Over the last several years, Coca-Cola’s expanding lineup of drinks and convenient, smaller package options have helped Americans, including Philadelphians, reduce their sugar intake and enjoy more of the beverages they love on their own terms. Now in the City of Brotherly Love, the company’s commitment to choice also is helping reduce the burden of an onerous 1.5 cents-per-ounce sweetened beverage tax.

“We’re doing the right things to offer brands people want at prices they can afford – and that helps stores grow their total business,” said Fran McGorry, president and general manager of Coca-Cola Refreshments' Tri-State Metro Operating Unit, also known as “Philly Coke”.

Mini Cans and 1.25-Liter Bottles
Coca-Cola has worked with Philly store owners to boost availability and visibility of 7.5-oz. mini cans and 1.25-liter bottles.

Coca-Cola’s local bottler has been operating in Philadelphia for 115 years. Today, Philly Coke employs more than 700 people.

To help its retail customers, Philly Coke has worked closely with large and smaller store owners to boost availability and in-store visibility of 7.5-oz. mini cans and 1.25-liter bottles in Philadelphia stores. Coca-Cola offers 800 different beverages in the U.S. – 250 are reduced-, low- and zero-sugar options.

“We’ve been offering smaller packages across the country – and here in Philadelphia – not because of cities passing beverage taxes, but because they're what people want,” said McGorry. “But these steps also are helping our customers navigate the business challenges presented by this tax and helping make our products affordable for consumers.”

Mini-can multipacks have become more prominent in stores over 12-packs of 12-oz. cans, and 1.25-liter bottles are stocked alongside 2-liter bottles. The smaller offerings, which aren’t taxed as much because they have fewer ounces, are now the featured Coke products in retail promotions and special offers.

'We’ve been offering smaller packages across the country – and here in Philadelphia – not because of cities passing beverage taxes, but because they're what people want. But these steps also are helping our customers navigate the business challenges presented by this tax and helping make our products affordable for consumers.'

 

The strategy is working. Coke’s sales of mini-cans and 1.25-liter bottles in Philadelphia grew 9 percent and 9.5 percent in 2016, respectively. “While the government is trying to tell people what to buy, we've been working hard to offer the drinks and packaging consumers prefer,” McGorry said.

Rudy Salas, senior vice president, franchise leadership, Coca-Cola North America, added, “We have to be creative in how our brands and packages are marketed in stores if we want to catch the attention of shoppers. Despite the challenging environment caused by the tax, we are working together with local retailers to reinvent the beverage aisle by expanding choices for Philadelphians.”

The Philadelphia City Council passed the beverage tax in June 2016 despite a poll showing that nearly 60 percent of residents were against it. This sentiment is consistent across most of the U.S.; over the last nine years, more than 40 beverage tax proposals have been rejected across the country.

Philadelphia residents protest the 1.5 cents-per-ounce sweetened beverage tax outside city hall in 2016.

American Beverage Association

And it seems the tax is not changing any minds in the first few months of 2017. Since Jan. 1, Philly residents and small businesses have seen the tax’s wide impact. More than 1,000 beverages – from sports drinks and teas to juice boxes and diet soft drinks – are impacted by the Philly tax. As a result, restaurants and stores have been forced to boost beverage prices, and others have reduced the variety of beverages offered to their customers. Mom-and-pop shops have been hit especially hard.

'“Bottom line is this tax is hurting consumers, especially working-class consumers who can least afford to pay it. It’s significantly hurting our customers and their employees, and it’s hurting our business. Thriving communities and economies need thriving businesses.'

Meanwhile, businesses outside Philly are benefiting from frustrated shoppers fleeing the city limits in search of a better beverage value.

“We’re seeing one store with a line out the door across the street from a store with an empty parking lot,” said McGorry. 

McGorry said retailers appreciate Coke’s proactive approach to helping them manage their beverage business since the tax took effect on New Year’s Day. “But 99 percent of the conversations we have are complaints about what the tax is doing to their traffic, their overall revenue and their ability to compete in the market,” he added. “Some are concerned about being able to stay in business, and some are having to lay off employees. That’s why we’re glad we can at least help a little bit by continuing to emphasize our smaller packages."

“Bottom line," he concluded, "is the tax is hurting consumers, especially working-class consumers who can least afford to pay it. It’s significantly hurting our customers and their employees, and it’s hurting our business. Thriving communities and economies need thriving businesses. You have to wonder how long this can last.”