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NYC's sugary drink ban battle puts restaurants in limbo

A day after a New York judge knocked down Mayor Michael Bloomberg’s highly touted plan to ban large servings of sugary drinks, restaurants in the city were keeping one eye on their inventory and another on the mayor's quickly filed appeal.

“We are in the wait-and-see mode,” cook Rakim Brown said as he was helping to open Schnipper’s on Tuesday morning, when the ban would have begun.

Restaurants like Schnipper’s were shifting gears quickly to convert back to the larger sizes Bloomberg blames for helping to expand New Yorkers’ waistlines. Schnipper’s Quality Kitchen on 23rd Street had been prepared to transition from 20-ounce cups to smaller 16-ounce cups, which are usually reserved to serve alcohol, Brown said.

State Supreme Court Judge Milton Tingling on Monday ruled the ban was “arbitrary and capricious” and “laden with exceptions based on economic and political concerns.” The city filed its appeal Tuesday. Bloomberg has said he is confident his administration will prevail on appeal.

The last-minute ruling prevented the city from enforcing a ban, championed by Bloomberg, that would have ended the sale of sugary drinks in containers larger than 16 ounces at locations that are also subject to food-service letter-grade regulations.

But while some businesses are stuck holding unwanted smaller cups, many are taking the change in stride.

Elsewhere, restaurants were changing menus and adjusting inventory as bottlers were converting their sizes, said Chris Gindlesperger, a spokesman for the American Beverage Association. “Some businesses had done that, some had not,” he said.

At the Film Forum, the independent theater stopped ordering the 24- and 32-ounce cups two months ago. “We knew this was coming,” said manager Matt Koroghlian.

The plan was to keep using the big cups for seltzer and diet soda. Regular soda would have been available only in small, 16-ounce cups. The only disruption now is that they’ll have to place an order for more big cups, Koroghlian said.

In Brooklyn Heights, Roshane Smith started his morning counter shift at Subway with the same 40-ounce and 31-ounce cups stored in their usual place. Typically good sellers, no one had yet told him he would still be allowed to sell them Tuesday. “They’re still there,” he said, pointing to a spot behind the counter.

The extra large sizes have been selling particularly well as the soda deadline approached. “People were pretty much coming in to get their souvenir cups,” Smith said.

Francis Kim, the general secretary of the Korean American Grocers Association, said about 30 percent of his members would have been impacted by the ban. He called around to some of them Tuesday to see if the last-minute change caused disruptions, and was pleased to hear shop owners said they deal mostly in cans and were able to return the soda to the distributors.

“It was quite easily done,” Kim said. “They were quite grateful.” The Korean-American Grocers Association filed the legal action against Bloomberg's ban along with the American Beverage Association, National Restaurant Association, the National Association of Theatre Owners of New York State, the New York Statewide Coalition of Hispanic Chambers of Commerce and the Soft Drink and Brewery Workers Union, Local 812, International Brotherhood of Teamsters.

Part of the judge's criticism of the proposed law was that it would have applied unevenly. The law would have exempted grocery stores, convenience stores, bodegas, markets and even the 7-Eleven Big Gulp.

Some of those stores had made plans to exploit the loophole by selling big sodas, along with items that might have been purchased elsewhere. Last week, 7-Eleven debuted two new sandwiches, which it characterized as part of a strategy shift “toward a more fresh-foods-focused product mix to compete not only with other food retailers but also with quick-serve restaurants.”

“We have found that downtown, urban stores appear to have higher sales rates of fresh foods compared to most suburban stores,” 7-Eleven spokeswoman Margaret Chabris said via email.

“Ours is a holistic fresh-food plan. ... That’s what differentiates 7-Eleven from most prepared-food providers,” vice president of fresh food innovation Kelly Buckley said in a statement.

At the Duane Reade on the Fulton Mall in Downtown Brooklyn, the store recently was renovated to make way for the arrival of prepared foods, such as wrapped sandwiches and donuts. Less than two weeks ago, a self-serve Coca-Cola branded soda machine was set up near the front entrance.

Store manager Ken Peli said the soda machine had been ordered independently from the soda ban. So far it sells only 20-ounce sodas for $1.99 but a 12-ounce offering is also in the works. “Our customers haven’t really noticed it yet, but once they realize it’s there we think it’s going to be a big seller,” Peli said.

Timothy O’Connor, vice president at research firm RetailNet Group, said the fresh-food category is an increasingly important source of revenue for drugstores. "They’re trying to grow it anyway. ... For them, it’s all about driving more trips and driving front end sales."

At Walgreens on 23rd Street at Park Avenue South, the store has a lot of fresh-prepared foods, as well as cold sodas, milk and other food items in both the front and back of the store. But that transition happened well before the soda ban was proposed, said Rob Demeester, the community leader for the store.

Walgreens, a Chicago-based drugstore chain that also owns Duane Reade, has been adding fresh food to its stores nationally since 2010, he said. His store, which is also exempt from the ban, did nothing new to capitalize on the potential new business from the ban elsewhere.

“We didn’t think it was going to pass, so we didn’t do anything,” Demeester said.