Will Mayor Bloomberg's War on Big Sodas Make Your Wallet Thinner?
The Big Apple is fizzing and frothing over plans by Mayor Michael Bloomberg to ban the sale of sodas and other sugary drinks in portions larger than 16 fluid ounces.
Bloomberg's stated goal is to combat obesity, which he calls "one of the biggest problems this country has." Preliminary polling suggests that New Yorkers are skeptical of Hizzoner's efforts. A survey of 500 adults conducted by NY1 and Marist College found that 53% considered the ban a bad idea, while 42% approved.
Reaction around the world has been bemused: While expressing "a mix of incredulity, awe and disgust when confronted with some of the sizes of sugary drinks sold stateside," the smattering of global citizens polled by the Associated Press made clear that a ban is hardly more appealing to them than a 50-ounce cola.
The ban, which could take effect as soon as next March, would be a first for the nation. But as the Times observes, "many of the measures adopted in New York have become models for other cities, including restrictions on smoking and trans fats, as well as the use of graphic advertising to combat smoking and soda consumption, and the demand that chain restaurants post calorie contents next to prices." So Bloomberg's war on sugary libations could be coming to your town next -- carrying certain financial implications for businesses and consumers.
Negative Impact on Businesses
The ban would prohibit the sale sugar- or HFCS-sweetened beverages in cups or bottles larger than a pint -- a hair under half a liter -- which is less than today's typical "single-serving" soda bottle (20 fluid ounces). A range of liquid refreshments would be affected: energy drinks, iced teas, and of course sodas. "The measure would not apply to diet sodas, fruit juices, dairy-based drinks like milkshakes, or alcoholic beverages," the Times reports.
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Establishments including restaurants, delis, cinemas and sports arenas would all be forced to comply; grocery stores and convenience stores would be exempt. Corner stores and bodegas would fall under the new rules only if the city defines them as food service establishments. Such stores are marked by the cleanliness letter grades that the health department assigns them, which must be displayed in their windows. This last detail is noteworthy because it means that 7-Eleven -- home of the archetypal oversized soda, the Big Gulp, and its prodigious progeny, the Super Big Gulp and the Double Gulp -- will be immune.
Many of those business owners who stand to be affected have reacted hostilely to the mayor's proposal -- and it's little wonder, when one considers the markup on soda. According to Crain's New York Business, a soda priced at $1.49 costs a retailer approximately 25 cents. "The remaining $1.24 is pure profit."
As Alan Vituli -- former chairman and CEO of Carrols Restaurant Group, which owns more than 500 Burger Kings in the U.S., including in New York -- explained to Crain's, "Over time, if you make consumption more difficult, like the tax on cigarettes, ultimately consumption will diminish." If diners cut back on soda -- and Crain's reports that sales have already begun to drop, in the face of increased dietary health consciousness among consumers -- restaurateurs would take a hit on their biggest-margin offering. (Soda surpasses even alcohol when it comes to markup.)
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Vituli predicts that his industry will compensate. "If the ban goes into effect, we'll sell a lot of beverages with synthetic sweeteners," he explained, "and our water sales will go up." More concerned are executives at big beverage manufacturing companies, which stand to lose money by focusing more on "less lucrative products, like energy drinks and juices, that cost more to produce," Crain's reports. Steve Cahillane, CEO of Coca-Cola Company (KO) Refreshments units, complained to the AP that his industry was being "demonized and discriminated against."
"This is one product, one ingredient," Cahillane said. "And to call it out and say we're going to attack this one product, and this one category, in what is obviously a discriminatory way, is not the right answer." While Cahillane admitted that his company's product contributed to excessive calorie consumption, he insisted that the real problem was a lack of physical activity among children.
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Passing the Costs Along to Consumers
Among those without a direct financial stake in the unbridled imbibing of soda, objections to Bloomberg's planned prohibition center on questions of personal liberty and government intrusion. But the mayor denies that his plan will restrict citizens' choices. "Your argument, I guess, could be that it's a little less convenient to have to carry two 16-ounce drinks to your seat in the movie theater rather than one 32 ounce," Mr. Bloomberg said "in a sarcastic tone," according to the Times. "I don't think you can make the case that we're taking things away."
Of course, the fallout would be worse than the inconvenience of having to carry two drinks -- you'd also have to buy them, and two half-sized drinks together are sure to cost more than a single full-sized beverage. (Currently, the size of a small soda at New York's Regal Union Square Stadium 14 theater is 32 ounces.)
Outside of movie theaters, the impact of the ban would be limited. Fast food chains would have to distribute cups of 16 ounces or less, but the law wouldn't prevent them from offering free refills -- which might even end up saving customers money, since they wouldn't need to shell out for a supersized soda.
The DIY Approach
One company that might stand to profit from is SodaStream (SODA), the Israel-headquartered manufacturer of at-home carbonation systems. SodaSteam machines allow customers to use their tap water to make soda, which can then be mixed with various flavored syrups to create do-it-yourself carbonated drinks -- outside the reach of the long arm of Bloomberg's law.
While acknowledging that "in a way, [the ban] could be an opportunity for us," SodaStream CEO Daniel Birnbaum denounced the mayor's plan as intrusive, un-American, and "totally to the contrary" of his company's philosophy. "We believe consumers should be offered more control, not less."
"On the one hand, we applaud the efforts of the mayor to fight obesity. On the other, we completely disagree with the effort to control what consumers will drink."
Birnbaum explained that his product allows for dosing control, whereby consumers can determine for themselves how sweet to make their beverages -- and hence how many sugar-borne calories they consume. "Not everybody wants it as sweet as you get it when you pop a can of cola. Americans are used to drinking very sweet soda."
For anyone inclined to try the DIY approach, check out the video below on the virtues of making your own brew.
