The Pepsi plant in Baltimore will no longer make soda, and the company plans to lay off 77 people as officials have decided to stop manufacturing operations — a decision they blame in part on a controversial new beverage tax in the city.
The last cans and 2-liter bottles of Pepsi-Cola, Diet Pepsi, Mountain Dew and other sodas ran through the production line Monday morning. Executives at Pepsi Beverages Co. told workers in meetings later in the day that production would be halted for good. Pepsi officials said they would work out details regarding the layoffs, including potential severance, with the local Teamsters union.
The company will continue most other functions at the plant on Union Avenue in Hampden. An additional 318 workers with positions in sales and in the warehouse will keep their jobs. Pepsi will continue making soda in other parts of the state and the Baltimore plant will get beverages from those facilities as well as others in the Mid-Atlantic region to distribute.
Kristine Hinck, a company spokeswoman, said a number of factors played into the closing of the production side of the business — including the 2-cent tax on bottled beverages passed by the City Council last year. The need to streamline operations was another factor in the decision.
"While the decision to close the manufacturing line was not easy — nor made without considerable thought for our employees — it is necessary to control costs for our customers and consumers and strengthen our core operations, which will continue to provide good employment opportunities in the area," the company said in a statement.
Hinck also said: "Given the climate, making a beverage in a city where there is a beverage tax certainly doesn't help."
The Baltimore plant is known for the digital clock and sign that can be seen from Interstate 83. During last year's contentious debate about the bottle tax, Pepsi used the sign to broadcast its protest. The sign will be unaffected by the halt in production.
The tax was part of a package of new fees intended to help close a $121 million hole last year in the city's $1.2 billion budget. City officials said earlier this month that they now face an $81 million gap in the budget.
While retailers have said they feel the brunt of the beverage tax, Pepsi officials said the levy also affects manufacturers and distributors, and signals an unfriendly business environment. As sales for retailers decline because of the tax, they buy less from the manufacturers, Pepsi spokesman Mark Dollins said.
"When we're looking at where to do business … we look at what we believe is an environment where we can invest and production lines where it makes the most economic sense," Dollins said.
A spokesman for Mayor Stephanie Rawlings-Blake said that Pepsi officials were hinting that the Baltimore plant might not remain open for other economic reasons at a spring meeting regarding the bottle tax — before it was approved.
"I asked them — hypothetically — if the bottle tax were not approved, could you guarantee you could stay another few years," said spokesman Ryan O'Doherty. "They couldn't say 'yes.'"
He also stressed that the tax is levied on the distribution of bottled beverages, not the manufacturing. And he pointed out that the tax is generally passed along to stores and shoppers.
"Who is this tax really affecting? The retailers are saying it's affecting them. The distributors ran ads saying it's affecting working families and now the manufacturers are saying it's them," O'Doherty said.
The 2-cent tax is slated to expire in 21/2 years.
Ellen Valentino, a beverage industry lobbyist, said the decision by Pepsi is another example of how the tax has hurt local business. Grocers said last month that they had seen a sales decline because of the tax.
"This has been a local burden," Valentino said. "We are going to continue to try to meet with the mayor's office and city leaders to make a case and outline why this law should be repealed."
The decision by Pepsi is the latest hit to the local manufacturing industry, which has seen declines for years as the country's manufacturing base has declined in general.
"I just think it's the continuation of a trend," said Gene Burner, president of the Manufacturers' Alliance of Maryland. "It's a wake-up call. We need to make sure we don't continue to lose these kinds of high-quality manufacturing jobs."
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