In response the American Beverage Association coordinated a lobby effort that resulted in their budget rising from $391,000 in 2003 to $8.67 million in 2010. The heavy lobbying led the proposal to be discarded and wasn't included in health care reform.
With victory in hand, sugar producers made a surprise turnaround today and not only scaled back all lobbying efforts, they changed their stance and advocate for the tax. "At first we were concerned with the potential loss of revenue and ripple effects throughout the industry. Even a slight change in taste that our valued customers are familiar with could reduce brand loyalty and secure markets could be reshuffled. Would customers still want to drink Coke or Pepsi if they tasted more diluted than before? In the worst case scenario, they may just switch to other tax exempt sugary beverages such as juice and dairy related drinks," says industry spokesman Rick Badgers.
"Even with our lobbying efforts to better inform policy makers of the risks, some states and municipalities successfully passed the tax. In the industry, we viewed this as an opportunity to view the effects on a smaller scale. Expecting the worst, we funded research studies in these areas to analyze the effects on sales. There was an immediate blip on our charts. In NYC alone, we saw an 16% decrease. That was huge. That kind of growth took years of advertising and creating loyalty."
With potentially billions of dollars in revenue at stake, producers cut sugar in their main products lines and expanded into sweetening products such as to-go sugar and high fructose packets.
"We thought selling sweetener separately but in close proximity to our drinks would bypass the taxation and satisfy our customers at the same time. We were right. Sales not only bounced back, they increased as our consumer base expanded due to the perception that the drinks are healthier. Existing customers now had a chance to customize the sweetness of their favorite beverages and people who avoid excess sugar felt more comfortable consuming our products. We also increased our margins by marking up the separate sugar. Before the cost of sugar was included in our retail prices, now we sell it as a stand alone product and mark up prices accordingly."
What once was a powerful deterrent of food taxes, the beverage industry is now leading an effort to expanded the tax all over the country.