Coke, Pepsi fight soda tax with smaller bottles

Stung by falling sales at Philadelphia stores since the city started taxing soda and other soft drinks last fall, Pepsi and Coca-Cola are selling smaller containers that incur less tax.

Pepsi will be replacing 2-liter bottles with 1-liter bottles, which it called an example of the "products and package sizes working families are more able to afford," spokeswoman Jennifer Ryan told me.

"We believe this will give our retail and foodservice partners the best chance to succeed in this challenging environment and will minimize the chance of product going out-of-date," she added.

At Coke, sales are down in the city overall, but they are rising for smaller sized products: "In 2016, 7.5-oz mini-cans grew 9% and 1.25 liter bottles grew 9.5% and they are still growing this year, according to a statement by Fran McGorry, president and general manager of the Tri-State Operating Unit, Coca-Cola Refreshments.  

Coke has moved to smaller sizes, "not because of cities passing beverage taxes, but because they're what people want," McGorry added. The trend began before the tax. The company has diversified its products "to give people more choices and to help people manage their sugar consumption."

Back at Pepsi, "Larger package" sales are down "more than 50%" in the city, and even more at some grocers, the company says. "Pepsi’s beverage sales are down 40% in the city and up only 10-15% outside the city."

The suburbs are larger, so a smaller percentage gain can translate to a large increased sale volume.  Pepsi and Coke didn't provide estimates of the total changes in regional sales.

Even with the higher suburban sales, Pepsi is threatening to "eliminate 80-100 positions in Philadelphia over the next few months" if the tax isn't reversed, and promising "to bring people back to work" if the city caves in.  (Revised)