Soft-drink companies want an in

By Dawn Ziegenbalg

September 5, 2000 Web posted at: 11:37 AM EDT (1537 GMT)

WINSTON-SALEM, North Carolina (Winston-Salem Journal) -- Coke and Pepsi aren't the drinks of choice in Reynolds High School's cafeteria -- most likely because laws limit the sale of carbonated soft-drinks in schools.

But students stand in line to buy water, juice and fruit drinks that are bottled by the soft-drink giants.

''One student said, 'We ought to get an extra line just for drinks,' '' said Donnie Holt, the school's assistant principal.

Profits from those sales are part of the reason that Coca-Cola and Pepsi are offering millions of dollars for an exclusive contract with the Winston-Salem/Forsyth County Schools. But the marketing rights that come with a contract may be the biggest reason, some experts say.

''It's huge,'' said Anne Brumbaugh, an assistant professor of marketing at the Babcock School of Management at Wake Forest University.

''It gets them (soft-drink companies) access to making a whole bunch of very young consumers loyal to their product very early. And if you can get a few people early, you've got them for life.''

School officials are expected to present the latest information about each company's proposal -- including a detailed analysis of how much each company would pay for a deal -- during a meeting tonight.

In initial proposals, Coca-Cola offered $1.1 million for a five-year deal and $2.4 million for a 10-year deal. Pepsi offered $2.7 million and $6.5 million. But those offers were based on the company's own sales estimates, and school officials want to refine them based on their own estimates.

The school board could vote Sept. 12 on a deal with either Coke or Pepsi. The deal would give the winning company the sole rights to sell drinks in school vending machines, cafeterias and concession stands. In the Forsyth County schools, most drink revenue comes from cafeteria sales, said Doug Punger, the school system's attorney.

But state and federal law limit those sales. For instance, elementary and middle schools cannot sell carbonated soft drinks to students, said Harry Wilson, a legal assistant with the N.C. Department of Public Instruction. And high schools can't sell soda to students during breakfast or lunch, he said.

In Forsyth County, the system would make even stricter rules if a contract is signed. Timers on high-school vending machines would ensure that soda is sold only after lunch -- not before, as it is in two high schools now, Punger said.

Drink sales in schools are not big moneymakers for soft-drink companies, said Lauren Steele, a spokesman with Coca-Cola Consolidated in Charlotte.

''Our business with the schools is not a profitable business for us,'' he said. ''Whether it's a money-loser or not is debatable, but it is definitely not a profitable part of our business.''

Brumbaugh said that the exclusive sales probably make some money for soft-drink companies, but she doesn't believe that is the goal of their contracts.

''My professional opinion is it's more driven by (product) loyalty,'' she said.

Both Coca-Cola and Pepsi have said they would buy advertisements in yearbooks and school newspapers, provide scoreboards and sports supplies, offer scholarships, and provide hundreds of cases of free drinks.

And with the two companies competing for about 80 percent of the cola market, that kind of marketing is crucial, Brumbaugh said.

''There are just two big players, and it's a huge race to create loyalty,'' she said. ''To have cups with the logo on it -- even if they have milk in them -- is subtly making these kids loyal. In large part, their presence there is not only about selling and moving product. It is also a promotional issue.''

Students could be persuaded to switch their favorite brand of soda easily, said Marissa Hall, a freshman at Reynolds.

''They wouldn't have a choice,'' said Hall, who was eating lunch at a picnic table outside Reynolds last Friday. ''Everyone likes soda. I don't think they taste different. People would just buy whatever's available.''

She said she doesn't like the idea of an exclusive contract because it would bring too much advertising into schools.

But her friend, Katharine Bosworth, said that the contract is a good idea. ''It'll bring money to the schools,'' said Katharine, who is also a freshman.

She said she brings a Coke with her lunch everyday. And although she likes Coke better, she wouldn't care which company won the deal. ''Both of them have basically the same (kinds of) drinks,'' she said.

Developing product loyalty is important, said George Suddath, the vice president of corporate affairs for Pepsi Bottling Ventures in Raleigh. But soft-drink companies also want to help schools by donating equipment and drinks and by providing scholarships, he said. ''At some point when they're an adult and make a purchase decision, we hope they're going to remember that there was a Pepsi Cola scoreboard in my high school or Pepsi funded that band trip or field trip that we took. We just want to be a part of the community.''

The companies have had smaller deals with individual high schools for years. If a systemwide contract is signed, those relationships would remain in effect until the individual contracts expired. But then, one company would lose the school system's business.

Suddath and Steele say that neither company pushed for an exclusive contract. They simply answered the school board's request for proposals.

''It was a lot less formal in the old days,'' Suddath said. ''What's happened here lately is this has become a process where the school board is taking more control of this process than what used to exist.''

And exclusive contracts are not necessarily the best deal for the cola companies or the school system, Steele said.

''I think losing a partner in education, whether it's us or Pepsi, is not in the school system's best interests,'' he said. ''And I'm sure the board has considered that. If there is an exclusive districtwide bid, where one company is locked out, support for the schools would suffer from the other company. That would just be natural.''

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