Mexico’s Soda Tax Is Working

Beverage makers are reporting a drop in sales since the new law was enacted.

(Photo: Tom Kelley/Getty Images)

Oct 10, 2014· 1 MIN READ
Willy Blackmore is TakePart’s Food editor.

Ten million dollars is a lot to spend on two local ballot initiative campaigns. That’s how much the beverage industry has poured into swaying people living in San Francisco and Berkeley, Calif. In November the two Bay Area cities will vote on ballot initiatives that, if passed, would enact new taxes on soda and sugary drinks.

PepsiCo’s third-quarter earnings report, released on Thursday, may hint at why the soda giants are outspending supporters of the initiatives. The company’s sales have dropped 3 percent in Mexico, where people consume far more soda—more than 12 ounces a day on average—than anywhere else in the world. The drop reflects “the adverse impact of the enactment of taxes on certain food products,” according to a statement. More plainly stated: The country’s junk food tax appears to be working.

Although Coca-Cola’s domestic sales are up, thanks in part to its “Share a Coke With” campaign, The Associated Press reports that the company has seen “beverage volume declines in Mexico for the first half of the year” because of the tax. The Mexican law tacks on seven pesos, or about one cent, to the price of a soft drink.

Both Bay Area initiatives look viable less than a month from Election Day. The San Francisco Chronicle recently endorsed Proposition E, despite arguing against a similar ballot measure considered by Richmond, Calif., voters in 2012.

But is taxing consumers the best way to address the nutritional problems presented by sugary, high-calorie beverages? PepsiCo CEO Indra Nooyi doesn’t think so, as you might expect. “I believe discriminatory taxes on certain categories are just wrong,” she said Thursday on a call with investors. The beverage companies are in the ironic position of making a social justice argument against the proposals: The taxes would have the most impact on the Bay Area’s poorest residents.

A study published by The American Journal of Preventive Medicine in August suggests that young, overweight minorities have the most to gain from government programs designed to curb obesity. Researchers created micro-simulations to see how after-school exercise programs, banning junk-food TV ads targeting kids, and a one-cent-per-ounce tax on soda—the exact tax on the ballot in Berkeley—would affect obesity rates. “The SSB [sugar-sweetened beverage] excise tax would reduce obesity the most among adolescents aged 13–18 years (2.4 percentage points),” the authors concluded. “All three policies would reduce obesity more among blacks and Hispanics than whites.”