Some local grocers are frustrated with the rollout of the new Cook County sweetened drink tax that goes into effect on July 1 and say it will likely hurt sales.
The ordinance, passed in November 2016, levies a 1 cent-per-ounce tax on a variety of sweetened beverages including soda, flavored water, sports drinks, and teas. Cook County officials have said it will generate tens of millions of dollars in revenue in its first year and help improve public health.
Beginning July 1, a 99 cent 24-ounce bottle of sweetened soft drink will now cost a customer $1.23; a $1.50 2-liter would be about $2.17.
“It makes no sense. All you’re going to do is hurt businesses,” Mike Nutley, one of the owners of Ed’s Way Food Mart in Forest Park, said June 21. “It’s gonna kill my pop sales. All the sugar sales are going to be dropping like a rock. By the time it’s all said and done, what did they accomplish?”
Nutley said that he expects customers, especially in communities close to Cook County’s western border, to shop elsewhere for their sugary drinks. Sweetened beverages represent about 10 percent of sales at Ed’s Way, Nutley said.
“They already go there for their gas and cigarettes. Now you’re forcing them out there to get their groceries,” Nutley said, referring to DuPage County “The tax is awful. They are just driving people out of the county. It’s a snowball effect. We’re gonna lose sales.”
The tax’s potential effect on sales is just one frustration for business owners.
Since its passage, the ordinance has gone through several rounds of tweaks, with the Cook County Board of Commissioners issuing a handful of clarifications, leading to some confusion.
“It’s annoying, it’s constantly changing,” Dennis Tischler, owner of Tischler Finer Foods in Brookfield said June 22. “There’s no clarity for us.”
Tischler said about 3 or 4 percent of his sales are from sweetened beverages.
“It’s just more of the pie getting sliced off,” Tischler said. “[But] you make do.”
Joe Salamone, owner of Fair Share Finer Foods in Oak Park, said sweetened drinks make up 5 to 10 percent of his business. While he expects them to take a dip, he said his overall business — which specializes in meats and produce — should be able to absorb the drop. But, Salamone added, he typically features soda in promotional sales to draw customers to the store. That may have to change now.
Peter Boutsikakis, owner of Riverside Foods, called the roll-out “disorganized” and said his IT team is still working to put together a system to comply with the new tax. Salamone agreed and added that his point-of-sale software vendor is still trying to figure out a new system, too.
There have been at least four regulations sent out by the county since November, clarifying aspects of the new law. On June 16, for instance, the Cook County Board of Commissioners said retailers that participate in the Supplemental Nutrition Assistance Program (SNAP) could register as “distributors,” before July 1. This exemption, while addressing one potential problem raised by retailers, will end on July 1, 2018.
Before June 16, retailers like Nutley had worried about cash flow problems. According to the original text of the ordinance, distributors, like PepsiCo. Inc., would have charged independent grocers for the tax at the “back door” when they delivered shipments, even if those products are never bought or if they are bought by a SNAP participant.
There is no point-of-sale software currently available to track SNAP purchases — which are exempt from the tax — by vendor, according to Brian Jordan, the president of the Illinois Food Retailers Association.
If a customer uses SNAP to buy a sweetened beverage, the grocer must keep track of each individual product purchase, including the vendor, to request a refund on the beverage tax.
This process, Nutley said, would have been cumbersome and would have required significant staff time to tabulate daily sweetened product sales broken down by vendor, just to recoup money paid upfront by retailers.
“It’s not like punching a button. There’s nothing up there that’s going to do that,” Nutley said. “That would all be manual and that would be a nightmare.”
While that issue is temporarily addressed by the one-year exemption, it’s not clear what will happen next year.
“They see there’s a mistake there,” Salamone said of the commissioners’ tweaking the ordinance. “They see it’s not practical, so they try to, maybe for public relations, try to adjust it.”
Setting aside logistical issues, grocers are split on the tax’s potential public health benefit, a justification explicitly mentioned several times in the ordinance. Nutley said customers wanting a sugary beverage will find it — in Cook County or elsewhere — and added that he hasn’t seen a drop in cigarette sales even when there is an increase in tobacco taxes.
Salamone agreed, adding he expects customers to go to big-box retailers, like Costco, in DuPage County and load up on sugary beverages, even if they continue to do everyday grocery shopping at Fair Share.
Boutsikakis said he’s not sure customers will spend the extra time and gas money going outside of Cook County for sugary drinks. But, he said he expects soda sales to continue to drop, an industry trend that predates the tax. Customers, Boutsikakis said, will continue to move toward unsweetened beverages, like carbonated water.
Nutley and Tischler both said they’ve been giving their customers a heads up as July 1 approaches.
“We’ve been telling our customers watch out for it,” Tischler said. “They’re aware. We don’t want them blindsided.”