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Schools Are Latest Front in Cola Wars

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Joe Martin, the athletic director at California's Berkeley High School, thought he had hit on a perfect plan for getting extra money for sports programs.

For years, schools such as Berkeley High have allowed a few soda machines on campus, and in return, local Coca-Cola or Pepsi-Cola bottlers helped pay for a new scoreboard and shared a small slice of the proceeds from the machines.

But those arrangements are escalating to a whole new level. With the help of marketing specialists, savvy school districts are demanding more money and extra benefits from beverage companies. And the soft drink companies seem happy to oblige, as long as they get the exclusive right to sell their line of products on campus.

Berkeley High was all set to join this trend with a seven-year, $100,000 contract with the local Pepsi bottler. But the famously liberal community agonized for months about whether an exclusive beverage contract would be too much of an intrusion by corporate interests.

"We have to be very careful going into any sort of a deal with a corporate power," said Sarah Church, a 15-year-old sophomore at Berkeley High. "When a corporation brings advertisements onto our school campus and has an influence on what is taught, that is a severe issue."

Last week, the Berkeley school board passed a policy that limits corporate logos on campus and prohibits requiring the district's 8,800 students to view advertisements in class or in their books.

Mr. Martin said that even under the new policy, an exclusive beverage contract is still likely to be worked out with Pepsi.

And when that happens, Berkeley High School will capitalize on the leverage it can exert on the company, as many schools have failed to do in the past, Mr. Martin said.

"We control the property and the constituency," he said, referring to the students, teachers, and others who are the beverage consumers. "You've got a new sheriff in town."

Exclusive Rights

This new way of thinking about soda pop has led to some big deals around the country. For example:

  • The Colorado Springs, Colo., district signed an exclusive deal with a Coca-Cola bottler last November in which it will receive $8 million over 10 years. Under the deal, the 33,000-student district's 53 schools are expected to sell 70,000 cases of Coca-Cola products per year.
  • The 25,000-student Madison, Wis., district signed a three-year, $1.5 million deal with the local Coke bottler that includes a $100,000 "signing bonus" and a $515,000 advance on future sales. Other provisions include a $5,000 teacher of the year award and two paid internships for students.
  • The 19,000-pupil Hurst-Euless-Bedford district near Dallas signed a five-year, $1.95 million deal with the Pepsi-Cola Co.

Each deal is somewhat different, but they typically give the soft drink companies exclusive vending rights in campus machines and at school events such as football games. The companies may provide a logo-laden scoreboard or two, and they often throw in extras such as donations to scholarship funds and some free cases of their beverages.

By one estimate, a single soda vending machine generates anywhere from $3,000 to $7,000 in profit per year.

Districts typically play Coke and Pepsi bottlers against each other, although in some areas, such as Texas, the Dr Pepper/Seven-Up bottler is a major player, too.

Districts' growing interest in doing business with the soft drink companies was pointed up last month by the widely reported incident in which officials at Greenbrier High School in Evans, Ga., suspended senior Mike Cameron, who wore a Pepsi shirt on a day when the school was trying to impress Coca-Cola Co. officials for a $10,000 contest.

No Free Soda

Critics contend the beverage contracts are not nearly as lucrative as they sound, since the dollar amounts need to be analyzed based on the size of the district. And the bulk of the money is ultimately coming from the students and others who buy the soft drinks.

"By signing these agreements, schools are requiring children to buy their education one soda at a time," argued Alex Molnar, a professor of education at the University of Wisconsin-Milwaukee and the director of the Center for the Analysis of Commercialism in Education.

That is not the only criticism. While many schools have long had soda machines, the effect of an exclusive contract is to put schools in the business of promoting the consumption of soft drinks, critics say.

"In health and nutrition classes, kids are being asked to look for healthy beverages," said Charlotte Baecher, the director of education services for Consumers Union, the Yonkers, N.Y., watchdog organization that publishes Consumer Reports magazine. "By putting soda machines in the hallways, schools are giving them the opposite message."

But defenders of the contracts contend that schools are merely waking up to the idea that they are in a position to demand better deals from the vendors.

"Everyone thinks this is a new issue, but there have been vending machines in high schools for 25 years," said Don DeRose, the president of DD Marketing in Pueblo, Colo. The firm is helping dozens of districts negotiate exclusive beverage contracts.

What's new, he said, is that "schools are saying you're not going to be in for free anymore."

Mr. DeRose said districts can reap an average of $35 or more per student per year under the new deals, compared with about $3 or $4 a student annually in the old days.

DD Marketing has negotiated some of the more lucrative recent deals, including the $8 million Colorado Springs contract and an unusual $3.4 million deal in the Grapevine-Colleyville, Texas, district in which Dr Pepper logos are painted on the rooftop of a school in the flight path of Dallas-Fort Worth International Airport.

Not every district that has explored the idea has signed an exclusive contract. The 76,000-student Fort Worth district thought it would get as much as $5 million in a 10-year exclusive beverage deal, but its best offer was $3.2 million over 10 years from Coke.

"I think the perception is that because we are an urban district, and we have a higher rate of poverty, we won't sell as many beverages as a suburban district," said Eldon Ray, the district's associate superintendent for noninstructional services.

The Fort Worth school board turned down the Coke deal and allowed local schools to keep making their own agreements.

Brand Loyalty

If the new deals are good for schools, the soft drink companies acknowledge they are drawing benefits, too--and not just in immediate sales.

"We do see this as a business-development opportunity as well as doing a little good," said Larry Jabbonsky, a spokesman for the Pepsi-Cola Co., the soft drink division of Somers, N.Y.-based Pepsico Inc.

Gary Hemphill, the vice president of Beverage Marketing Corp., a New York City research and consulting firm, says the exclusive contracts give soft drink companies something that is probably more valuable in the long run than the sales or short-term advertising exposure: the chance to build brand loyalty among young consumers.

"Teens are starting to make those decisions" about favorite brands, he said. "They often carry those consumption habits with them throughout their lives."

While the beverage contracts generally don't draw as much fire as the advertising carried on Channel One, the daily satellite news show for students, some educators count themselves among the critics.

"There is a barrier we seem to be crossing when we enter into exclusive contracts," said Steven Dold, the deputy state schools superintendent in Wisconsin. "The exclusivity sends a message to students that the public education environment is somehow for sale to the highest bidder."

But the beverage contracts may be just the tip of the iceberg. While a number of districts have explored stepping up the acceptance of advertising in various forms, the Jefferson County, Colo., district is considering expanding its exclusive deals well beyond its seven-year, $2.1 million arrangement with Pepsi.

"The soft drink deals are the easiest ones to do and the most visible," said Don Oatman, the deputy superintendent for support services of the 88,000-student district near Denver.

The district also has a 10-year exclusive deal with U S West Inc. that will put the phone company's name on a new district football stadium and is pursuing other exclusive deals with local athletic-supply companies, newspapers, and other businesses.

"People who are just going out and doing the soft drink thing and calling it a day are missing out," he said.

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