Seth Goldman is one of the entrepreneurial founders of the beverage company Honest Tea, which makes fresh-brewed, organic, low-sugar teas and sells them in a global industry standard bottle: 500ml, or 16.9 ounces. You’d think that such an entrepreneurial activity and such a beverage would be attractive even to Nanny Mayor Michael Bloomberg. But, as Goldman recounts in today’s Wall Street Journal (Mayor Bloomberg and Our 16.9-Ounce Tea), that extra 0.9 ounces beyond Nanny Bloomberg’s dictated size will be a problem:
When the mayor announced his proposal to ban sugar-sweetened drinks in portions over 16 ounces from New York City restaurants, many of my friends assumed Honest Tea would welcome the news as a public initiative to complement Honest Tea’s long-standing commitment to marketing lower-calorie drinks. Yet the mayor’s proposal would actually prevent Honest Tea from selling most of our drinks in New York City restaurants.
Under the proposed changes to Article 81 of the NYC Health Code, food-service establishments would not be able to sell packages larger than 16 ounces for drinks that have more than 25 calories per eight-ounce serving. Honest Tea’s top-selling item is our organic Honey Green Tea, which has 35 calories per eight-ounce serving and is in a 16.9 oz. bottle. We label 70 calories on the front of the package so consumers know what’s in the full bottle.
We initially went with 16.9 oz. (which is 500 milliliters) because it is a standard size that our bottle supplier had in stock at the time. We subsequently invested several hundred thousand dollars for 16.9 oz. bottle molds. Is 16.9 ounces the perfect size? Who knows? As a beverage marketer, we willingly submit to the unforgiving judgment of the market. What we did not anticipate was an arbitrary decision to constrain consumer choice.
The rest of Goldman’s piece clearly points out the costs that arbitrary bureaucratic diktats impose on producers like Honest Tea. Goldman is explicit about the arbitrariness risk they face — he wonders what will happen to their costs if they were to change to 16-ounce bottles and then have Cambridge, MA impose a 15.5-ounce limit next year.
Do bureaucrats take those costs into account when making their arbitrary regulations? No. And they should, because costs like this will either mean sandwich shops not carrying Honest Tea, which will reduce Honest Tea’s profits and consumer surplus, or it will mean costly capital retrofits for Honest Tea that would increase their costs and increase the retail price of their drinks.