I’m a fan of large sodas. They taste good, are refreshing in moderation, and in most cases are fairly cheap. So I was a bit surprised today when I found out that Mayor Michael Bloomberg has announced that he plans to ban sugary drinks over 16 ounces from being served at any of New York’s restaurants, theaters, or street carts.
New York City’s ongoing crusade for better public health, which has previously targeted trans fats, salt, and high calories, is stepping up its game even further. Apparently, the city’s recent ban on donating food to homeless shelters because the city cannot monitor the salt, fat, and fiber content of donations was not enough. The ban would basically mean that any coffee, soda, sports drink, or sweetened tea in the city cannot be served in a size larger than 16 ounces. The original New York Times article on the subject read that, however, “The measure would not apply to diet sodas, fruit juices, dairy-based drinks like milkshakes, or alcoholic beverages; it would not extend to beverages sold in grocery or convenience stores.”
So I can at least be relieved that my gas station drink stop won’t be hindered if I drive through New York City in the future. Setting my own affinity for caffeine, however, the policy is still extremely wrong-headed. First of all – and let’s just get this out of the way now so we can move on – the government has no business telling me what I can and cannot drink.
To clarify the previous statement: the government can and does regulate and restrict those things that might cause harm to others (like alcohol and drugs), and has passed certain regulations requiring that medical or nutritional information be included on certain labels to guarantee that the public can make informed dietary or medical choices. Those are fine, but beyond those two things, the overriding government interests that would permit them to intervene in the diets of individual citizens – because that’s basically what such a ban is, a legally-enforced dietary intervention – become very few and far between.
That being said, I am willing to give Bloomberg a pass here for the sake of argument. New York City does have an overall obesity rate of around 50%. I can understand where, with that high of a percentage, the government might claim that there is an overriding public health concern that needs to be addressed.
But it’s been previously demonstrated that government programs designed to reduce obesity don’t always work. Let us take as an example the case of New York City public schools. Mayor Bloomberg celebrated in December what was claimed to be a 5.5% reduction in the obesity rate in New York public school students between kindergarten and eighth grade. While a 5.5% reduction sounds great, however, the Gothamist points out that the change in the overall percentage of obese children isn’t really that great: the overall obesity rate dropped from 21.9% in 2006-7 to 20.7% in 2010-11. So out of the roughly one in five kids who are obese in New York schools, the obese kid stayed obese and that other kid on the end who maybe needed to exercise more lost a few pounds. Sure, that one kid benefited, but the obese kid is still there.
The important thing to note here is that these results are among public school children whose lives are basically under complete government control from 8:00 AM until 3:00 PM (or later) for five days out of the week – what the kids have for lunch, what they learn in class, and how hard they play at recess is all controlled by the government. This program is executed with massive funding: NYC Public Schools have a $24 billion annual budget, and divided out over 1.1 million estimated students that’s roughly $21,818 per student. So for all their resources, and all the control that New York City public schools can exercise over their students, all the city was able to do was reduce the obesity percentage by 1.2%.
This is probably because the policies don’t work. The Archives of Pediatric and Adolescent Medicine published a study conducted by Daniel R. Taber, Ph.D. from the University of Illinois at Chicago and Rae-Ellen Kavey, M.D. from the University of Rochester Medical Center. The study found that laws banning soda in schools did not reduce the consumption of sugary drinks because students simply purchased other sugary beverages. Bans on all sugar-sweetened beverages did result in a reduction of purchases of high-calorie drinks in schools, but did not result in a reduction of sales to students outside of schools.
Basically, students who wanted to get soda or other sugary drinks found a way to get those drinks regardless of whatever policies were in their way. Other findings from the study suggested that students who were subjected to sugary drink rules at school were actually more likely to drink sugary drinks on a daily basis! The policies, it would seem, backfired in this regard.
Now, let’s seriously examine how this policy will affect the greater New York population, which – to the great displeasure of Bloomberg and the like – live without the constant assistance of a dietary version of Big Brother. The city has already spent massive amounts of money on many advertising campaigns on the negative health effects of sugar, and at one point even photoshopped off a man’s leg in an attempt to link larger sodas to Type 2 Diabetes and amputations. Despite these efforts, however, the city has not been successful and is likely turning to the 16 ounce cap as the next resort.
Peter Cohan at Forbes isn’t buying the idea that the policy will be successful. He argues fairly convincingly that consumers will end up paying out the nose through the policy. Smaller sizes of drink often cost more per ounce, and persons who want the same larger amount will have to pay more to get it. While this is a problem for folks at Starbucks, the prices are worse for those in captive venues like restaurants or theaters. Here’s what Cohan has to say about what moviegoers might face under the policy:
Consider prices of a 32 ounce Coke purchased at a McDonald’s (MCD) compared to a movie theater. For example, near Detroit in December 2011, the McDonald’s Coke went for $1.06 while the same size at a nearby AMC Movie Theater was $4.50, according to Courthouse News Service. Presumably they each contain 272 calories and 73.6 grams of sugar.
AMC is privately held — but competitor, Carmike (CKEC) is publicly-traded. And while Carmike does not report on its soda revenues and profits, it does reveal that its operating margins on so-called concessions — candy, popcorn, and soda — are much larger than the margins on the films.
Specifically, Carmike’s concession operating margins are 35 percentage points higher than those of its films. According to its first quarter 2012 10Q, Carmike’s film operating margin (comparing admission revenue to film exhibition costs) was 53%. But its concession operating margin was a whopping 88%.
If these figures are at all indicative of how much profit they make selling 32 ounce Cokes, movie theaters could take a significant financial hit if New York City residents can no longer buy Big Soda when they go to the movies.
However, if those people just buy more of the smaller-sized sodas, consumers will be just as obese, they’ll spend more money, and they’ll pump more profit into the movie theaters’ coffers.
Bloomberg’s policy is further flawed, however, because it doesn’t totalize its restriction. As was noted earlier, the policy excludes drinks sold at grocery and convenience stores. This means that anyone who really wants an extra-large coke can still go to the local convenience store and pick one up without any legal problems. McDonalds’ patrons could buy their sandwich and fries, then drive down the road to a grocery store with a soda fountain for their icy cold beverage of choice.
Further, that outside access may encourage illegal activity elsewhere to evade price gouging: men with backpacks or women with large purses could, conceivably, carry a cold 2-liter and cups in to the movies to get around the higher prices. Will theaters then begin searching bags to prevent beverage smuggling? Just how far down the rabbit hole are we willing to go with these policies?
The point to take away is this: Bloomberg’s ban ultimately won’t fulfill it’s stated purpose, and New Yorkers will merely be forced to spend more money and go through more hoops to get their drinks. The population of New York City will go wherever it needs to go for its delicious sugary caffeine dose – just as the children from the study mentioned earlier still got their drinks after school.
But while we all watch and see whether New York City gets its act together and realizes that a government simply cannot ban or regulate away its problems, I will still be enjoying my large drinks.