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Coca-Cola Says Industry Must Fight Soda Taxes

Mon, 06/14/2010 - 10:00am
Emily Fredrix, AP Business Writer

NEW YORK (AP) -- The soft drink industry has to work together to make sure proposed soda taxes never come to pass, the chief financial officer of soft drink giant Coca-Cola Co. said Monday.

Gary Fayard told analysts at a meeting that shoppers will continue to buy soft drinks even if prices go up -- which taxes would do -- but the industry's profits would be hurt and it doesn't want to see taxes passed.

Some state lawmakers have proposed taxing sugary beverages as a way to raise money and reduce obesity, which is linked to costly health problems such as diabetes. Some taxes being considered would amount to a penny an ounce, which analysts say would be a 30 percent price increase on average.

"We're an easy target as an industry, and this is one where we're all going to have to pull together and work diligently because it's a threat," Fayard said at a conference held by trade publication Beverage Digest.

He said the industry has been fairly successful in the fight so far -- with much of the campaign done by the American Beverage Association, the trade group for the nation's soft-drink makers. But the industry must keep working against the taxes, he said.

The trade group spent $5.4 million in the first quarter lobbying the federal government on proposals to tax sugary beverages, children's nutrition and other issues, according to a recent disclosure report. It has also been running television advertisements urging consumers to fight the taxes.

The soda makers see taxes as a big threat in a slumping domestic soft drink market. Companies like Coca-Cola, based in Atlanta, and number-two player PepsiCo Inc. have been facing a weak profits domestically as shoppers switch to juices and teas and cut their purchases to save money.

The industry has been cutting calories to help fight obesity, Fayard said, and he noted that 45 percent of the Coca-Cola brand's business is now from diet drinks, which would not be subject to soda taxes.

Although the threat to business from the taxes is considerable, he said it won't dampen the appetite for soft drinks. In the fall of 2008, Coca-Cola raised prices across its portfolio of brands between 15 percent and 20 percent. It expected volume to drop as consumers reacted to the higher prices but Fayard said volume held steady.

Both Coca-Cola and PepsiCo are racing to develop natural, no-calorie sweetener alternatives such as stevia that they can use in drinks while maintaining taste and avoiding taxes.

Fayard said the sweeteners hold promise but there is still work to be done. He said their potential to aid the business will improve as prices of stevia fall.

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