PepsiCo Lobbies Against Junk Food Tax
By Ellis Hensley
San Francisco and Berkeley are considering instituting a new per-ounce tax on sugary beverages, as proposals are ready for the November election. If these measures pass they will be first two areas in the United States to institute a tax on junk food, similar to the one in Mexico which has already had a dramatic effect on sugary beverage sales, according to both PepsiCo and Coca-Cola. Experts and analysis are closely watching the movement of this measure—particularly in the liberal Bay Area—as failure to pass this tax would suffer a major blow to health advocates who view it as a small thing we can do [as a country] to collectively improve nutrition efforts. After all similar proposals have already failed in other U.S. cities.
But despite opposition, health advocates continue to push for these taxes, which introduce a two-pronged approach to stemming calorie-laden junk food consumption in America. Charging a tax, of course, could help to redirect consumer spending away from these choices and more towards healthier ones, but it could also pump more money into research and development of better and healthier products. And it is a strategy that has already been successful with cigarettes.
“Junk food” product makers, however, call the tax unfair. As a matter of fact, PepsiCo chief executive officer Indra Nooyi personally addressed the measure in California, responding that she feels these “discriminatory taxes” are “wrong,” as they single out these two competing companies.
As you might expect, the American Beverage Association has already spent $7.7 million to shut down the proposal in San Francisco, which is leagues more than the $391,000 supporters of the tax have contributed.
Which raises the question: couldn’t that $8 million USD be better spent on developing and marketing better products instead of investing in marketing campaigns that cancel each other out?
Pepsico profits rose 5 percent in third quarter
October 9, 2014, 12:25 PM CDT | Written by Christian Nordqvist | Food and DrinkNews |
PepsiCo posted a 5% increase in profits for the 3rd quarter, driven by strong sales overseas, despite a difficult environment, the company announced on Thursday. PepsiCo shares, which have risen by 18% over the last year, surged by 1% to $95.25 in early trading on Thursday.
In its outlook for the year, the Purchase, New York-based multinational food and beverage corporation forecasts a 9% increase in full-year adjusted earnings, compared to its previous guidance of 8%.
PepsiCo’s Chairman and CEO, Indra Nooyi, said in a statement:
“We delivered good third quarter results in the face of an ongoing challenged macroeconomic environment driven by increasing volatility in the emerging markets and continued sluggish consumer demand in developed markets. Our organic revenue grew three percent and we achieved positive effective net pricing through strong price/pack revenue management. Together with our relentless focus on productivity, this translated to both gross margin and operating margin expansion.”
The world’s second largest food and beverage business registered earnings of $2.01 billion ($1.32 per share) for Q3 (ending September 6), compared to $1.91 billion ($1.23 per share) during the same period last year.
Revenue overall rose by 2% to $17.22 billion in Q3 2014 compared to $16.91 billion in Q3 2013.
Sales in Africa, the Middle East and Asia surged by 11%, and in Latin America by 6% in the third quarter.
Sales in Mexico down
However, in Mexico, which has the world’s highest consumption of sodas per head of the population, things did not go so well. Mexico’s President Enrique Peña Nieto introduced a new tax on junk food and sugar-laden drinks, which resulted in a -3% decline in snack sales. Several lawmakers have been impressed by President Nieto’s tax and are considering introducing similar levies in their own countries.
At the beginning of October, PepsiCo said it plans to sell Pepsi True, the mid-calorie stevia-stweetened soda, via Amazon.com.
Along with Coca-Cola and Dr. Pepper, PepsiCo committed to reducing the calorie content of its sugar-laden drinks by 20% by 2025.
PepsiCo has resisted calls from activist investor Nelson Peltz’s Trian Fund Management LP to break up the firm’s snack and beverages businesses, arguing that the company has a better future if the two stay together. For the past five years, PepsiCo has been losing market share to arch-rival Coca-Cola