< Soda-Makers Try To Take Fizz Out Of Bay Area Tax Campaigns

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ROBERT SIEGEL, HOST:

Again and again, crusaders against soda and other sugary drinks have been stymied in the U.S. Voters and courts have rejected proposed taxes and restrictions. But earlier this year, Mexico enacted a tax on sugary drinks, and that has encouraged American anti-soda activists. It's also caused beverage companies, like Coca-Cola and Pepsi, to spend millions on defensive advertising, especially in California, where we find reporter Sarah Varney.

SARAH VARNEY, BYLINE: It used to be that having a coke was as American as apple pie and advertising.

(SOUNDBITE OF COCA-COLA ADVERTISEMENT)

UNIDENTIFIED PEOPLE: (Singing) I'd like to buy a world of Coke and keep it company. That's the real thing.

VARNEY: Those harmonious days, though, are long past. Americans drink less soda than they did a decade ago. And Coca-Cola announced earlier this month that quarterly profits were off 14 percent, in part because of a decline in sales in Mexico. Grassroots advocates in San Francisco and Berkeley have been encouraged by what they see as Mexico's success in battling obesity and are hoping voters in the Bay Area will follow suit. After walking the steep sidewalks and knocking on doors in the Berkeley Hills on a recent evening, soda tax supporter Pam Gray finds a neighbor being pulled on the end of a leash by a friendly dog.

PAM GRAY: I am volunteering on the Measure D campaign. And so have you heard about the soda tax?

KATY WILSON: I know all about it. I've I been pulled four times.

VARNEY: Gray's neighbor, Katy Wilson, agrees kids eat too much sugar. But she says, she's going to vote no on the measure, which would impose a one-cent tax per ounce on sugary drinks. The money would go into the city's general fund.

WILSON: I don't think that the measure gets to the root cause, which is our attitudes towards eating, drinking and taking care of ourselves. It's just, like, a penalty.

VARNEY: The neighbors debate for some time. And Gray tries to make the case that Berkeley, where one out of three kids will develop diabetes, has to start somewhere.

GRAY: The very initial steps around taxing tobacco started with some very small legislative steps, and so I think that this is really Berkeley's attempt at beginning that process, also.

VARNEY: The comparison to the struggling tobacco industry isn't far off. Vivian Azer is a soda and tobacco stock analyst at Cowen and Company. She says, the health concerns that have contributed to soda declines are a lot like what she saw for cigarettes a couple of decades ago.

VIVIAN AZER: What we've seen in soda is that volumes have been inclining for about 10 years now, so I would argue, you know, that sodas about 20 years behind cigarettes.

VARNEY: Another reason cigarette sales are down is higher taxes and smoking bans. That's meant fewer teens and young adults are taking up the habit. Azer says, soda drinkers tend to start young, too, and if they don't drink a lot of soda as a kid...

AZER: ...The likelihood of them stepping up their per capita consumption over time is relatively low.

VARNEY: Along Berkeley's main streets and in the underground subways here, advertisements blasting the proposed soda tax are everywhere. The American Beverage Association has spent some $1.7 million fighting the measure in Berkeley and 7.7 million fighting a two-cent-per-ounce soda tax in San Francisco. Roger Salazar is the anti-tax spokesman. He says, these kinds of taxes have failed to pass across the country, and San Francisco and Berkeley will be no different.

ROGER SALAZAR: While they try to paint it as a launching pad, it's more of a last gasp.

VARNEY: Salazar says, cities have more important priorities than deciding what their residents should be drinking. And he says, taxes don't get at the root of the obesity epidemic.

SALAZAR: Taxing beverages is not going to change behavior or teach people about healthy lifestyles.

VARNEY: But economists say soda drinkers do change their behaviors when prices go up - more so than cigarette smokers. Matthew Harding is an economist at Duke University and recently looked at over 100 million supermarket purchases. He found Americans spend about 10 percent of their food budget on sugary drinks. But when supermarkets raise those drink prices, consumers switch to more nutritious choices. And what do those different choices mean for shoppers?

MATTHEW HARDING: Sugar intake drop by almost 20 percent, and calories drop by eight-and-a-half percent.

VARNEY: Stock analyst Vivian Azer says, soda companies have come up with one response to the pressure to cut empty calories - make the cans smaller and charge more. For Coca-Cola's so-called mini cans, she says, the revenue per ounce is more than 100 percent higher than a regular can of Coke. For NPR News, I'm Sarah Varney.

SIEGEL: And that story is part of a reporting partnership between NPR and Kaiser Health News.

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