NEW YORK – Soda pop (tax) flop? The Wall Street Journal reports that sales of soda are climbing two years after Mexico imposed a roughly 10% tax on sugary drinks—“a bright spot for an industry that has feared it could be cast as the next tobacco.”
Imposing the tax two years ago was Mexico’s “attempt to cap alarming obesity and diabetes rates in a country where per capita soda consumption is the highest in the world. It came at a time when then-Mayor Michael Bloomberg was trying to limit sales of the beverages in New York City, and more countries are weighing a similar tax,” writes the news source.
However, after an initial drop when the sugar tax first hit, soda sales are rising in Mexico, making the country a key market for soft drink companies. “Underscoring the resiliency of sugary drinks, the tax of one peso per liter has raised more than $2 billion since January 2014, about a third more than the government expected,” notes the news source.
Anti-soda groups aren’t ready to declare the tax a failure, saying that soda sales have been boosted by unusually warm weather. A public health campaign financed by Bloomberg Philanthropies has also stopped running, which asked consumers if they would eat 12 spoonfuls of sugar, about the equivalent of a 600-milliliter bottle of soda.
“The sugar tax is an important piece but not the only one,’’ Kelly Henning of Bloomberg Philanthropies told the news source.
Coca-Cola Femsa SAB, Mexico’s largest Coke bottler, said last week that its Mexican soda volumes rose 5.5% in the first quarter from a year earlier. Arca Continental SAB, the No. 2 Coke bottler, reported soda volumes surged 11%.
“We know these taxes don’t work,” said Coke CEO Muhtar Kent at the company’s annual shareholder meeting last week.
Other countries are considering additional taxes on soft drinks, including India, South Africa and the Philippines. The American Beverage Association is fighting similar proposals in the United States, and plans to highlight a new study that found Mexico’s beverage industry lost about 3,000 jobs in the first quarter of 2014 because of the sugar tax, notes the news source. That survey estimates Mexican soda consumption returned to pretax levels by mid-2015, and found the initial downturn only lowered the average Mexican’s daily caloric intake by 6 to 7 calories, or 0.2%.