September 19, 2007
Competing with Coke & Pepsi
Sometimes you have to wonder.
Ray Murphy @ YoungPhillyPolitics is incensed, incensed, that Coke and Pepsi are taking (well paying for) regular ol' Philly tap water, putting it in a bottle, slapping a label on it, and marking up the piss out out it.
Half a cents worth of tap water is now worth a dollar and a half.
According to the Philadelphia Coca-Cola Bottling Company website, our local plant is the fourth largest nationwide with over half a billion dollars in annual sales. Both Pepsi and Coke have reported that bottled water sales are among the fastest growing in their companies and may soon catch up or even overtake the sale of carbonated beverages. That means there are a lot of potential water consumers in Philadelphia.The simpler way to profit off of water is to tax Pepsi and Coke at a higher rate for their water usage. I had some trouble figuring out the PWD’s business tax rate (hello Philadelphia, can we get some good city websites up or what?), but for consumers, it costs about $17 in taxes for 600 gallons of water. Philly Coke’s website says it serves about 5 million consumers a year. If one-third of these people buy one 20 oz. bottle of water a year, we’re talking at least 278,437 gallons of water sold annually.
I don’t really care how we make money off of water, but the point here is that in these cash strapped times, we are stupid if we don’t.
Our water supply is currently being exploited by Coke and Pepsi. As the largest municipality collecting and cleaning water for drinking in the region, Coke and Pepsi can’t really get the tap water they need for Dasani and Aquafina anywhere else but Philly (and shipping tap water from other places would likely cut too deeply into their bottom line). That means that whether we tax them more, or bottle our own water, Philadelphia is in a good place to be able to better take advantage of a natural resource.
Admittedly, I am not a degreed economist, but I'm sure this is a catastrophically bad liberal idea, but I repeat myself.
I'll say it slowly. (Please read along slowly for full effect)
1) If the city of Philadelphia can not control crime within it's own boundaries, how in the hell is it supposed to compete with two massively global companies that have had their horns locked for years?
2) If the city of Philadelphia charges big soda more for water, they can go bottle tap water somewhere else. There is nothing special about what Trenton flushes into the Delaware River. Really. Nothing.
Bonus part of that is when they close their bottling plants in the city and move them outside of the city limits, the city loses wage tax collection, property taxes, etc... a win-win!
Never mind that whole issue of a government specifically targetting two industrial consumers of water to the exclusion of the other industrial consumers. How many gallons of water go into a box of Oreos from the Nabisco bakery? ... what about my precious Tasty-Klair Pie? or a case from the Yards Brewery? *
Ideas like this are nicely nucleated examples of liberal progressive thinking.
... and it goes without saying that if you buy bottled water that's municipal sourced, you're a dope, no matter who puts a screw top on it.
Get a Nalgene bottle and fill it before you leave the house... and use the bottle again, and again, and again. It takes two liters of water to make a one liter plastic bottle, btw.
See? You can be conservative and environmentally conscious!
* Note: I'd list more water consuming businesses within city-limits, but great business friendly ideas like this have chased most out into the suburbs, or the south or Mexico.
Economics and Markets Government Pennsylvania We're from the government, and here to help. Posted by AlexC at September 19, 2007 8:09 PM
I read somewhere that the City of Pittsburgh almost saved the world from bad beer when they tried to close Iron City because the brewer wasn't paying their water bill. (Water being the source and closest taste to IC).
Posted by: TrekMedic251 at September 19, 2007 11:19 PMI love it. He goes to the Philadelphia Coca-Cola Bottling Company website and finds everything he needs, goes to the city website and can't find anything -- then says that government should tell private business how to operate.
Posted by: jk at September 20, 2007 10:32 AMSecond-best-case scenario: the companies stay put despite the taxes, but they must pass the additional taxes on to consumers. Instead of paying $1.50 for bottled water, consumers must now pay $1.65 or whatever, so sales will decrease. Thing is, the Laffer Curve can also work in reverse, so those sales could very well drop and take the tax revenues along with them.
Best-case scenario: the companies stay put, they pass the additional taxes on to consumers, and sales remain the same. But because a consumer now spends $1.65 on a 20-oz. bottle water when he spent $1.50 before, that's 15 cents taken away from other purchases. By definition it must come from *somewhere*, and it adds up to anything from a supersize option on fast food to a notepad to a restaurant meal. Now *those* companies will experience an equivalent sales decline, which means they must cut back on man-hours. Of secondary importance is the lost tax revenue. Now, this is the absolute best possible scenario, and it's also the most improbable. It won't happen for a simple reason: economies never, ever shift toward industries or sectors that are taxed higher.
A lot of people subscribe to the economic fallacy that charging more can be good, because it means the sellers (and in this case, government as a tax receiver) has more money to spend, and this supposedly spurs economic growth. On the surface it looks good, but it cannot avoid the fact that buyers have finite incomes. If I spend $1.65 on bottled water instead of $1.50, or when Henry Ford paid workers enough to afford the cars they made (an economic urban legend), that money must come from somewhere else. I'll spend less on other purchases if I'm to buy bottled water in the same quantity and frequency, and because Henry Ford's customers must spend more on the cars, they'll spend less on other things. True economic output does not increase -- unless the central bank prints more dollars so we can spend more, which is, of course, inflationary.
The lesson, as always, is to remember what Bastiat taught us. Look for the unseen.
Posted by: Perry Eidelbus at September 20, 2007 11:22 AMI should add that I stick to bottled water, even if it's ultimately tap water, as a matter of taste and sanitation. I prefer spring water, but I'll still buy Dasani. To me, there's no choice between "free" water from a Grand Central Terminal fountain and paying $1.65 at any of the vendors. When government says it purifies, filters and UVs tap water, I wonder how well. When Coca-Cola says it does those, I actually trust it more, not because it's interested in protecting me, but because it wants to keep my business.
Oh, and by the way, liberal idiots like Murphy and Gavin Newsom can give themselves edemas with plain old tap water.
Posted by: Perry Eidelbus at September 20, 2007 11:33 AMWho drinks brand label water? Progressive elitists ... I'm with W.C. Fields on this one. My hydration comes from a bottle of scotch, thnx.
Posted by: mdmhvonpa at September 20, 2007 12:47 PMI think it's a mistake to compare bottled water to tap water. The substitution is bottled water vs. Coke. The price comparison is a lot less extreme and it represents substitution better: convenient, disposable, &c.
"Freakonomist" Steven Levitt has an interesting piece discussing that Coca Cola now advertises that Diet Coke is 99% water -- after trying to hide that fact for years.
Posted by: jk at September 20, 2007 1:23 PM | What do you think? [6]