San Francisco

Grocers Are Caught in the Middle of Soda Wars

The NBC Bay Area Investigative Unit reveals the tactics, the spin and the big money being used to shape your opinion and win your vote.

Temur Khwaja has been building his grocery business in Oakland for the past 14 years. Earlier this year, he agreed to be in a television commercial to oppose a new tax on soda. Things haven’t been the same since.

“They tried to use me, and use the business.”

He says that soda company representatives convinced him that the soda tax was really a tax on all groceries. They explained that distributors would pass the tax on to grocers, and grocers would most likely distribute the cost across all items in the store, rather than mark up only the cost of soft drinks.

Does he think they were lying to him?

“Yup, yeah. So you find out later, it’s too late.”

Before he knew it, he was part of a $22.5 million campaign to defeat the soda tax, rebranded in the commercials as a “grocery tax.”

In TV ads, Temur says, “The last thing Oakland needs is a tax on groceries. It will hurt my customers, it will hurt my customers, my business, and my community.”

After making the ad, he got an earful from customers, and city leaders who support the tax. He’s now convinced that the tax is on soda, not groceries, aimed at raising money to educate consumers of soft drinks about eating a healthy diet and avoiding excess sugar.

Click here to read the full the text of the measure, which calls for a one-penny per ounce tax on the distribution of sugar-sweetened beverages within San Francisco. Similar ordinances are up for a vote in Oakland and Albany.

Joe Arellano is a communications strategist been hired by a Bay Area coalition determined to defeat the tax. His fees are paid largely by the American Beverage Association, whose members include Coca Cola and Pepsi.

“We believe this is a grocery tax.”

When asked if the proposed measures are in fact meant to tax soda not groceries, and therefore whether his group is confusing the issue Arellano was unequivocal.

“Absolutely not,” said Arellano. “Over 70 percent of the grocers we just surveyed said we’re going to spread the cost across all the items in our stores, that’s what makes better business sense for us.”

He says that the grocers in the survey his group conducted are afraid to speak publicly, but he showed us two statements in which grocers said that if they were taxed on soda, they would “disperse the tax throughout my store,” and “raise the price of everything.”

The Investigative Unit spoke to grocers who appear in the commercials financed by the American Beverage Association. Even though they are the faces of the campaign, most of the grocers who spoke to NBC Bay Area did not agree that the measure is a grocery tax.

Humberto Felix has run his grocery store, Casa Lucaz, in the Excelsior District of San Francisco for thirty years. He appears on a flyer that says, “The last thing this community needs is a grocery tax.”

But when the Investigative Unit paid him a visit, he said, “Para mi es exageracion decir que es un “grocery tax. No tanto es que va afectar todos los groceries. Translation: For me it’s an exaggeration to call it a grocery tax, it’s not really going to affect all the groceries.

Miguel Angel Huerta and his wife own Grandma’s Little Deli in San Francisco’s Mission District. They’re also in the ads, objecting to a grocery tax. But when NBC Bay Area asked Miguel Angel what would be taxed, he said, “Pues es en todas las bebidas azucaradas” “Well it’s all the sugary beverages.”

The Investigative Unit asked Joe Arellano, the spokesman for the coalition to defeat the soda tax, if the grocers were misled by the campaign.

“Absolutely not, we respectfully give them the right to have their own opinion, that’s part of what makes democracy so great.”

Were the grocers paid or compensated in any way for being the faces of the campaign to defeat the bill?

All of them said they weren’t paid at all. There was one nice perk, though. They were invited to watch the Giants play the Dodgers in the Coca Cola Box at AT & T Park. That was a special day for Gianfranco Di Sciullo, who runs an Italian Deli with his parents in San Francisco’s Dogpatch neighborhood.

“It was a box suite. It was beautiful - never been in a suite before. We were right next to Virgin America and Bank of America, so it was pretty nice. It was a new experience for me.”

San Francisco Supervisor Malia Cohen placed the soda tax measure on the ballot in San Francisco. She says the soda industry is trying to trick people by calling the measure a grocery tax.

“Their strategy in their campaign is really a campaign of sugar coated lies.”

She’s joined forces with health advocates - and former Mayor Michael Bloomberg of New York, to fight for the bill. Together they’ve raised $13.3 Million to run their own campaign in support of the tax.

Cohen says she’s seen the devastating effects of diabetes and heart disease, and she believes the soda tax will help not only to reduce consumption, but by putting money into a fund that will help educate consumers about a healthier diet with less sugar.

“It’s in our best interest to be putting a tax on a distributor that is distributing poison,” said Cohen

She says she had an epiphany one day while listening to a talk by Dr. Robert Lustig, a pediatric endocrinologist at UCSF who works with obese teenagers.

“What happens if you drink too much alcohol - you fry your liver. Well if you drink too much soda you fry your liver for the same reason,” Dr. Lustig said.

Dr. Lustig recently completed a study which showed that when teens were taken off sugar for just 10 days, their health improved, and they showed lower risk for diabetes and heart disease.

In 2014, the City of Berkeley became the first city in the nation to pass a soda tax. Xavier Morales serves on the board that decides how best to spend the $1.5 million in revenues they’ve collected so far.

“We’ve been doing it for over a year. We’ve got a year track record on this,” said Morales.

Morales points to a study by UC Berkeley researchers which shows a 21 percent decrease in soda consumption in Berkeley neighborhoods after the tax passed and was implemented.

“We’re collecting revenues on a product that is causing disease and death, and investing those revenues in these communities so that folks can learn and have healthier options,” Morales said.

But Gianfranco’s dad, Massimo DiSciullo says, “I’m against tax because they’re killing me already.”

Humberto Felix of Casa Lucaz worries that soon other items will be taxed. “There’s sugar in everything. There’s sugar in that bread. Are they going to tax that?”

The money from the tax will go into a general fund. That’s currently how the Berkeley tax works, and commission members who administer the fund say every dollar goes towards educating lower income communities and children about healthy options. But critics say any tax money that goes into a general fund can wind up anywhere to pay for anything from pensions to potholes.

Tamer Khwaja thinks there must be a better way to fix the obesity problem.

"Why use me? You're a huge corporation - or you're the city. Go do something else, you have the money, you have the power to do something else," Khwaja said.

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