Legislation and Soft Drinks
July 1/Business Monitor International Ltd. (BMI) -- The U.S. carbonated soft drinks sector,already suffering in the wake of the economic downturn and increased health consciousness, could be set for further difficulties if two proposed policies are introduced by the Obama administration. The Center for Science in the Public Interest (CSPI) has launched a campaign to repeal a measure introduced in 2003 that prevents government sponsored health campaigns from naming specific foods. Meanwhile, politicians in the U.S. congress have recently discussed raising taxes on soft drinks and alcohol to help pay for Obama's ambitious healthcare reforms.

As one of the few products directly linked with obesity, soft drinks would surely be among the worst hit segments if government health campaigns were allowed to mention specific products. The 2003 legalisation outlawing such messages is attributed by the CSPI to lobbying from soft drink firms after a number of state health campaigns were introduced that encouraged consumers to drink less carbonated soft drinks.

While the return of such campaigns would be damaging, perhaps an even more serious threat to the carbonated soft drink sector is the possibility of extra taxes, under the premise of funding healthcare reforms. A "lifestyle tax" was first posited by the U.S. Senate Finance Committee at the end of March, with the proposals suggesting that a tax of $0.10 on a can of soft drink could curb consumption and help finance comprehensive healthcare reform. These measures have met with resistance in the U.S. senate, with concerns raised about the impact on an industry that is already under strain. However, the policy is supported by the CSPI and a group of health campaigners who wrote in an open letter to Senator Max Baucus, chairman of the Senate Finance Committee, that "because of rising obesity rates, this may be the first generation in our nation's history that has a shorter life expectancy than the prior generation. While many factors contribute to weight gain, soft drinks are the only food or beverage shown to have a direct link to obesity."

The introduction of either of these policies is likely to have a direct impact on soft drink sales at a time when figures suggest that sales of carbonated soft drinks in the U.S. are declining more quickly than ever. In volume terms, sales of carbonated soft drinks fell 3% in 2008, after declines of 2.3% in 2007, 0.6% in 2006 and 0.2% in 2005. This is a rapid fall from favor for the sector, which was experiencing 3% growth rates as recently as the 1990s and can be attributed to increased health consciousness as well as the economic downturn which has curbed discretionary spending.  

From the July 6, 2009, Prepared Foods E-dition