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“The way you make money is on soda and water.”
By Mark Dent
billypenn.com
The beer selection at the corner market owned by Ricky in South Philly is stocked with solid craft brands. He likes to say he doesn’t sell the cheap stuff.
But Ricky is not a beer snob. He’s a businessman. The choice to sell beer rose less out of preference than necessity, a decision he made to fight declining sales of cigarettes after the city started taxing them more heavily in 2014, and one he hopes softens an expected sting from the sugary drinks tax.
Ricky would rather not talk about the beer and would prefer his shop be identified only as a market in South Philly and his last name not be mentioned. He says he’s worried about the future of his business in post-soda tax Philadelphia.
Such a concern might seem like hyperbole given the 1.5-cent-per-ounce tax on sugar-sweetened beverages has been around for about a week. But for owners of Philadelphia’s approximate 1,500 corner stores dealing with what they see as taxes on nearly everything already — “you could do something different; the city has another tax” — early declines in beverage sales have brought concern.
“From Jan. 1, it’s been completely dead,” said Mohammad Alqtaishat, owner at Roxborough’s M&M Market. “I’m not making money at all.”
Alqtaishat is in a particularly precarious position given his location. Prospective customers can travel a couple miles to Bala Cynwyd or Gladwyne. He’s seen this happen for cigarettes and expects the same for sugary beverages. In just one week, he said “you could count on a finger” how many people have been buying soda, tea and energy drinks in sizes or quantities larger than a can.
Alqtaishat sells the typical corner store fare: hoagies, snacks, cigarettes, lottery games, a few grocery items and drinks. The drinks, especially in the summer, constitute a large share of overall revenue. He pegs it at close to 50 percent. Most other corner store owners interviewed by Billy Penn said it was closer to 25 or 30 percent.
“Wawa, which is a big chain, they don’t care,” Ricky said. “They can move around and figure out how to move it back. Small businesses like myself, it’s truly dependent on the soda. The way you make money is on soda and water.”
In Fishtown, Belgrade Deli owner Kim (she asked her last name not be used because she didn’t want distant family members to know of her location) hopes to make up for possible revenue losses by selling more grocery items. She said water and seltzer water have been some of her top selling drinks even before the tax. This reflects a trend for Philadelphia: In 2010, about 37 percent of adult residents drank at least one sugar-sweetened beverage daily. In 2015, the last year for which data is available, the share had decreased to 32 percent.
For corner stores and groceries, supplying more water or other untaxed drink comes with an incentive. The city is offering a tax credit on the Business Income and Receipts Tax of up to $2,000 for stores that increase their supply of these types of drinks. Marisa Waxman, first deputy revenue commissioner, explained any increase of supply up to $2,000 in healthier drinks is basically free.
There will be no way of telling how many stores apply for the tax credit until next year, when taxes are filed for 2017. Only stores making at least $100,000 — the point at which the BIRT goes into effect — are eligible. Waxman said the city will consider other incentives after each year of the tax credit, particularly if the smallest businesses need better assistance. According to the National Association of Convenience Stores, the average convenience store in the US makes $265,000 in revenue each year, excluding gasoline sales.
Alqtaishat had heard nothing about the tax credit. If business stays down, he said he may have to cut down his staff. Jim Hendricks, owner of Anne’s Place in Fishtown, said he’s not sure what he’ll do yet to recoup possible revenue losses from soda but for now is planning on restocking on sugary drinks every month instead of every two weeks.
In South Philly, beer sales have helped Ricky cover losses from cigarette sales. But he’s not sure if it’ll be enough to make up for lost revenue if fewer people end up buying sugary drinks..
“Right now I’m just seeing what to do,” he said, “see how much it hurts me.”
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