Philly Beverage Tax Blowback: Coca Cola Sales Plunge 32%

Just a month after PepsiCo said it would lay off 80-100 people due to the 'unintended consequences' of Philadelphia's new soda-tax, Philly Coke, the local Coca-Cola bottler, has cut 40 jobs amid a 32% plunge in sales.

Since all of this is taking place as previewed in a recent post: "The 'Soda Police' Just Learned A Valuable Lesson About Taxes", we doubt it would come as a surprise to anyone, although we are confident that Philadelphia city workers will be amazed by these unexpected developments.

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. According to Philly.com reports, 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 - are now planning for layoffs.

A month ago, PepsiCo slashed jobs, blaming the soda tax...

With sales slumping because of the new Philadelphia sweetened beverage tax, Pepsi said that it will lay off 80 to 100 workers at three distribution plants that serve the city.

 

The company, which employs 423 people in the city, sent out notices 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.

 

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. Langdon said the writing was on the wall: 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."

And on Friday, as Phily.com reports, Coke did the same...

Philadelphia’s new sweetened-beverage tax has led to the loss of 40 Coca-Cola jobs and a 32 percent drop in sales, the company said Friday.

 

Fran McGorry, president and general manager of Philly Coke, the local Coca-Cola bottler, said in a news release that the job losses are due to commission-based employees leaving the company, not layoffs.

 

“We are not able to replace those positions right now,” he said. “In total, we have fewer people working in the city while more people are now working outside Philadelphia due to increased demand there. We have also made the decision not to hire seasonal employees for the summer months due to the negative impact the tax is having on our business.”

Lauren Hitt, spokeswoman for Mayor Kenney, stressed that fact when responding to the job losses and said the industry is “looking for opportunities” to make the tax a scapegoat. The Kenney administration lambasted the news, pointing to the industry's overall profits and the benefits of the expanded pre-K program that the 1.5-cent-per-ounce tax funds.

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."

The beverage industry is suing to strike down the tax.

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