According to the Associated Press, the health department of New York City (NYC) has proposed to limit the consumption of beverages like Coke, Dr Pepper and Pepsi in restaurants, movie theaters and other public places in order to address the growing concern of obesity in the city of New York.
The move has negatively impacted soda-makers like The Coca-Cola Company (KO - Analyst Report), Dr. Pepper Snapple Group, Inc. (DPS - Analyst Report) and PepsiCo Inc. (PEP - Analyst Report).
As per the Associated Press, the proposed ban by the New York Health Department would apply only to sweetened drinks over 16 ounces that contain more than 25 calories per 8 ounces. This would seriously impact Coca-Cola, as a 12-ounce can of Coke has about 140 calories. However, this would not affect diet soda and any drink that contains at least 70% juice, or half milk or milk substitute.
The source also stated that any business in the city will have to pay $200 per inspection for not following the rules. However, the proposal requires the approval of the city's Board of Health. Once approved, it would push the U.S. government to adopt similar measures.
In order to sustain in U.S. markets, beverage companies have introduced smaller packs which have less calorie-content. Pepsi introduced Pepsi Next early in 2012, which has about 60 calories than the regular ones which have 140 calories, whereas Dr Pepper launched "Dr Pepper Ten" last year, which has just 10 calories.
Coca-Cola had introduced a 7.5-ounce "mini-can" in 2009 and is also expected to roll-out its mid-calorie versions of Fanta and Sprite in selected cities over the near term. Moreover, the companies have started printing the total caloric content on the front of its beverages, in order to make consumers aware of their calorie intake.
Coca-Cola and its peers have been struggling in recent years as people in U.S. have increasingly become health-cautious and are shifting away from high-calorie soda beverages to bottled water and juice-based drinks. We therefore expect the beverage makers to look for opportunities in the emerging markets to remain profitable over the long term.