In the Battle Over Sugar Taxes, Does Big Soda Really Believe in Big Business?

Two months ago the citizens of Berkeley, California, made a historic decision to impose a tax on sugary soft drinks sold in the city. Coca-Cola, Pepsi, and their DC-based lobbying arm, the American Beverage Association, spent a lot of money--an estimated $2 million in Berkeley alone --to crush the measure. Their message was simple: "Taxes on food, beverages and containers will be bad for the economy."

We've heard this before.

Back in the 1970s, this was the same message the beverage industry touted when it sought to combat mandatory deposit bills that would have placed a tax on one-way, throwaway containers in the United States. Then, the industry argued that taxes on disposable containers would essentially destroy beverage businesses and the retailers that depend on them, eliminating thousands of jobs as a consequence.

Ignoring the doom and gloom predictions of big business, several states passed mandatory deposit bills in the 1970s to deal with mounting packaging waste, and instead of industry implosion, what we saw was innovation.

The case of Oregon, which passed a tax on throwaway containers in 1971, proves instructive. Just months after passage of the state's mandatory deposit bill, refillable bottles--once the soft drink industry standard before 1950--returned to Oregon. According to the state's Department of Environmental Quality, beverages packaged in returnable containers represented 90 percent of soft drink and beer sales in the state soon after bill passage. It seemed the beverage industry had not collapsed after all, but retooled itself in the face of new rules.

Throwaway containers did return to Oregon, in part because the five-cent deposit was not large enough to disincentivize disposable containers in the long run (a lesson that should not be lost on sugar tax proponents), but elsewhere in the world, where governments put tougher packaging laws and restrictions into force, refillable bottles remain. For example, in Denmark, a nation that passed a virtual ban on throwaway containers in the 1980s, returnable delivery systems became commonplace. Today, Danish vendors use returnable containers for roughly 97 percent of beer and soft drink sales. Again, in the case of Denmark, Coca-Cola and other soft drink firms did not collapse in the face of stricter environmental regulations, but rather discovered ways to do business that reduced their environmental footprint.

Given this history, perhaps we should see the current doom and gloom economic predictions regarding obesity taxes for what they are: specious and ahistorical claims that undersell big businesses ability to reshape their enterprises to meet new rules and regulations.

Right now, the beverage industry pitches a strange contradiction. On the one hand, soft drink companies laud their firms as dynamic job creators, seemingly capable of solving almost any problem. But on the other hand, they describe their businesses as vulnerable, anemic enterprises incapable of retooling themselves in the face of small taxes designed to promote public health. Makes one wonder: Do these folks really believe in the creative ingenuity of American business?

Call me crazy, but I have more faith in American enterprise. Historical precedent suggests that soft drink companies will respond to the environmental pressures they face and revolutionize their product lines towards healthier choices rather than cower from the obesity tax challenge.

So, America, perhaps it's time to step up and follow Berkeley's lead. With over a third of the US adult population struggling with obesity and facing associated health costs totaling over $147 billion, it's time Big Soda got the message that selling a twelve-ounce drink that contains nine teaspoons of sugar for a few quarters is not a bargain deal the public can afford. Coke won't collapse because of new health taxes; they'll just adapt to meet the needs of a consumer base clamoring for better products. And with revenues generated from new imposts, we can reinvest in small businesses and retailers to help them make the transition to healthier foods and beverages.

Here's to believing in the innovative spirit of American enterprise, even when big business doesn't.

Bart Elmore is the author of Citizen Coke: The Making of Coca-Cola Capitalism. He is now assistant professor of environmental history at the University of Alabama.

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