PepsiCo is laying off 80 to 100 workers at distribution plants serving Philadelphia. According to the company, a soda tax that is cutting the area’s soda consumption is to blame.
The layoffs, which account for roughly 20% of Pepsi’s 423 Philadelphia employees, will begin Wednesday and be spread out over the next few months, the Philadelphia Inquirer reported.
“Unfortunately, after careful consideration of the economic realities created by the recently enacted beverage tax, we have been forced to give notice that we intend to eliminate 80-100 positions, including frontline and supervisory roles, in Philadelphia over the next few months, beginning today,” Pepsi said in a statement to Business Insider.
Philadelphia’s soda tax passed in June 2016 and went into effect in January of this year. The 1.5-cent-per-ounce soda tax is expected to raise about $91 million annually.
As the tax went into effect, local businesses and shoppers reportedly quickly felt the results. Customers apparently began changing their purchasing habits, as the price of two-liter bottles and 12 packs of cans nearly doubled.
In mid-February, Bloomberg reported that some soda sellers in Philadelphia said that beverage sales had dropped up to 50% in 2017. Operators of local supermarkets have reported significant drops in revenue, something executives say will result in their cutting of jobs in the near future and have already forced them to slash employees’ work hours.
The tax is currently under appeal with arguments expected to begin in April. A Pepsi spokesperson told the Philadelphia Inquirer that if the tax is repealed, the jobs will return.
As news of the layoffs broke on Wednesday, the city of Philadelphia fired back with evidence that the tax is also creating jobs. Philadelphia’s soda tax has been used to fund expanded pre-K opportunities, creating about 250 jobs for teachers and support staff, the city said in a release sent out minutes after the news of layoffs broke.
Philadelphia Democrats have argued that layoffs are simply a case of companies trying to prevent other cities from passing soda taxes, by painting the taxes as dangerous for business.
“[Beverage companies] are so committed to stopping this tax from spreading to other cities, that they are not only passing the tax they should be paying onto their customer, they are actually willing to threaten working men and women’s jobs rather than marginally reduce their seven figure bonuses,” Philadelphia Mayor Jim Kenney told the Philadelphia Inquirer in mid-February, as soda distributors began to report layoffs plans.
While the soda industry has spent millions of dollars fighting soda taxes, Coca-Cola and PepsiCo are also investing in less-sugary drink options that wouldn’t be subjected to the taxes. Both companies often highlight that an increasing percentage of their business comes from the sales of things like bottled water, healthy snacks, and tea – not soda.