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Cola Wars

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

For years, schools such as Berkeley 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 sales. But those were usually penny-ante deals. Now, 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 product lines.

Berkeley High was 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. In early April, the school board passed a policy that limits corporate logos on campus, among other things.

The new policy is a setback for the seven-year Pepsi deal, but it probably won't kill Berkeley High's exclusive contract, says Martin, who is itching to capitalize on the leverage the school can exert on the company. "We control the property and the constituency," he says of the school grounds and the students and teachers who spend much of their day there. "You've got a new sheriff in town."

Such aggressive thinking by school officials around the country has led to some big deals. In November, the Colorado Springs public schools signed an exclusive deal with a Coca-Cola bottler that will net the district $8-million over 10 years. Under the agreement, the 33,000-student Colorado district's 53 schools are expected to sell 70,000 cases of Coca-Cola products per year.

The 25,000-student Madison, Wisconsin, district, meanwhile, 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.

Each deal is somewhat different, but districts typically give the soft drink companies exclusive vending rights to campus machines and at school events. In addition to money, the companies may throw in logo-laden scoreboards and free cases of their beverages.

In their negotiations, districts typically play Coke and Pepsi bottlers against each other. In some places like Texas, the Dr Pepper/Seven-Up bottler is a major player, too.

Critics contend the beverage contracts are not nearly as lucrative as they sound, since the dollar amounts ultimately depend on the size of the district. They also point out that the bulk of the money comes 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," argues Alex Molnar, a professor of education at the University of Wisconsin-Milwaukee and director of the Center for the Analysis of Commercialism in Education.

That is not the only criticism. Though many schools have long had soda machines, the new exclusive contracts put schools in the business of promoting the consumption of soft drinks. "In health and nutrition classes, kids are being asked to look for healthy beverages," says Charlotte Baecher of Consumers Union, a watchdog organization that publishes Consumer Reportsmagazine. "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 can 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," says Don DeRose, president of DD Marketing in Pueblo, Colorado.

What's new, he says, is that "schools are saying you're not going to be in for free anymore." According to DeRose, districts can make an average of $35 or more per student each year under the new deals, compared with about $3 or $4 before.

DD Marketing has negotiated deals for dozens of districts, including the $8 million Colorado Springs contract and an unusual $3.4 million package for the Grapevine-Colleyville district in Texas that includes a large Dr Pepper logo on a school rooftop 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 deal, but the best offer was $3.2 million from Coke. "I think the perception is that because we are an urban district and have a higher rate of poverty, we won't sell as many beverages as a suburban district," says associate superintendent Eldon Ray. The Fort Worth board turned down the deal but lets local schools make their own agreements.

If the new deals are good for schools, the soft drink companies are drawing benefits, too. Gary Hemphill, vice president of Beverage Marketing Corp., a New York City research and consulting firm, says the contracts give soft drink companies something that is probably more valuable than the sales or short-term advertising exposure: the chance to build brand loyalty among young consumers.

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

Though the beverage contracts generally don't draw as much fire as other forms of commercialism and advertising in schools, they don't completely escape that criticism. "There is a barrier we seem to be crossing when we enter into exclusive contracts," says Steven Dold, 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."

And in some districts, the beverage contracts may end up being just the tip of the iceberg. "The soft drink deals are the easiest ones to do and the most visible," says Don Oatman, deputy superintendent for support services of the 88,000-student Jefferson County school district in Colorado. In addition to its seven-year, $2.1 million arrangement with Pepsi, the district also has a 10-year exclusive deal with US West that will put the phone company's name on a new football stadium. And it is pursuing 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 says.

—Mark Walsh

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