Will a Philadelphia Soda Tax Hurt Coca-Cola or Pepsi?

Big soda is under fire across America.

In November 2014, a ballot measure to impose extra tax on soda beverages in Berkeley, Calif., passed by a landslide. Now Philadelphia, the fifth-largest city in the United States, is weighing the pros and cons of a tax that would raise the price of soda by more than 50%.

Does this growing push to curb soda make stocks such as Coca-Cola (KO) - Get Report,Dr Pepper Snapple (DPS) and PepsiCo (PEP) - Get Reportdangerous investments? Or is there still some fizz left for these beverage giants?

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Berkeley's soda tax levies 1 cent per ounce on a container of pop. But Philadelphia's proposed tax would add an extra 3 cents per ounce.

Philadelphia Mayor Jim Kenney introduced the measure, saying that revenue earned from the tax would be diverted to public services such as prekindergarten education, libraries and parks.

The city council will vote on the measure next month.

Not only would fizzy drinks be affected by the tax, the levy would also apply to other beverages to which sugar has been added, including iced tea and energy drinks.

Whereas other cities considering similar methods have focused their arguments on the health benefits of avoiding sugary drinks, Kenney has been promoting the measure as a way to generate as much as $100 million in annual revenue.

Beverage industry analysts forecast that, if passed, the tax would cause a nearly 80% drop in the city's soda consumption.

Three cents per ounce would, on average, raise beverage prices by 55% to 60%.

This would noticeably dent beverage companies' revenue and negatively affect their stock values, and leaders in the sector have reportedly not ruled out attempting to stop the tax through a lawsuit.

The industry already pushed Philadelphia to abandon a similar tax proposal in 2011 by donating $10 million to a children's hospital. Overall, in the past seven years, the industry has spent more than $100 million to combat soda tax measures across the country.

But if the tax were to go through, mega-soda manufacturers such as Coca-Cola and PepsiCo wouldn't suddenly turn into poisonous investments. Although revenue would take a hit, these companies are already making moves to shift their businesses away from relying solely on soda.

PepsiCo, in particular, is concentrating its efforts to diversify away from soda dependence, not only because of the tax issue but also likely because soda consumption in the country decreased by 1.2% last year, according to Beverage Digest.

Last month, Chief Executive Indra Nooyi said that less than 25% of the company's global sales come from soda, with 25% of sales derived from unsweetened drinks and bottled water, which would be exempt from the Philadelphia tax.

Nooyi referred to it as "future-proofing" PepsiCo's business.

The big beverage giants have been given a stern warning, and the new Philadelphia tax proposal puts extra emphasis on this: Adapt or else. With a strong and diversified portfolio, PepsiCo particularly stands out as a safe investment choice as the beverage industry faces increasing headwinds.

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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.