priority has always been to preempt the field," said a tobacco lobbyist. Today, the majority of states have some type of tobacco preemption, and the soda industry is borrowing the same technique.

According to Grassroots Change, 12 states have enacted laws preempting local ordinances related to nutrition, including measures rammed through in Michigan, Arizona, and California over the past year.

In Michigan, House Bill 4999 was introduced Sept. 20, 2017, rushed through the legislature, and signed into law on Oct. 31. The bill bans an excise tax "on the manufacture, distribution, wholesale sale, or retail sale of food for immediate consumption or nonimmediate consumption." Beverage and soda taxes are not mentioned, but included, according to legislative counsel analysis.

A host of agricultural interests were activated to register in favor of the bill, making it a "farm interests" bill. These groups testified in a very vague manner that they make and export many food products and are responsible for a lot of jobs in the state, but did not address any specifics nor mention a beverage tax.

The powerful $100 million National Federation of Independent Business (NFIB) also testified in favor of the bill, specifically citing the beverage tax passing in other states. The NFIB has also worked to preempt paid sick days and local minimum wage hikes in other states and was cited by the media as a key player in Michigan.

In Arizona, HB 2484 received its first reading on January 30, 2018, rushed through the legislature, and was signed into law on March 16. This bill also broadly discusses food taxation, not just a beverage tax or a soda tax. The groups registered to lobby for the bill include the Arizona Retailers Association, Arizona Restaurant Association, Arizona Beverage Association, Arizona Food Marketing Alliance, and Arizona Chamber of Commerce and Industry, as well as the Arizona Association of Food Banks. CMD has submitted an open records request to the bill authors for more information.

A bill has been introduced in Illinois (HB 4082) and another is scheduled for a vote in Pennsylvania (HB 2241).

Broad Anti-Grocery Tax Measures on the Ballot in Washington and Oregon

But the strong-arm tactics don't stop there. The industry is rolling out statewide ballot measures in referendum and initiative states to ban all grocery taxes, including soda taxes.

Seattle's soda tax took effect in January 2018. Since then, more kids and adults are drinking water, and it brought in more than $10 million in revenue for use on educational and health programs in its first six months. But in February 2018, a committee with the name "Yes! To Affordable Groceries" was launched to make sure the public health measure would not be adopted by any other local governments in Washington. Initiative 1634 is a deceptively simple anti-grocery tax measure that has been run through the corporate spin machine; it opens with the line "Whereas access to food is a basic human need of every Washingtonian." The soda industry has raised over $20 million for the effort so far, with little organized opposition on the other side.

Heavy-handed industry tactics are also on display in Oregon this year, where grocers and the ABA have raised $6.5 million on an overly broad constitutional amendment that would not just impact soda taxes but can be read as prohibiting taxes at all stages in the chain of commerce, permanently preventing the state and its cities and counties from levying any taxes related to distribution or sale of groceries. The ABA recently kicked in two enormous cash contributions of $500,000 each.

Opponents of the measures on the ballot in Oregon and Washington appear unlikely to be able to muster the kind of big money wielded by the soda industry. But health groups like the American Heart Association are doing their best to educate the media and voters.

One headline in the Seattle Times summarized what's on the line for local democracy campaigns well: "Vote for this initiative and you may as well bow down to your corporate overlords."

Supermajority Strategies and High-Stakes "Hostage Taking" in California

Early in 2018, California had the most soda tax measures under consideration of any state. Cathedral City, Palo Alto, Santa Cruz, and Richmond all seemed poised to join Berkeley, San Francisco, Oakland, and Albany as cities with soda taxes on the books.

That changed in April when the ABA spent millions on a campaign to get an explosively controversial measure on the November ballot that would have required a two-thirds supermajority vote by either voters or an elected body before any tax hike at the local level could be implemented. The move prompted an outcry by mayors across the state and was characterized as an "abomination" by Governor Jerry Brown.

After meeting with the soda industry, the governor cut a deal that resulted in legislators in Sacramento passing a preemption bill to ban local soda taxes until 2030 in exchange for taking the measure off the ballot. The whole incident was called a "shakedown," "extortion," and "high-stakes hostage taking" by the media.

Sen. Scott Wiener (D-San Francisco) said, "Industry is aiming basically a nuclear weapon at governing in California and saying if you don't do what we want, we're going to pull the trigger and you are not going to be able to fund basic government services."

This supermajority tactic, popularized by the American Legislative Exchange Council (ALEC), which has peddled a "Super-Majority Act" for decades, is now spreading. Following last year's repeal of a short-lived soda tax in Cook County, Illinois, a group of county commissioners introduced legislation last month that would require a two-thirds supermajority vote by commissioners to enact any new taxes.

Public health groups campaigning for soda taxes did score one big win this year, when the Supreme Court of Pennsylvania upheld the City of Philadelphia's 2017 soda tax after an industry challenge.

Consumers can anticipate more deep-pocket PR campaigns and tactics in 2019 to bully localities into abandoning the soda tax idea.