Grocer down $40m
Atray of sandwiches is sitting on a couch in the northern Philadelphia office of union man Danny Grace, waiting to be delivered to the homeless the next day.
Philadelphia is the poorest large city in the United States, and it was the first major city to adopt a sugary drinks tax.
Here, where a quarter of the city’s 1.5 million residents live below the poverty line, there is a lot of need.
The drinks tax, charged to distributors at 1.5 cents-per-ounce, has tried to meet some of that need – funding 2000 much-needed slots for quality early childhood education (‘‘pre-K’’). But it’s been at the expense of ‘‘bread and butter’’ jobs in the beverage industry, Grace says.
Grace drove for Pepsi for 20 years, till 1995. Now he’s secretarytreasurer of the Local 830 Teamsters Union, which represents more than 2000 beverage industry workers in the tri-state area of New Jersey, Delaware and Pennsylvania.
I meet him 11 months after the tax kicked in.
So far, 170 permanent industry positions have gone. Hiring has frozen and summer positions have dried up.
This is because drinks sales are down 45 per cent in the central city, but up 12-15 per cent on its untaxed fringes.
‘‘Simple math, we’re still losing 30 per cent of the business.’’
City officials are skeptical of the figures, saying no independent data has proved their accuracy. They’re also not convinced the beverage tax is solely responsible for job losses and say automation or loss of market share could be factors.
They cited a Harvard study – funded by former New York mayor and pro-sugar tax man Michael Bloomberg — which said sales of taxed drinks were down 57 per cent in Philadelphia during the first six months of 2017, but found overall store sales were not impacted by the tax.
But Grace is adamant the tax is hurting across the board. Those who are hurt the most are the delivery drivers on commission.
‘‘It’s all the new guys – young people who are just starting out in life who can’t make any money, ‘cause the sales aren’t there.’’
Asked what shape his members might be in a year from now, Grace says he’s scared to answer.
‘‘Each location rises and falls on its own. The Coke plant here in Philadelphia – if they’re not making money, they’re going to shut it down.’’ Stores around the city’s borders face the most challenges, particularly when people can cross the street to an untaxed area and pay much less.
No-one has seen this effect more than multi-grocery store owner Jeff Brown.
The fourth-generation Philadelphia grocer is the founder, president and chief executive of ShopRite – a conglomorate of 11 supermarkets in and around the city.
Six of them are in the area affected by the city’s drinks tax.
‘‘I’m down $40 million in sales for the year in my city stores, which has made my entire supermarket business unprofitable,’’ Brown says.
Those city stores saw a total drop in sales of more than 14 per cent in 2017.
Some sales are down close to 20 per cent at his stores on the city’s fringes, he says.
‘‘The saddest part is the risk that some of the most vulnerable families in the country might lose all that they gained in unionised jobs, healthy food access, economic development etc., caused by uninformed or reckless elected officials, advisers and researchers.’’
A beverage tax
Philadelphia’s tax also applies to diet drinks, bucking the trend of other sugar taxes.
Mayor Jim Kenney’s original plan would have left diet drinks alone, but doubled the tax on sugary ones, to 3c an ounce.
The compromise that passed council in 2016, by 13 votes to 4, cut the rate in half, but extended the tax to drinks containing sugar substitutes.
Sweetened milks and fruit juice are also included.
Exemptions are made for drinks that are at least 50 per cent cows’ milk, medical foods and baby formulas, and anything containing more than 50 per cent