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Philadelphia Mayor Jim Kenney’s justification for his proposed sugary drinks tax: soda companies still bring in considerable profits, he says.
"Big soda has a lot of money," the mayor argued in an interview with KYW. "They make a lot of profit off their product and they market in neighborhoods that suffer from these very things that we’re trying to cure."
Billy Penn has covered how low-income consumers drink more sugary beverages than higher income ones. Advertising is more heavily featured in poor neighborhoods of color, research has shown. So, we decided to look into Kenney’s comment on profits.
In the last decade, soda sales have fallen dramatically. In 2014 in the U.S., Coca Cola and Pepsi together sold 1.4 billion cases fewer than they did in 2004, Fortune reported, the sum of "modest declines" for 10 years straight. The Philadelphia Inquirer detailed that Coca Cola in particular had lost $1 billion in sales each year since 2012. These drops have meant big changes for Big Soda: Investing in foreign markets, implementing cost-cutting measures, bottling drinks in smaller sizes too for higher profit margins or raising prices altogether, to name a few. Beverage Digest Editor Duane Stanford highlighted price hikes in an interview. "Companies have increased prices for their products, so they’ve been making money even though they’re selling fewer beverages," he said. But! "Soft drinks are still profitable," he continued. Soda corporations "still have pricing power because their brands are powerful."
Judging how big profits have been is "entirely dependent on the company themselves," said Stanford. "It’s a relative statement."
Big soda to some commentators refers to the carbonated drinks industry as a whole. To others, it speaks to the biggest soft-drink selling corporations in the game: Coca Cola, Pepsi and, if the bronze-level company is in the discussion, Dr. Pepper Snapple. (Kenney’s communication director shared data on Coke, Pepsi, and Coca Cola FEMSA, the company’s Mexico-based bottler, in response to a fact-check inquiry for this report.)
Coca Cola reported $7.4 billion in net income, Pepsi reported $5.5 billion and Dr. Pepper Snapple $764 million. Dr. Pepper Snapple and Coke experienced slight profit boosts over the year before, while Pepsi’s numbers took a $1.1-billion dip. News reports on annual and quarterly reports deemed profits for all three companies better than expected.
Kenney stated that big soda makes a lot of cash. Profit-wise, despite current consumers trends that may signal a bleak future for soft drink sales, carbonated beverages remain profitable, thanks, in notable cases, to reorganization and new pricing. We rate this claim true.
News report, "Mayor Kenney Strikes Back At Opponents Of Soda Tax," Pat Loeb, KYW, Mar. 27, 2016
News article, "U.S. soda sales dropped for the 10th straight year in 2014," John Kell, Fortune, Mar. 26, 2015
News article, "Coca-Cola Plans $1 Billion in Cost Cuts as Profit Falls," Duane Stanford, Bloomberg, Feb. 18, 2014
News article, "Philly's soda tax is one more battle for Coke and Pepsi," Joseph N. DiStefano, Philadelphia Inquirer, Mar. 28, 2016
News article, "Smaller soda containers mean bigger profits," Jonathan Berr, CBSNews, Nov. 4, 2015
Phone interview, Duane Stanford, Editor, Beverage Digest, Mar. 28, 2016
Report, 2015 Annual Report, Coca Cola Company, Feb. 2016
Report, 2015 Annual Report, PepsiCo, Feb. 2016
Report, 2015 Annual Report, Dr. Pepper Snapple Group, Feb. 2016
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