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Junk Food Wars: Giant Sodas Keep Flowing, For Now

28 March 2013 in Trading Ideas

Take that, Mr. Bloomberg.

A judge’s recent decision to strike down the New York City mayor’s attempt to ban the sale of big sugary drinks points both to the current difficulty of governmental regulation as well as the inevitability of future court battles facing the industry.

In striking down New York’s law just hours after it went into effect, a New York City superior court justice cited the city’s regulatory overreach, saying the mayor hadn’t consulted the city council.1 But he also noted that the rule was “arbitrary and capricious,” because it didn’t apply to all of the city’s establishments (or all of the city’s sugary drinks, for that matter). For example, while restaurants would be fined for serving sugary drinks of more than 16 ounces, convenience stores would not, since they are regulated by the state.

In addition, a high-sugar milkshake was exempt from the law because it contained more than 50% dairy.

While makers of junk foods applauded the ruling as upholding freedom of choice – and freedom from mandated healthy behavior – the Christian Science Monitor noted that a bigger influence may simply be how difficult it is to ban fat and sugar in some foods but not in others.

And that there is more fat and sugary food out there isn’t much of a debate. Fast-food sales in the US alone grew to $160 billion in 2011 from just $6 billion in 1970. (The Junk Foods motif has risen 11% in 2013 and is up 14.4% in the past 12 months).

On the other hand, what’s also growing is a public relations battle that is forcing junk-food makers to defend the role that their respective products have in the country’s epidemic of obesity and skyrocketing health care costs.

And governments have certainly been allowed to regulate products and behaviors that are legitimate public-health concerns (seatbelts, cigarettes, etc.) Part of legitimizing that regulation was an expanding campaign that built consumer awareness of the societal risks. In that sense, Mayor Bloomberg may have lost the battle in a war that he and fellow junk-food opponents may ultimately win.

1 Schuyler Velasco, “Junk food fight heats up,” The Christian Science Monitor, March 25, 2013, http://www.csmonitor.com/Business/2013/0325/Junk-food-fight-heats-up, (accessed March 26, 2013).