Restaurant industry leaders oppose proposed New York soda ban

Restaurant industry leaders oppose proposed New York soda ban

NRA labels plan to ban large sugary drinks "hyper-regulation;" restaurant operators hold mixed reactions on whether ban will affect sales

Foodservice operators and association executives slammed New York Mayor Michael Bloomberg’s plan to ban the sale of large sodas and sugary drinks in the city’s latest effort to address the nation’s health and obesity problems.

Saying “it’s what the public wants the mayor to do,” Bloomberg said he is seeking to establish a 16-ounce size limit on sugary beverages served at restaurants, delis, sports venues, movie theaters and street carts throughout the city. The ban would not include beverages sold in grocery or convenience stores.

According to the proposal, sugary drinks are defined as beverages that are “sweetened with sugar or another caloric sweetener that contain more than 25 calories per 8 fluid ounces and contain less than 51 percent milk or milk substitute by volume as an ingredient.” It would not apply to diet drinks, calorie-free drinks and alcoholic beverages.

The ban, which if enacted could take effect as early as March 2013, would require that restaurants in noncompliance could face fines of $200 following a three-month grace period.

While City Hall officials and health advocates maintain that sugary beverages are one of the biggest contributors to the obesity problem, restaurant operators and association executives maintain that a ban on such high-margin beverages would damage businesses that are just beginning to rebound from the long economic downturn.

Industry associations sound off

Andrew Moesel, a spokesperson for the New York City Chapter of the New York State Restaurant Association [3] said: “We appreciate the mayor’s concerns about public health, but this goes too far. We believe the public is not in support of this measure.”

Moesel said the association would oppose the measure “vigorously." He added, "The mayor has pushed through several other burdensome policies against restaurants … and our members already feel put upon by local government. This measure will only add to their frustration.”

There are about 25,000 foodservice establishments in New York’s five boroughs.

This marks the latest in a series of health-oriented face-offs between the New York restaurant community and Bloomberg. During his three terms as mayor, Bloomberg has banned smoking in public places, outlawed trans fats in restaurants and mandated that chain operators post calorie counts and other nutrition information on their menus and menu boards.

In addition, he has campaigned to get restaurants to cut down on their use of salt and mandated that health inspection letter grades be posted prominently in restaurant windows. He also promoted a New York state tax on soda, but the measure was defeated in Albany.

Commenting on this latest initiative, Judith Thorman, the International Franchise Association’s [4] senior vice president, Government Relations & Public Policy, warned that the ban “will harm New York City's thousands of small business franchise owners, job creators and their employees at a time when they are still grappling with a slow economic recovery."

She continued, "Limiting the sale of beverages to consumers will do nothing more than force small business franchise restaurant owners to raise prices on other items to account for a loss in sales, or worse yet, consider laying off workers — and neither option is a good option.”

Scott DeFife, executive vice president of Policy and Government Affairs for the National Restaurant Association [5], criticized the mayor’s decision to ban super-sized beverages. “There is no silver bullet in America’s fight against obesity, and hyper-regulation such as this misplaces responsibility and creates a false sense of accomplishment,” he said.

“Public health officials in New York should put all of their energies into public education about a balanced lifestyle with a proper mix of diet and exercise rather than attempting to regulate consumption of a completely legal product enjoyed universally,” he said.

Restaurant operators hold mixed reactions

Restaurant operators also voiced concerns about the trend toward government over-regulation and the shift toward what some have come to refer to as a “nanny state” mentality. Jim Morgan, chief executive of Krispy Kreme, said the pending regulations won’t really affect the doughnut chain’s business, which operates a handful of units in New York.

However, he said, “The scarier part is the interference with personal choice and business. We all need to be careful about that. Government needs to be very careful with what they regulate and what they don’t.”

Zane Tankel, the operator of more than three dozen Applebee’s restaurants in New York and the surrounding area, agreed, saying he “doesn’t believe the government should be limiting free choice or business this way. I’m against the idea of the government telling us to do too much. It’s a slippery slope. And how far should the government intrude on personal life?”

However, Tankel admits to being ambivalent about the issue. “I do see some justification for it,” he said. “Obesity is a major problem. Health care costs are going through the roof. And at the end of the day we end up paying for it in taxes.”

He acknowledges, though, that a ban on the selling of large servings of high-margin sweetened drinks would cut into his business. “It won’t have a dramatic impact on gross sales, but it will have an impact on margins,” he said. “Soft drinks are a high-profit item.”

Irwin Kruger, who formerly owned seven McDonald’s franchises in Manhattan — including the high-grossing unit on Broadway — said the ban “would really be a negative. It would impact a [quick-service restaurant] in a variety of ways.”

For example, he said: “You’ll get tourists who have no clue about what a ban on soft drinks is all about. Employees will have to explain to them why they can’t get the same sized drink in New York that they’re used to at home, and that will take time at the counter and possibly annoy the customer. It also will impact the speed of service, and it’s important for [quick-service restaurants] to be able to serve customers quickly.”

Kruger, who is now a Smashburger franchisee on Long Island, N.Y., said the ban likely would affect sales and the bottom line, noting that soda has the highest margin of any product line on the McDonald’s menu.

Others see consumer health more important than business

Bloomberg’s proposal is not without its supporters. Michael Jacobson, executive director of the Center for Science in the Public Interest [6] in Washington, D.C., said obesity “poses enormous costs to society and we need to cut down on the major causes of obesity — and soft drinks are at the top of the list.

“If [the ban] reduces consumption by 5 or 10 percent, it should have an impact on obesity and reduce health care costs in New York,” he said. “I’m sure every other health commissioner in the country is looking at this, and I expect to see more proposals around the country.”

Furthermore, he added: “It’s not the end of the world to have to sell small and medium drinks instead of large. I wish the restaurant industry would just go along with it voluntarily and play their part in reducing this epidemic.”

Contact Paul Frumkin at [email protected] [7].