The Decline of ‘Big Soda’

The New York Times – October 2, 2015

Soda, man’s greatest invention, is currently facing an unprecedented crisis.  Observing Philadelphia five years ago, the article reminisces the state’s failure to pass a tax on soda.   In the wake of such a tax, these multimillion dollar soda corporations poured their resources into improving the public’s opinion about them.  Making campaign contributions to politicians and even setting aside $10 million to Children’s Hospital, soft drink corporations reigned victorious over the attempted tax (Fremson, 2015).  Unfortunately, however, the fight for a tax on soda had awakened a movement towards healthier options, even despite the limited evidence pointing to soda’s unhealthy effects.  Teen soda consumption in Philadelphia declined “by 24%– from 2007 to 2013” according to federal researchers (Fremson, 2015).  Harold Honickman, the chairman of one of the largest soda distributors in the mid-Atlantic region, reported to approximately 2% of soda businesses being lost each year (Fremson, 2015). Now, soda across the nation is facing a decline in demand as people begin turning to healthier options.

This article displays the common theme of supply and demand central to all business.  Facing a decline in demand, soda corporations are finding ways to maintain a stable supply as less people are purchasing their products. However, rather than decreasing the price, businesses seem to be trying to appeal to the public’s new standards.  From entering into “agreements to reduce the total number of calories per person” to making “investments in obesity research”, companies are finding new ways to get their names on the healthy list (Fremson, 2015).  While these may appeal to the health standards of the public, companies have primarily dealt with the decline in demand for soda by promoting new, “healthier” supplements.  This is a sustainable alternative to simply decreasing the price as it focuses on the central problem of shifting public opinions.  If successful, it would increase demand and maintain corporate supply levels for many years to come.

Soda Graph (2)

This graph shows the shift in both the demand curve and the supply curve of soda.  Because there has been a shift in the demand curve, companies have decreased the amount of soda they produce and increased production of healthier supplements.  Products such as iced tea, flavored water, and other alternative beverages have been ways of maintaining prices while decreasing the quantity of soda.  Pepsico has even boasted that “soft drinks represent only 25% of the company’s net revenue”, which seems absurd.  The negative shift in the demand curve and the negative shift in quantity of soda supplied in effect has decreased overall quantity of soda, while prices remain indeterminate.

Fremson R. (2015, Oct 5). The New York Times. Retrieved from           http://www.nytimes.com/2015/10/04/upshot/soda-industry-struggles-as-consumer-tastes-change.html?ref=business&_r=0