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Judge blocks New York City's sugary drink limit

By: By Lisa Fickenscher
CRAIN'S NEW YORK BUSINESS

March 11, 2013

NEW YORK — Honest Tea, the Bethesda, Md.-based beverage manufacturer, was ready for New York's new ban on large sugary drinks, which was supposed to go into effect Tuesday. But on Monday afternoon a judge invalidated the ban, leaving the issue up in the air just when companies are spending millions to comply.

The Coca-Cola Co. subsidiary began shipping slightly smaller bottles of its popular teas to New York City retailers last week. The bottles are less elegant than Honest Tea's original containers, which are rounded at the top, but more importantly, they contain 0.9 fewer ounces of tea. Honest Tea's original bottles, which continue to be sold outside of New York City, exceeded the city's regulation by exactly that amount. "We launched a 16-oz. bottle just for New York City, our largest market," said Seth Goldman, CEO and co-founder of the tea company.

The ban is meant to address the growing obesity problem in the city. The city had hoped to begin assessing fines for violations of the regulation starting on June 12, when a three-month grace period was slated to end. But the ruling by the judge throws the ban into doubt.

The judge's Monday ruling favored a beverage industry suit against the city, which some retailers and beverage makers were counting on to kill the rule. The city plans to appeal the judge's decision.

On the eve of the directive, Mayor Michael Bloomberg, along with the city's health commissioner, Dr. Thomas Farley, announced new data supporting the premise that large, sugary drinks are a leading cause of obesity here. The data shows that nine of the top 10 neighborhoods with the highest number of overweight residents also had the highest sugary drink consumption.

"Obesity is killing more than 5,000 New Yorkers each year and demands bold steps to fight this crisis," said the mayor, in a statement.

Goldman, however, feels like collateral damage in a health campaign that is primarily aimed at soda manufacturers and excessively sweetened drinks. Honest Tea is generally perceived as a healthier choice and contains 70 calories, less than many of its competitors.

Nevertheless, the company is preparing to switch over to 16-oz. bottles nationwide next year. In order to do so, it will need to invest about $1 million to change the manufacturing mold and design for its bottles, Goldman said.

The new bottles in New York City are existing stock bottles that many beverages come in—not the distinctive design of Honest Tea's products outside of the city.

In the meantime, Goldman said "our distributor has to make sure to take out the right boxes out of its trucks in New York."

If the courts eventually rule in the city's favor, consumers may have to accept that they are paying the same price between $1.50 to $1.99 per bottle of Honest Tea—and getting less in return.