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Small Grocers Say Soda Tax Will Kill Business

OAKLAND, Calif. (CN) - While voters in Oakland, California, will have the final say on a penny-per-ounce tax on sugary drink distributors come Election Day, small grocers say the tax will hurt their businesses and the city's poorest residents.

"This money is going to come out of the lowest-income people in Oakland," said Abdul Taleb, owner of Mi Carnal Market in Oakland's Fruitvale district.

Taleb grew up here and went to school with many of his customers. Rents are soaring, and Taleb says he's seeing longtime residents being pushed out of Oakland. Others are barely earning enough to stay in their homes, and higher food prices will drive them out too.

"People are struggling," he said. This is something that shouldn't be done at this time."

"This" is Measure HH, which would levy a penny-per-ounce excise tax on soda distributors like Coca-Cola and PepsiCo, who will in turn charge retailers more for their products. Taleb said a 2-liter bottle of soda that costs $2 at Mi Carnal right now will cost $2.68 if Measure HH passes, but chain stores that can afford to absorb the extra expense will still charge $2 after the tax takes effect.

Taleb said he's afraid he'll lose customers to nearby chain stores if they notice a big hike in the price of one item at Mi Carnal. To make the price increase less obvious, he'll need to spread the tax to many different items - essentially turning the soda tax into a "grocery tax."

"We're already struggling to keep people in the neighborhood," he said.

Advocates of Measure HH and three other soda tax initiatives going before voters on Nov. 8 - Measure V in San Francisco, Measure O1 in Albany, north of Oakland and Measure 2H in Boulder, Colorado - expect that retailers will pass the extra cost of sugar-sweetened beverages on to customers. The hope is that higher prices will discourage consumption of sugary drinks and reduce the risk of developing chronic diseases like childhood obesity, diabetes and cardiovascular disease.

Several studies have linked sugary drink consumption with the diseases. One study found that people who drank one to two cans of a high-sugar drink each day were 26 percent more likely to develop type 2 diabetes. Another found that men who drank one can of a high-sugar drink per day were 20 percent more likely to have or die from a heart attack, and a related study found similar results in women.

To combat the health effects of sugary drinks, the Institute of Medicine in 2009 recommend soda taxes as a tool for lowering consumption. Assessing the effectiveness of this November's tax measures, researchers at Harvard and Columbia project the incidence of diabetes will fall by 4 percent under the penny-per-ounce taxes in Oakland and San Francisco, and by 3 percent in Albany, which has also proposed a one-cent tax. In Boulder, where residents will be voting on a 2-cents-per-ounce tax, researchers project the incidence of diabetes will fall by 10 percent over one year.


"It is a small tax that can have a very large impact," said Diane Woloshin, a registered dietician and director of the Coalition for Healthy Oakland Children. The Oakland group and San Franciscans United to Reduce Diabetes in Children have received a combined total of $9.7 million from former New York City Mayor Michael Bloomberg to pass Measure HH and Measure V, according to campaign finance tracker MapLight.

Nearby Berkeley, which passed the nation's first soda tax in 2014, may already be feeling that impact. A team of researchers at the University of California, Berkeley found that soda consumption fell by 21 percent in the city's low-income neighborhoods four months after the tax took effect and rose by 4 percent in low-income neighborhoods in Oakland and San Francisco.

"That's a pretty sizable drop," said Jennifer Falbe, a postdoctoral research fellow at UC Berkeley's School of Public Health and the study's lead researcher. "In public health, we're looking for ways to promote health among a lot of people at once in a way that's cost effective, and it does look like a soda tax might be an important tool that could reach everyone, not just people with access to health care."

By law, California and Colorado can't tax most grocery items. To get around that, November's soda tax measures target distributors but don't spell out which items retailers must pass the extra cost on to if at all. The American Beverage Association, the soda industry's trade group, has capitalized on that loophole and the concerns of small grocers like Taleb, airing ads featuring small minority grocers in poor neighborhoods to assure voters that a soda tax will raise the price of food, not just sugary beverages; low-income, minority consumers will struggle to feed their families; and small minority grocers could go out of business if the measures pass.

"This tax would disproportionately hurt low-income and hardworking families already struggling to get by," San Francisco's No on V campaign says on its website. "At a time when many of us are struggling to afford to live in the city, we should not be increasing taxes on groceries."

The American Beverage Association, which has spent more than $30 million fighting the four initiatives, and Joe Arellano, the group's consultant working to defeat the Bay Area measures, did not return multiple requests for comment.

By targeting lightning-rod issues like race and class, the beverage group has ensured an ugly battle over the measures this election season.

Taleb said soda tax advocates have threatened him over his stance on Measure HH and for appearing in commercials sponsored by the group. Meanwhile, two other small Oakland grocers who appeared in anti-tax ads have pulled their support for the No on HH campaign. When asked why, International Produce Market owner Pablo Martinez said he "didn't want to talk about it anymore." And an unidentified employee at Marwa Market said Marwa's owner, Temur Khwaja, would likely not return a call requesting comment because he had run into "trouble" for opposing the measure, suggesting both grocers also received threats.

Khwaja did not return the call.

"This industry from A to Z has mislead and lied to people about the impact of this, from labeling it a grocery tax to poor people being hurt by this," said Larry Tramutola, a consultant working to pass the Oakland and San Francisco initiatives. "It's a tax on them and they know that."

And the trade group didn't push the grocery tax concept during its unsuccessful Berkeley campaign, proving the concept to be "a figment of the beverage industry's imagination," he said.

Using the controversial concept this time around, however, the group has succeeded in distracting voters from a bigger question: whether passing a regional soda tax could alleviate the inequity city taxes create for small grocers.

Falbe and her team at UC Berkeley found some chain stores had indeed chosen to keep prices of sugar-sweetened drinks the same in Berkeley in order to match prices in their other Bay Area stores. That could partly account for why Berkeley retailers had only passed on 69 percent of the tax on sodas and 47 percent on sugar-sweetened beverages three months after the tax's implementation, according to Falbe.

But she said passing a soda tax over a larger area could induce more chains to raise prices.

"If a larger number of their stores are affected then they might decide to raise the price of sugary drinks across their stores in the region," she said.

Taleb says a regional tax would help allay his fears, but it would need to encompass a more comprehensive area than the three Bay Area measures and Berkeley's would cover.

Meanwhile, Taleb says the small grocers he knows in Berkeley have increased food prices since the tax took effect there.

When told that none of the Berkeley retailers interviewed by Falbe's team acknowledged raising food prices, Taleb said they were too scared of angering their customers to admit to it.

"If you come back to me after this passes and ask me how it's affecting prices, I can't tell you I'm spreading everything," Taleb said. "A lot of people are doing it in Berkeley but they're not going to say so."

A regional tax may already be taking shape. Berkeley City Councilman Laurie Capitelli, who was instrumental in passing his city's tax, said he believes California will move to tax sugary drinks in "another couple of election cycles."

"I still don't think there's enough juice to get the Legislature to act on this," Capitelli said, adding that he expects to see more California cities pass soda taxes while calls for a statewide push gather momentum.

"California can be a leader," he said.

If small grocers fighting to retain their customers under disjointed city-level taxes are correct, however, they may not be around long enough to see it.

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