A tax on sweet drinks may help feed hungry Rhode Islanders, if a pending bill becomes law.

According to Dr. Amy Nunn, executive director of the Rhode Island Public Health Institute, the state is in a crisis “on par” with the Great Depression, as one in four Rhode Island households are food insecure.

In addition, the Centers for Disease Control and Prevention indicates that diabetes is the seventh cause of death in the state.

Over 79,000 Rhode Island adults report a diagnosis of Type 2 diabetes, and an additional 311,200 Rhode Island adults are at risk of developing diabetes, while the Black and Hispanic populations in the state have an even higher prevalence of Type 2 diabetes.

In light of these serious issues, the Rhode Island Public Health Institute (RIPHI) has launched an initiative to nourish Rhode Island through a tax on sugary drinks.

“There is overwhelming evidence of the link between obesity and diabetes with the consumption of sugary drinks,” said Dr. Nunn, executive director of the Rhode Island Public Health Institute, in an interview on Thursday.

The Sugary Drink Tax bill will generate revenue that will be directed to address the hunger crisis that many Rhode Island families are experiencing.

The revenue from the 1.5 cent per ounce sugary drink tax will be used to fund a retail SNAP incentive program, which will provide low-income families with a 50 percent discount on their fresh fruit and vegetable purchases at retail grocery stores when they pay with SNAP benefits. Sports drinks, soda, and other beverages with added sugar will be taxed under the bill.

The RIPHI estimates that the tax will raise $40 to $45 million, and proposes that $24 to $30 million be earmarked for reinvestment into the SNAP initiative.

Healthier Rhode Islanders

Studies have shown that 75 percent of SNAP recipients eat more fruits and vegetables when a SNAP Incentive is available, said Dr. Nunn.

“We have found that with the incentives, people actually increase their fruit and vegetable consumption,” said Dr. Nunn. “This is a great way to promote public health.”

Farm Fresh RI, a statewide organization that makes fresh produce accessible and affordable to low-income families and those with SNAP benefits, has a similar program in place. Farm Fresh RI offers produce at a discount, however, their program is limited to farmer’s markets and doesn’t extend to retail grocery stores.

Dr. Nunn explained that while the Farm Fresh RI program is a great resource, “the challenge is that most people shop at conventional grocery stores,” she said.

“We have found that people who participate in that program, even those in abject poverty, improve their eating behaviors,” she said.

According to Elizabeth Burke Bryant, executive director of Kids Count, 31 percent of Rhode Island children aged two to 17 are considered overweight or obese, a number Bryant called “alarming.”

“RI Kids Count supports the bill,” she said in an interview on Monday. “We need to be looking at a range of strategies to reduce those numbers.”

Children who are overweight or obese are at a significant risk of developing health issues like type 2 diabetes, cardiovascular disease, asthma, joint problems, or other acute chronic health problems. Overweight or obese children are more likely to experience social and psychological problems, and are more likely to have health problems that will make them absent from school, said Burke Bryant.

“We know that low consumption of healthy food with a high consumption of sugar sweetened beverages contributes to obesity in children,” she said, and is optimistic about the SNAP incentive.

Burke Bryant pointed out that child food insecurity has been shown to decrease by almost one-third after their families received SNAP benefits for six months.

“Hunger and lack of regular access to sufficient food are linked to serious physical, psychological, emotional, and academic problems in children, and can interfere with their growth and development,” said Katie Orona, policy analyst for Kids Count, in her testimony at the Senate Finance Committee hearing on May 3.

Similar bills proposed in the past

Dr. Nunn explained that similar sugary drink tax bills have been proposed before, but this is the first time “we’re proposing a reinvestment in healthy eating.”

She calls it a “win-win for everybody.”

The sugary drink tax isn’t a new concept. In fact, 42 countries have adopted legislation that taxes sugary drinks, including Ecuador, France, Ireland, the United Kingdom, and South Africa. Seven cities in the U.S., including Boulder, San Francisco, Seattle, and Philadelphia, have implemented a drink tax. If the Rhode Island House and Senate vote in favor of the legislation, it will be the first time a sugary drink tax is instituted statewide.

According to Dr. Nunn, bills suggesting a sugary drink tax have been up for discussion for the past decade. “We’ve always been supportive of those bills,” she said.

For Dr. Nunn, it’s important that this bill passes into law.

“When you tax sugary drinks, people switch to water,” said Dr. Nunn. While this may seem like an obvious observation, she explained that it’s critical that the state start to curb the obesity epidemic. “We have really high rates of obesity and childhood diabetes, on par with the southern U.S.”

Dr. Nunn says this fact caught her attention, since she originally hails from Arkansas. “To see that our childhood obesity rates are eleventh in the country is astounding. We need to intervene to keep kids from drinking sugary drinks.”

At the Senate hearing on May 3, Dr. Nunn said 33 people testified, many of who have experienced food insecurity, and all but a handful supported the legislation.

Dr. Nunn has confidence that the reinvestment will “have a lot of political appeal.”

The bill went before the House on May 13 and, because of the large volume of testimony submitted, a second hearing was scheduled for Tuesday.

Small businesses, big opinions

The small business community seems to be divided over the issue. Some owners like, John Santos, general manager of Urban Greens Co-Op Market in Providence, fully support the proposed tax, while others, like the more than 70 members of the Stop the RI Beverage Tax coalition, do not.

As a grocery story manager, Santos is looking forward to the SNAP incentive to boost produce sales, a department with the highest losses.

“Anything that incentivizes customers to buy produce helps a store manage their losses,” he said. “In some cases, produce goes right into the compost bin. With the incentive, I’ll be able to shift my profits, that are minimal from Coke and Pepsi sales, to an area that is more operational, gives me healthier customers, and has more potential branding value to a retailer. I would be so glad to trade a Coke sale for a sale of bananas or oranges or tomatoes.”

Santos explained that some of the biggest players and loudest voices in the food industry come from the “monster” soda companies. In an interview on Wednesday, he described the impact Coke and Pepsi companies had over consumers as “unlike any other.”

“This effort to tax sugary sodas and sugary beverages is really, really important,” said Santos, who has more than 40 years of experience in the grocery business. “Understand who is determining the choices of food in front of you when you walk into a store and what their motivation is. These big companies have a tremendous amount of influence in getting their product, and they’re very competitive, on the shelf. They make it high on their priority list to get real estate in the stores. By controlling the environment so aggressively, they really push out the competition.”

The soda companies are able to afford representatives, merchandisers, and strategic teams to handle all displays and ordering. Santos explained that grocery stores with a partnership with Coke and Pepsi never place their own orders. Instead, the company handles all ordering. There are also stipulations with display space for each brand. Santos explained that Coke can have the same amount of display space as Pepsi, but no more, and vice versa.

“If you give Pepsi a big spread, you have to give Coke a big spread, or you risk not getting paid,” said Santos.

Grocery stores “generally make 28 to 36 percent gross profit,” according to Santos, but the gross profits with Coke and Pepsi “are generally under 10 percent and no more than 20 percent.”

Santos said the companies can no longer claim that soda isn’t bad for consumers, so they’re blaming the sugary drink tax for a significant job loss, which Santos says is “possible, but not likely”.

“They don’t want to make it about the health issue, because they lost that one; they want to make it about the jobs,” he said. “No one is going to argue that drinking less soda is a bad thing. This has been on the radar of Coke and Pepsi forever, and they’ve already diversified their production, branching into seltzer water, sports drinks, even chips and cereal.”

According to a press release issued on May 13 from the Stop the RI Beverage Tax coalition, some local small businesses are concerned the tax will have “devastating” effects on the state’s small businesses.

“It is already expensive to operate a business in Rhode Island,” said Greg Leclair, owner of two 7-Eleven’s in Warwick, in the press release. “Now after more than a year of economic turmoil, small business owners like me are just trying to keep our heads above water…Rhode Island’s small businesses deserve protection, not higher taxes that gouge our customers and threaten the survival of our businesses.”

According to a fact sheet from the RI Beverage Association, “this tax will make it difficult for hard-working Rhode Islanders to afford common grocery items…If passed, locals will want to drive across the state border to do their shopping in Connecticut and Massachusetts where there is no tax, also hurting local businesses and depriving the state of revenue.”

Pushback from the beverage industry

At the House Finance Committee hearings on May 13 and 17, members of the beverage industry testified against the proposed tax.

“Coca-Cola and other beverage companies in Rhode Island have an overwhelmingly positive impact on the state’s economy and its communities. A tax would put good jobs and hardworking businesses in jeopardy in a time when we can least afford it,” wrote Joe Maggiacomo in his testimony. Maggiacomo is a lifelong resident of RI and currently, the large stores sales manager for Coca-Cola Providence. “Beverage companies are already investing considerable resources and marketing dollars to develop and promote low and no-sugar offerings.”

Maggiacomo said it would be “detrimental” to local businesses if customers “took their grocery shopping outside the city,” as was the case in Philadelphia.

Christopher Dammann, executive vice president of the National Association of Concessionaires, also testified against the bill.

“The fiscal impact of sweetened beverage taxes have failed to deliver,” he said in his testimony.

According to Dammann, the city of Philadelphia “realized 14.6 percent less than was projected” and “a February 2020 study from Drexel University found that the tax had no effect on what Philadelphians were drinking.”

Dammann called the proposed tax “the wrong funding and health mechanism, in the wrong place, at the wrong time,” and pointed out the failed legislation in Cook County, IL, where a sugary drink tax was implemented in August 2017, and repealed later the same year, after beverage sales dropped 21 percent in four months.

Nearly a dozen employees from Coca Cola Northeast signed up in opposition via email, but declined to testify at the hearing. None of them could be reached for comment.

Santos says the public perception is shifting, and a drop in Coke and Pepsi sales won’t be directly from the tax, but instead “increased consumer intelligence.”

Santos sees this legislation as an opportunity to act with one voice, and unite together for a healthier future.

“Change can happen. It’s not always comfortable, but it’s coming if leadership recognizes what’s in the best interest for the greater good,” said Santos.

“I think it’s important to note that the beverage industry is promoting a lot of falsehoods and fear mongering,” said Dr. Nunn, who pointed out that those who were opposed during the testimony were speaking on behalf of the beverage industry.

According to Dr. Nunn, representatives from Coca-Cola stated that the bill would lead to job loss and would be bad for small businesses.

“None of that has been borne out in other markets,” said Dr. Nunn, who pointed out other cities with successful sugary drink taxes. “Look at the evidence. That just hasn’t proved true in any other places where legislation has passed. This is just another way to scare people.”

According to Larry Berman, communications director for the House, testimony for the bill continued in a second hearing on Tuesday. Both the House and Senate Finance Committees recommended the bills be held for further study and no further action is scheduled at this time.