The View from A Farr - Fighting against the Fat Tax
There's no doubt what's currently exercising the minds of beverage executives in the US - the threat of a Federal CSD tax. Now that President Obama has said the idea is worth investigating the ante has been upped and the industry's leading companies are aggressively fighting their corner - and, argues Annette Farr, with justification.
The Coca-Cola Co's CEO, Muhtar Kent, wrote recently in The Wall Street Journal that the idea of a soda tax is getting increased attention despite its regressive nature and inherent illogic. He cites some telling statistics: although since the 1970s Americans have increased their average caloric intake by 12%, they have become more sedentary. According to the National Center for Health Statistics 2008 Chartbook, 39% of adults in the US are not engaging in leisure physical activity. The Center for Disease Control and Prevention has found that 60% of Americans are not regularly active and 25% of Americans are not active at all.
Alarmingly, a 2008 A.C. Nielsen study reveals that the average American spends the equivalent of 60 days a year in front of a television and time spent playing video games has risen by 25% over the last four years. Writes Kent: "If we're genuinely interested in curbing obesity, we need to take a hard look in the mirror and acknowledge that it's not just about calories in. It's also about calories out."
He questions whether a tax would make any difference. Apparently the two states which currently have a tax on sodas, West Virginia and Arkansas, are among those with the highest rates of obesity in the US.
At PepsiCo, chairman and CEO Indra Nooyi has been appointed vice chair of the Healthy Weight Commitment Foundation (HWCF), newly formed to tackle America's obesity problem. The HWCF says it aims to assist individuals, especially children, balance calorie intake and outtake, with a reduction in the level of obesity targeted for 2015. Founding members, which include Coca-Cola, have committed $20m to the programme, which will be independently monitored.
"For our part, we are committing to enhancing our efforts to offer food and beverage choices that can contribute to healthy weight. To do that, we'll offer more reduced-calorie and portion-controlled options," said Nooyi. "At the same time we will do more to educate people, particularly children, about balancing the calories they consume with those that they burn."
Kim Jeffery who heads up Nestlé's North American bottled water division (competitors of carbonated drinks) is reported to have said he is "totally against" the tax, regarding it as a thinly veiled opportunity for the US government to raise money. "Do we really think a tax on soft drinks will reduce obesity significantly in America? It's just going to make it more expensive," Jeffery is reported to have told investors.
The American Beverage Association (ABA) has mounted a robust challenge to the suggestion that taxing sodas will solve America's obesity crisis. In June, the ABA formed a campaign coalition called Americans against Food Taxes which has taken out print advertisements in Washington and New York attacking the soda tax.
Earlier in December 2008, the ABA successfully fought New York State Governor David Paterson's proposed 18% tax on non-diet sodas. Calling it an obesity tax, the revenue of which would go towards state health programmes, Paterson eventually abandoned the idea. Although many acknowledged that New York has an obesity problem, many more pointed out that plenty of overweight individuals drink diet sodas!
We are told by both the ABA and the UK's own BSDA that obesity is a complex issue. But it shouldn't be. Most people know that if you eat and drink high fat, sugary products you are putting on the calories; if those calories aren't burned off by exercise your waistline will expand.
A generation ago the choice of soft drinks was limited to squashes, lemonades, and carbonates. There were no diet or low-cal variants. Yet, people generally were not overweight because they watched less television, didn't play computer games and took more exercise.
The US government should be working with the industry, not against it, in fighting obesity. Together, united in educating Americans on nutrition and exercise, they have more chance of bringing about the change in lifestyle and diet needed to combat obesity than by a punitive tax imposed upon sodas.
There is evidence that delivering a healthy marketing message works. to a new report Marketing Kids' Healthy Beverages from New Nutrition Business, the US market for children's food and drink will grow in value by 50% from $16.4bn in 2007 to $26.8bn within two years. It health drinks (fruit juice, fruit-flavoured water and dairy drinks) making the biggest gains of the junior beverage sector as more companies recognise that parents are looking for alternatives to sugary colas and sodas.
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