Teaching the Impact of Litigation Costs on The
FIZZ FIGHT: HOW SODA TAXES AFFECT COCA-COLA’S BUSINESS STRATEGY Margaret Sherman and Harold Weston * I. INTRODUCTION How does a firm respond when government tries to tax away demand for its products? It responds with typical opposition (litigation, public relations, lobbying), and in the case of sugar taxes on soft drinks, by changing its business strategy to offer different products. Thus, in addition to the impact sugar taxes may have on consumer demand behavior, sugar taxes have significant impact on supplier behavior, as this study on The Coca-Cola Company’s responses to soda taxes shows. Since 2012, state and municipal governments in the United States, and in other countries, have considered and implemented taxes on sodas and sugar-sweetened drinks to address the growing obesity epidemic. Such taxes are often called “sin taxes” because they are assessed against products deemed to have a harmful effect in order to decrease consumption of the products. The goal of the sugar taxes (or soda taxes, because the tax applies mainly to soft drinks with sugar) is to discourage consumption and encourage manufacturers to modify their products. In addition, governments have focused on taxing sodas and sugary drinks because the revenue generated by soda taxes can fund public health programs or raise much-needed general revenue for communities.1 The American Heart Association recommends a daily maximum intake of 25 grams of sugar for adult women and 36 grams for adult men. Compare this against a 20-ounce bottle of regular Coca- * Margaret Sherman is Clinical Associate Professor of Legal Studies, and Harold Weston is Clinical Associate Professor of Risk Management and Insurance, at Georgia State University, J.
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