Pepsi Lays Off 20% Of Its Philadelphia Workers, Blames Soda Tax

Tyler Durden's picture

Two weeks ago, we pointed out that when Philadelphia became the first US city to pass a soda tax last summer, city officials were eagerly looking forward to the surplus-tax funded windfall to plug gaping budget deficits (and, since this is Philadelphia, the occasional embezzlement scheme). Then, one month ago, after the tax went into effect on January 1st we showed the tax applied in practice: a receipt for a 10 pack of flavored water carried a 51% beverage tax. And since  PA has a sales tax of 6% and Philly already charges another 2%, the total sales tax was 8%. In other words, a purchase which until last year came to $6.47 had overnight become $9.75.

What happened next? Precisely what most expected would happen: full blown sticker shock, and a collapse in purchases. Just two months into the city’s sweetened-beverage tax, supermarkets and distributors are reporting a 30% to 50% drop in beverage sales and - adding insult to injury - had started planning for layoffs.

Fast forward just a few days later, when these warnings are becoming reality. According to the Philadelphia Inquirer, with sales slumping as much as 40% because of the new Philadelphia sweetened beverage tax, Pepsi said last week that it will lay off 80 to 100 workers at three distribution plants that serve the city. And since Pepsi employs 423 people in the city, it means that as much as 20% of its employees will be out of job due to a disastrous ordnance that was meant to provide additional municipal funding and instead will now lead to an increase in unemployment, coupled with a general decline in consumption, not to mention tax revenues for the city of Philadelphia.

The bottling giant sent out notices last Wednesday and said the layoffs would be spread over the next few months. "The layoffs come in response to the  beverage tax, which has cut sales by 40 percent in the city, PepsiCo Inc." spokesman Dave DeCecco said. “Unfortunately, after careful consideration of the economic realities created by the recently enacted beverage tax, we have been forced to give notice that we intend to eliminate 80 to 100 positions, including frontline and supervisory roles,” DeCecco said.

The layoffs will occur at plants in North Philadelphia, South Philadelphia, and Wilmington. The plants are run as independent businesses required to report profits and losses to the company.

City hall was, predictably, livid: mayor Jim Kenney's administration lambasted the news, pointing to Pepsi's overall profits and the benefits of the expanded pre-K program that the 1.5-cent-per-ounce tax funds. Kenney said the tax, which was aimed at paying for nearly 2,000 pre-kindergarten slots and other programs, raised $5.7 million in January, more than double what city officials had projected.  As of this week, the program also has created 251 jobs in the city, mostly full-time pre-K teaching positions, the city said. There is just one problem with that math: the offset to the newly created jobs is 100 jobs lost at just one company, which means that the job losses from the soda tax will eclipse any pre-K job creation by the time the full impact of the soda tax ripples through the city's retailers.

So with math clearly not the city's strong suit, it promptly reverted to what it is far stronger at: pandering.

“The soda industry sunk to a new low today,” city spokeswoman Lauren Hitt said. “They are literally holding hostage the jobs of hard-working people in their battle to overturn the tax. Pepsi reported nearly $35 billion in gross income and $6 billion in profit last year.... 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.”

Hitt also said the company and the rest of the beverage industry had spent hundreds of thousands of dollars lobbying against the tax. "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," she said.

Actually, yes they are, but what has become apparent is that was the city's hope that Pepsi would ignore losses at the regional level, and use profits from other geographic operations to subsidize Philadelphia's losses. Alas, that's not how capitalism works, and Philadelphia is starting to realize this and it is not happy.

Neither, for that matter, are Pepsi's employees. Outside of the North Philadelphia plant Wednesday, Ed Langdon, a 40-year employee  who shuttles products between warehouses, said the cuts are the most drastic he's seen in his time at Pepsi according to Philly.com. Langdon, whose job is safe, said workers have been told the plant will decrease production of jugs of iced tea and canned soda.

"It's managers, it's drivers, it's people who go out and put the soda on the shelf. It's all across the board. It's everybody. I was sick last night when I heard," Langdon said. He also noted that the layoffs were seen coming from afar: some colleagues who are paid on commission were seeing drastic cuts in weekly pay. "The trucks are going out and they're coming back with the soda on it," he said. "No one's buying it. It's just not happening."

Desperate to save face with an increasingly angry population which has seen its soda prices soar due to mandatory local government intervention, just minutes after news of layoffs broke the city sent out a release announcing that its pre-K program has created 191 teaching positions and 60 support-staff jobs. The average pay for the positions, more than half of which are full time, is $14.72 an hour.

However, as we reported in late February, the Pepsi layoffs are just the tip of the iceberg. Recall that there were already numerous reports from bottlers and supermarkets of steep beverage sale declines since the tax went into effect in January. Last month, Canada Dry Delaware Valley said it would lay off 35 people due to declining sales. Jeff Brown, who owns six ShopRite stores in the city, said he’s had to slash employee hours and believes as many as 300 jobs could be cut. In other words, 250 jobs created and roughly double that already on the chopping block.

Meanwhile, Pepsi has explained to city hall what it can do to stem, and even reverse, the job losses: undo the tax.

DeCecco said the Pepsi jobs would be restored if the tax — currently under appeal and awaiting an April hearing — is struck down in court.

 

The city has pointed to higher-than-expected revenue numbers in the first month of collection, and restaurants who report being largely unaffected by the tax, to argue the industry could be exaggerating sales declines in an attempt to prevent the enactment of similar taxes in other cities or to gain a favorable outcome in court.

The Pepsi spokesman said there was nothing political about the layoff announcement, and in this particular case he is right: it is all about the bottom line.  

“This isn't something we take lightly or want to do, and we are committed to working with our employees and the union to treat impacted individuals with the care and dignity they deserve,” he said.

Pepsi may end up winning as the tide of public opinion is starting to turn against the mayor. Anthony Campisi, a spokesman for a coalition of retailers, bottlers, and unions opposed to the tax, said it was unfair for the city to blame the companies for the job loss.

“It’s the mayor who’s to blame for the economic and human impact of the tax,” Campisi said. “And its offensive to blame the impact on Philadelphia businesses that are no longer sustainable because of it."

But the straw that just might break the municipal camel's back in the deeply democratic city would be if the Teamsters - the backbone of any democratic administration - cry bloody murder, which they are starting to do. 

Danny Grace, secretary-treasurer for Teamsters Local 830, which represents many of the employees affected, said in a statement: “Our worst fears have been realized today. ... This terrible news, although not surprising, is particularly disastrous for the members of Teamsters Local 830, who rely on a strong soda industry for their livelihoods.”

Will Philly's soda tax be the latest attempt by an intrusive local government, demanding an ever greater share of the pie, seeing its efforts blow up in its face, and will City hall have no choice but to reverse course handing the local retailers a quick victory? For now the stalemate remains, but a few thousands more layoffs, and Philly's soda tax experiment will promptly end up on the garbage pile of "brilliant" bureaucrat ideas gone badly wrong.

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besnook's picture

the sales tax works! there are fewer people able to afford soda so there is less soda consumption and the city gets a few more bucks in taxes. winning!

abyssinian's picture

BLM should be outraged! Just should for whatever reasons you can imagine! :)

hedgeless_horseman's picture

 

Da Purple Drank is too damn high!

GUS100CORRINA's picture

Yes. here we see some more fruit from another PROGRESSIVE LIBERAL innovation.

These DESPOTS with REPROBATE MINDS will never learn.

It's the economy STUPID!

froze25's picture

You really can't make this up, how could you not see that raising the price on anything affects the way a consumer will spend their money? They really are freaking retarded.

ToSoft4Truth's picture

On the long end of the curve, dialysis treatment costs went down in the year 2040. 

FireBrander's picture

Exactly.

IF,,,HUGE IF....it were not possible for "soda drinkers" to spread thier "health costs" to me, I wouldn't give a shit how much soda they drink.

GIVEN THE CURRENT, AND FORESEABLE FUTURE, where the healthy pay an BURDENOUS amount for the sick...I say TAX THE FUCK out of anything where "sugar" (all forms) exceeds 5% of the products ingredients.

Fuck it, TAX IT.

Logan 5's picture

Fucking dumbasses

 

Don't want to pay a soda tax? Buy a bag of goddamned sugar and some powdered kool aid concentrate.

 

Ain't gonna help the Pepsi workers (cept maybe help them find out that they were getting paid to make people fat & rot their teeth, which, if about two steps more noble than Krugmans occupation).

 

Chrissakes ~ I never even buy Margarita mix... If I want a Margarita, it's sugar, water, and lemon juice.

Shocker's picture

Bad Regulations = Jobs Lost.

Good work

Full Layoff List: http://www.dailyjobcuts.com

-

ToSoft4Truth's picture

Need a job, get a job as a protestor. 

 

 

Grassroots Campaigns:

 

http://grassrootscampaigns.com/

BetterRalph's picture

I can make MORE MONEY without committing DOMESTIC TERRORISM. I can Plant beets. if I ever get sizable land, watch out I'll flood the damn world with em, I will build the MEXICAN WALL OUT OF BEETS!

Escrava Isaura's picture

The level of idioticy by some conservatives are second to none.

GUS100CORRINA: PROGRESSIVE LIBERAL innovation. These DESPOTS with REPROBATE MINDS will never learn.

So, let’s try your idea: Learn

One study found that for each additional 12-ounce soda children consumed each day, the odds of becoming obese increased by 60% during 1½ years of follow-up. (21)

People who consume sugary drinks regularly—1 to 2 cans a day or more—have a 26% greater risk of developing type 2 diabetes. Risks are even greater in young adults and Asians.

A study that followed 40,000 men for two decades found that those who averaged one can of a sugary beverage per day had a 20% higher risk of having a heart attack or dying from it. A related study in women found a similar sugary beverage–heart disease link.

A 22-year study of 80,000 women found that those who consumed a can a day of sugary drink had a 75% higher risk of gout than women who rarely had such drinks.

Now, did you learn of the “externalities” costs to society these soft drinks cause?

So, taxes? These soft drinks should never ever have existed in the first place. But try to tell it to the stupid people that keep drinking it.

https://www.hsph.harvard.edu/nutritionsource/sugary-drinks-fact-sheet/

 

lil dirtball's picture

>These soft drinks should never ever have existed in the first place.

They can in a free market and culture - but the people buying this shit should also know better than to drink gallons of flavored toxic sugar-water a week. Then the product would find its true value and probably not exist.

The consumers are idiots for drinking this poison, the teamsters for delivering it, the manufacturers for making it and the city for taxing it.

Being no one of any value is being harmed here - and no one is being coerced - I have no problem with this cannibalism.

Joe Trader's picture

HUGE win!!!!

I AGREE 100% with those who are aware of the huge negative effects of too much sugar in your diet.

Soda drinks serve the same supplmental function as protein - except sodas help you push your daily sugar intake to unhealthy levels.

Read up on NATUROPATHY PEOPLE!!! YOU'RE LIIVING IN THE STONE AGE IF YOU DON'T TREAT FOOD AS MEDICINE!!!!!

not dead yet's picture

Yeah and most of those studies when put under a microscope are pure unalduterated bullshit like so many other studies pushed by the food police who are under the influence of those with an agenda to get rich off their diet books or food. Any time they claim a percentage chances are it means they played with the numbers to get the outcome. The 97% of all climate scientists believe climate change is man made is a perfect example. In the case of the most famous "study" John Cook of skeptical science, which is not skeptical, took a data base of around 12,000 scientific papers and culled out the ones that mention global warming, climate change, etc. Then cull out the ones with a definitive opinion to get the percentages. Thus depending on who does the analysis the 97% is based on between 40 and 160 papers out of 12,000. All of the claims of 97% or 99% are based on this flawed methodology to push an agenda. Most of the studies that people site for whatever are not real studies but quickie bullshit for effect not deep down studies. Those that you site are based on simple questionaires and do not take into account lifestyle or health of the patients at the start or other factors that may come into play. Years a go another "study" made the rounds of how many people went to bed hungry every night because they could not afford food. Another quickie shallow study that based it's results on household income by the census service that did NOT include welfare, food stamps, or if the people had gardens or whatever and they extrapolated from there. Real researchers to counter this bullshit went through hospital and death records, where starving people would eventually end up, and found no evidence to back up the claim. Another is the recent claim that vitamins are worthless by siting a study where they took already very sick people and fed them vitamins and it did not cure them so it "proved" vitamins are worthless. Or another study that proved vegatarians lived longer by cherry picking a small bunch of old German vegatarians and comparing their death rates to the WHOLE German population. A well sited Chinese study claiming vegatarians lived longer was also based on faulty use of data too. So take your so called studies and shove them where the sun don't shine as most are bullshit to push an agenda. Just like so many other food police you pick on the low hanging fruit to make yourself look better and feel good while the real problems of rampant drug and alcohol abuse are ignored or encouraged.

Got The Wrong No's picture

Funny, the free thinking ZHers only hate taxes and big Government when it's good for them. 

FireBrander's picture

Yes, how horrible...fewer jobs BOTTLING SUGAR WATER, and (HOPEFULLY) fewer jobs in the "Health Industry" down the road...terrible.

Break the "I can eat whatever I want, get as fat as I want AND MAKE YOU PAY FOR MY ILL HEALTH when the time comes" REALITY we face today...and I'll oppose a sugar tax.

VZ58's picture

To Lefies like you it is always ok if people lose their jobs for the betterment of the species isn't it? One day your job too will be axed as well. and no one will cry for you when you have your meltdoown.

lil dirtball's picture

You weren't put on this planet to have a 'job' and it's a big bad world out there anyhow. Fuck everyone involved in this shitbag story ... they should find productive things to do with their time and not making, delivering and consuming corporate poisons. And, fuck Philly for being the disgustingly dirty shit-hole that it is.

FireBrander's picture

"Lefties" like me?

ROTFLMFAO!

Been a long time since anyone called me "Lefty".

BeanusCountus's picture

You... are an asshole. And a dumb one at that. So it's about YOUR money? Listen jerk, you only want to tax lifestyles that YOU dont agree with. How bout we tax the hell out of sports activity? Do you know what that costs in medical expenses? Just ask any ER what their busiest time of day is and they will tell you it's when "gym classes" are in session during the school day. Or how about taxing the hell out of women in child bearing years? Obstetricians and delivery of kids cost this nation a boatload. And you give a shit about the fat guy killing himself early from a heart attack? Killin yourself that way at 50 should get you a bonus! Because the bottomnline is, and has always been, the longer you live the MORE YOU COST in medical. Period. No one will tell you that, because they want you to just get on gov medical program before you get sick. And you will. Your odds of getting cancer (the most expensive) if you live to 90 are astronomically high. Maybe we should tax all you tofu eaters.

FireBrander's picture

If the activity results in above "normal" medical expenses, then tax the fuck out of it.

You want to be a gymnast, I want to fish...so why the fuck should I pay for your broken leg?

The SOLUTION here is STOP shifting expenses to such a high degree.

For fucks sake...local news story, FAT middle age women playing BINGO (with a jumbo soda on the table) worried that Medicaid will be cut and she can't afford her $18,000 A FUCKING MONTH IN PRESCRIPTION AND DOCTOR EXPENSES!

Jesus Fuck, We need to tax the fuck out of BINGO TOO!

BeanusCountus's picture

Hoping you were still up. Read it.

http://www.nejm.org/doi/full/10.1056/NEJM199710093371506

Bottom line: the vast majority of everyone's lifetime medical costs are incurred in the last few months of life. Everyone dies. From something. Although 1% do die in their sleep from no problems.

Get back to me.

scoutshonor's picture

Except: the beverage associated with the receipt in this article was water without any sugar.  Zero sugar--just tax.  Impact on future end stage renal disease or tooth decay also zero.

pods's picture

Its not just sugar that does most of the damage. It is all the fast carbs.

So your idea is going to have to go after basically anything that comes in a box.

pods

83_vf_1100_c's picture

Shhh! You are leaking the plan. /s

BetterRalph's picture

+1
I believe this. I think people know and say nothing, the same as condemning others to being SICK/or dead because they are UNEDUCATED about their own nutrition and basically sucking on a POISON DRIP.

mainstream media is useless's picture

I would argue for them to stop subsidizing medical care, and keep .gov out of both sides.  At the very least, if they insist on imposing the tax, put it toward the medical subsidies (I believe that is where the excessive portion of cigarette taxes go), not a pre-K program.

prime american's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://bit.ly/2jdTzrM

not dead yet's picture

No fuck you. 50,000 people died of drug overdoses last year after ending up in the emergency room and you paid for it. Tens of thousands of others ended up there too that survived and then went back to using drugs and you paid for it. We glorify drugs and booze so how many of those fat people chug calorie laden beer. When I was a kid it was the rare female that drank but now they belly up to the bar and chug them down just like the guys. You don't care because odds are you chug it too. According to the FEDS alcohol costs to US society is $250 billion per year and I'm sure that's low. 30% of Americans have a drinking problem and boozing on college campuses is rampant and administrators say it's a huge problem and getting worse. Drugs are even worse and people want to make them legal and according to experts the costs to society will explode. Tell us how many get killed on the highways every year from drivers being fat. We know it's tens of thousands killed and tens of thousands more injured by drunk and drugged drivers and YOU get to pay for it when your car and health insurance companies foot the bill. Not to mention lawyer costs when the lawsuits start flying and you pay for that too. Millions of your tax dollars go for the DEA and local outifts for the war on drugs because Americans are stupid and will do anything for a buzz or thrill. Not to mention innocent people getting their money and houses confiscated without any charges filed as cops want your stuff and use drugs as an excuse for your success. It is domestic disturbances with alcohol or drugs involved where most regular cops get killed or injured. A great many of those poor people that are sucking off the government tit got that way courtesy of drugs and booze. Many of those that file bankruptcy had plenty of cash for booze and drugs but not for paying the bills like my brothers and parents. A great many of the money problems in families and divorces are due to pissing away their money on booze and drugs. A lot of people on food stamps shop for their dealers in exchange for drugs and get pennies on the dollar for their efforts. Lot's of problems here that dwarf the cost to society of drinking pop but you clowns choose sugar because of the propaganda to distract you from the real problems of beer, booze and drugs. Not to mention the food police who spout their disinformation fed to them by those with an agenda to get rich selling books and getting kickbacks on food they recommend or have their name on. Willing to bet you dogooders are typing your sugar rants with a beer at your side. Sugar is just the easy low hanging fruit as you do not want to confront the real problems because they are not easy to solve or you are part of the problem. Typical Americans take the easy way out to fuck over other people to make yourself feel good. You're no different than the SJW's just on a different street.

Americans are lazier than ever and that's the cause of most obesity, along with beer consumption, which is obvious if you wanted to open your eyes. When I was a kid we drank pop like it was going out of style and did the same thing with cake, chips, cookies, and pie. We also were very active and burned off those calories and it was rare to see fat kids. Now we put kids in school as young as three and eliminate most recess and gym classes, lengthen the school day and year, pile on mountains of homework starting in kindergarten and that activity and will continue until the kid graduates or drops out and you wonder why so many kids are fat. Yet you ignorant people blame pop machines in schools. All that sitting indoors "to get an education" is hurting your kids health in other ways too but you blame climate change or whatever flavor of the month is fed to you by those with an agenda. As if all that extra "education" is doing your kids any good which it isn't as kids eventually tire of being fed bullshit and spending most of their childhood chained to their schoolwork instead of playing and exploring the world around them, it's called reality, and getting used to handling boredom.

Intellectually the war on drugs was a good idea as we have seen that rampant drug abuse has taken down from the inside countries and societies thus the extreme penalties for drugs in Asia. In reality the war is lost as Americans can't seem to get enough drugs and are unwilling to stop. So end the war that is causing so much carnage and puts corruption on steroids. Put the savings into anything but drug rehab, halfway houses, and other crap that these stoners need when they wake up or ordered to by the court. If they can't pay for it themselves let them go cold turkey or die. They paid for the shit that got them there so they can pay to fix the problem caused by their bad decisions and they are not victims as the bleeding heart morons claim. Fuck em, you made your bed sleep in it.

 

BeanusCountus's picture

Get over it. They saved taxpayers a fortune in social security and future medical expenses. Let everyone die as they choose.

Oldwood's picture

Curious the disconnect, where they can deliberately raise taxes on a specific activity and see its results almost immediately, yet feel free to tax PRODUCTION and then lament the resultant negative effects. Who could have seen that coming?

Amazing

Akzed's picture

The mayor blames evil greedy retailers for passing along the tax to their customers.

Let that sink in.

armageddon addahere's picture

That's what they wanted, wasn't it? That was the whole point, to get people drinking less sugary pop and more water. It's working like gangbusters. So, hundreds of people lose their jobs, just add them to the MILLIONS of jobs lost by government edict since the 1970s.

yogibear's picture

Her libtards can't aford it either.

Proves the libtards are self destructive.

NoDebt's picture

I live near enough to Philly I hear all the Philly talk radio stations.  You wouldn't believe how city hall and the mayor are trying to spin this.  They're throwing around accusations of "greedy corporations who are passing along the cost of the tax to consumers instead of paying it out of their own pocket".  It's hysterical.  Like a little chunk of Venezuela's politics right here in the US.

I told you that Chicago's got NOTHING on Philly in terms of single-party corruption.  Philly's where it's at, gentlemen.

Oh, and just wait until the pension system starts to wobble.  You'll need so much popcorn you'll swear it off the rest of your life after that one.

 

hedgeless_horseman's picture

 

passing along the cost of the tax to consumers instead of paying it out of their own pocket

No maff or bidness skilz fo tobe voteds in da Philleez cidee hall.

http://phlcouncil.com/council-members/

pods's picture

Seriously. Doesn't he understand that INDIVIDUALS pay tax?  I doubt it.

pods

NoDebt's picture

The part you're really going to like, HH, is that the city ALREADY SPENT THE EXPECTED REVENUE BASED ON A 0% DECREASE IN SODA SALES.

 

pods's picture

Of course they did. No need to thing about the elasticity of demand.

Now, if they were to tax say, INSULIN, that might not see much decline, but soda?  

pods 

Got The Wrong No's picture

People didn't stop drinking soda. The stores sales outside the City limits are booming. People are buying there Groceries there as well. This is hurting businesses in Philly. Dems have been destroying the City since Frank Rizzo left. 

chiquita's picture

It's not that there are a proliferation of grocery stores/supermarkets in the city limits of Philadelphia as it is.  Some parts of the city, mostly in the "better" areas, there are some ShopRites, Pathmarks, Save-A-Lots, and Acme Markets.  Trader Joe's opened in Center City a few years back.   However, in big areas where the population is shall we say less financially upwardly mobile (such as North Philadelphia), they call it a grocery wasteland.  These areas depend on the mom and pop corner markets because the big guys won't go there.  Some have opened and closed in short order due to the rampant crime.  The best and busiest grocery stores around Philadelphia--besides the ones all the way out in the suburbs--are the ones right across the city borders where the city taxes don't apply.  Residents who can drive have always shopped outside of city limits.  Even when I lived in Center City Philly in the late 70s, there weren't a lot of grocery choices and the ones from then went out of business.  Even the Italian market on 9th Street has long since seen better days.

Joe Trader's picture

The nice thing, for those that are aware of the health implications - kids are less likely to travel out of town for soda. Sure there will be a few young entrepreneurs selling cheap soda at school, but safe to say there's going to be a general positive effect for kids.

rich1657's picture

It makes me laugh every time I see that receipt from Morrell Shop Rite because I used to carry mail out of Torresdale Station which was right across the street.  It's only a block from the City Line and there's an ACME at Woodhaven Mall anyway.  "Fuck 'em & feed 'em beans."

davinci7_gis's picture

Agree...note that the mayor is asking Pepsi to "subsidize" it's plants in philly from other Pepsi plants in the US!  What a warped sense of entitlement.  I never thought I would see the day.

Two Theives and a Liar's picture

Philly is one of those super-entrenched democratic-machine feeding troughs for machine-connected Dems and race-hustlers of every description. It's like the 1970's never ended!

dot.dot's picture

A litle OT, but I quit buying Pepsi back when they changed their logo to look very similar to that retarded Oboma logo.

Why is this never discussed?  Or am I paranoid for seeing a resemblance/timing of its introduction after he was elected/etc.?

Gilnut's picture

Newton's Third Law:  For every action there is an equal and opposite reaction.  Also known as the law of unintended consequences.  :)

 

Which is why I laugh when people talk about such things as raising taxes or raising minimum wage.