Wish we were fighting for School business!!
Soft drinks contract to net schools million
By SUSAN LIGHT
Big money contracts with soft drink companies are nothing new to Jonesboro's schools. In fact, it was recently discovered that the Jonesboro School District was one of the first in the state last year to sign a million-dollar contract with soft drink giant Pepsi-Cola.
Last November, the district signed a $1 million 10-year contract with Delta Beverage Group (Pepsi-Cola Bottling Co.). According to the contract, only Pepsi can be sold at all campuses in the district in return for an annual payment of $92,000, plus a one-time signing bonus of $40,000, regardless of whether Pepsi makes up the money in profits from the soft drink machines.
Other schools in the state like West Memphis and Forrest City have since signed big money contracts with the soft drink companies.
"We're looking at it as a win-win situation," said Bill Burnett, assistant superintendent for Jonesboro School District. He explained that exclusivity contracts involving money are a win for the schools because they receive "free money" and it's a win for the soft drink company because they get to promote their product and support public schools.
Jonesboro's contract includes an annual cash payment of $14,000 to the district for expenses that would normally be requested from Pepsi, such as scoreboards and repairs, science fairs, radio support, sponsorships, tournament sponsorships, sports schedules and signs.
"We basically build up a customer base for the future," added Stacey Null, on-premise manager for Pepsi-Cola in Jonesboro. "It's establishing habits" while at the same time supporting public schools.
Jonesboro's contract was never officially taken to the school board, because Pepsi officials didn't want the terms of the contract publicized, Burnett said. The first payment in the contract was made this past January.
Exclusivity agreements are nothing new for public schools, Null said. Schools have touted specific soft drinks for decades, making themselves known as either "Pepsi schools" or "Coke schools."
What's different is the money.
"What we're doing is, we're paying out big money to the school," Null said. "We're finding out the needs of the school."
For Nettleton, it was football scoreboards and time clocks. Other schools have needed computer equipment, uniforms and other specific things, he said.
Over the past five years, area schools like Valley View, Bay and Nettleton have signed smaller exclusivity contracts with Pepsi, allowing only Pepsi products to be sold on campus in exchange for new scoreboards and other items. Valley View and Bay have agreed to sell only Pepsi products on their campuses; Nettleton agreed to sell only Pepsi on portions of their campuses, but not at athletic events. Schools that signed exclusivity agreements with Coca-Cola in exchange for specific items include Brookland and Westside.
Now, instead of needing specific items, schools need money, Null said. Such money contracts are typically geared toward the population base of the school, he added.
So far, Jonesboro is the only known area school that has signed a million-dollar contract with a soft drink company.
Burnett said Pepsi is taking a "tremendous risk" in offering the money for exclusive rights.
"They were hoping that kids will be more familiar with their product and over time it will influence their sales," he explained.
"So I can't say that Pepsi is going to make back what they're paying us in annual commission," he said.
As part of the agreement, Pepsi also listed where they would like soft drink machines placed at schools.
"But we made it very clear that our principals have the control over where the machines are placed," Burnett said.
Since last November, additional machines were placed outside Jonesboro High School and in both gymnasiums at South Elementary and Hillcrest Elementary, with the principals' approval, he added.
Before the contract, each of the Jonesboro campuses was allowed to keep a percentage of the profits from the soft drink machines located in their buildings or on campus. Overall profits amounted to only $25,000 a year, Burnett said.
Now, instead of letting the school keep that percentage of the profits, Pepsi offered the annual commission payment in return for exclusive rights to sell only Pepsi.
The new contract still allows the different campuses to keep that amount of money, approximately $3,000 for each school, and more than that depending on the number of students. The amount of money was determined from how much profits the different campuses gained from the machines just before the new contract was signed.
Currently, the first payment in the contract is sitting in a savings account gaining interest, Burnett said.
"We have discussed the possibility that it go back into some type of student activity," he said, adding that the school board has the discretion to decide how to spend the money. "It is not earmarked for anything this year," he said.
After the Pepsi contract was signed, Jonesboro also decided to seek a money contract with one vendor for food items in vending machines. Before, the school district used several different vendors.
The vendors were contacted and asked to submit bids on an exclusivity agreement, Burnett said. The result was a $25,000 five-year agreement with Quality Vending. The agreement includes a percentage of the profits from the vending machines.
"Basically, it was money that we just never asked for," Burnett summed up.
While some might feel that these types of contracts amount to rampant commercialism in public schools, Burnett said the agreements ultimately benefit the schools.
"It's something that we are cautious about ... but at the same time, we feel like this is a win-win situation in this instance," he said.
As for the issue of a captive audience for advertisements, Burnett said that's not really an issue.
"We're not really advertising," he said. "We're not forcing anyone to drink Pepsi. It's just there."
He added, "We're cautious and careful about making sure we're not doing anything that would pressure any youngsters about buying any one product."
Null added that Pepsi's intention is not to pressure children into drinking their product.
"We're not out to do that," he said. "We're trying to get the message out that we support the schools."
He added that ads are placed only in athletic locations, such as in gymnasiums and football fields.
The idea of big money contracts is also tempting many universities and colleges to jump on board.
Arkansas State University is currently awaiting bids for an exclusivity contract for the entire campus or parts of the campus, said Jennus Burton, vice president for finance and administration. A request for proposals was sent out to the soft drink companies a few weeks ago and a pre-proposal meeting with the companies is set for this Friday, he said. Formal bids will be accepted two weeks after Friday's meeting.
"We're looking at the advantages of either doing an exclusivity agreement, or breaking the campus up into pieces ... whatever is of greater financial advantage for the university," Burton said.
The result could be one company serving only the Convocation Center and another serving the rest of the campus or parts of the campus, he said.
The Convocation Center's exclusivity contract with Coca-Cola expired at the end of July, according to Carroll Albritton, director of the center. Under the expired contract, the trade-off for only selling Coke at the center was scoreboards and other signage, he said. The new agreement would likely be for that in addition to money, he said.
"This is actually something we decided to do a couple of months ago," Burton said, adding that university officials spoke with other universities across the country that have entered into such contracts.
"It seems to be the way to do business," he said of the money contracts.
ASU currently earns approximately $220,000 a year off of soft drink vending, Burton said. An exclusivity contract would likely exceed that number, he said. In addition, the company would likely agree to sponsor a certain number of events per year.
Other, smaller money contracts will likely follow with area school districts.
The Bay School District will be renegotiating their five-year contract with Pepsi this year, according to Supt. Jim Canada. The contract allowed for only Pepsi to be sold on Bay campuses during the past five years in exchange for new scoreboards. Pepsi and Taco Bell have also sponsored a multimedia motivational program each year at the school, Canada said.
"Of course, at renegotiation time, we may be looking at something else," he said. "We'll see if we can get some cash."
He added that the agreements benefit everyone.
"It's a good deal for the schools and it's a good deal for Coke and Pepsi," he said.
While Nettleton is currently under contract with Pepsi for only the high school cafeteria, that may change in the next few years, said Supt. John Sawyer. The contract will expire within the next four years, he said.
"We're going to consider our formal contract, and toward the time it does expire, we will be soliciting for people to be exclusive at our school," he said.
Other than this, I would buy more shares while the price is down but the fact that I can't get those damn samples really eats at me.
Have a profitable day!
Keith
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