Coke and Pepsi are
going to school.

By Anna White
Multinational Monitor, January 1999

[Originally posted here.]

Since last year, the two giant beverage companies have engaged in a frenzied rush to sign deals with public school districts that give them exclusive beverage selling rights in schools, plus an array of special marketing opportunities.

In the process, the cola companies have expanded their presence and role in public schools, far beyond the athletic scoreboards and vending machines which have been commonplace for decades.

The new school deals with the cola companies have increased the dollars at stake, encouraged greater soda consumption by younger children, commercialized curricula and helped Big Cola strengthen its market power.

School districts, many crippled by massive budget cuts or referendum failures, see exclusive rights cola deals as a quick and easy means of tapping new financial resources. On the surface, the proposed "partnerships" sound benign. They promise big bucks, lots of up-front cash and a wide selection of "amenities," ranging from new athletic scoreboards to computer software programs, without the hassle of involving a single taxpayer. Plus, proponents note, everyone gets thirsty.

"Kids and teachers who spend hour after hour after hour in school get thirsty," says Coca-Cola spokesperson Scott Jacobson. "Every time they consume a beverage brought from home it’s a lost revenue opportunity for the school. So it’s kind of a ‘win win win.’ It’s good for us. Good for people who are thirsty who want our products. Good for schools."

Dave DeCecco, manager of public relations at Pepsico, focuses attention on the company’s role in bailing out impoverished school districts. "They’ll come to us and say, ‘You know, we need some money for the school to run properly. What can you do to help?’ And we’ll say, ‘That’s great! We will definitely provide you with X, Y, and Z [all promotional items emblazoned with Pepsi logo].’ Pepsi’s a very youth-focused company and we know that schools are struggling to meet rising costs and shrinking budgets." He adds, "It’s good for us too. There’s no doubt about it that we want to connect to young consumers."

Critics agree the deals are very good for Coca-Cola Co. and Pepsico, but they argue that the beverage companies’ efforts to brand the "next generation" of soft-drinkers comes at the expense of students’ allowances, nutrition and school curricula.

Many school districts, say the growing legion of critics of cola-ized classrooms, do not consider or care about the distinction between "facilitating education" and "increasing commercialism" and its implications for redefining educational spaces. After signing exclusive cola deals, many school districts find themselves devoting valuable administrative time to their management, taking on the role of soda promoter and accepting advertising they had not realized was part of the deal. But hefty up-front money is an effective bribe to stick to the contract; few school districts are willing to dissolve contracts if it means returning money already pocketed.

The large sums of money big companies promise are seductive, but they add up to just $5 to $25 per student annually. Exclusive cola deals are no more "innovative" than turning bake sale fundraisers into year-round Coca-Cola and Pepsi-cola product drinkfests where schools get a commission off the beverages the kids buy with their own pocket money.

Big Soft Drinks’ Invasion of Public Schools

Big Cola went to college before breaking into primary and secondary schools.

Penn State University signed a $14 million, 10-year contract with Pepsi-Cola in 1992, giving the beverage company exclusive vending and advertising rights on each of 21 campuses collectively totaling 70,000 students. Never had an agreement been so all-encompassing, combining athletics sponsorship, vending machines and fountain sales. The executive vice president and provost of Penn State justified the deal by pointing out the state legislature had cut the university’s $250 million budget by 3.5 percent.

Others quickly followed. In the next two years, the University of Cincinatti, the University of Oregon and Rutgers signed contracts.

By the time University of Maryland sought $25 million to "name" its new field house and instead settled for an $8 million up-front, $260,000-per-year-in-potential-commissions, 15-year deal with Coca-Cola in December 1997, about 100 campuses and state higher education systems nationwide had inked deals with one of the two soft drink companies.

The University of Minnesota, with 37,000 students, has the record: a $28 million (non-guaranteed) 10-year contract with Coca-Cola.

Each company has about 50 percent of the exclusivity business.

Exclusive rights deals with public school districts took off in 1994. Pennsylvania’s Shaler Area School District signed a 10-year contract with Pepsi-Cola Co. of McKees Rocks worth close to $250,000. The district had not seriously considered exclusive deal offers by Coca-Cola and Pepsi-Cola until the school board voted to renovate the high school’s track and football stadium and was seeking funding for scoreboards. In addition to new athletic scoreboards and timing devices to be used for football, basketball and swimming, Pepsi promised a computer scholarship database, recycling revenue and commissions of $144,000 based on sales of 4,000 cases of Pepsi.

Nearby North Allegheny School District soon signed a 10-year contract with Cameron Coca-Cola worth approximately $330,000. The district’s athletic director Tim O’Malley said that he initiated talks with the soft drink companies following a school board refusal to provide money for a state-of-the-art swimming scoreboard and new wrestling mats.

From 1994 to 1997, the deals kept coming, and they kept getting bigger and more elaborate. In November 1995, McKinney Independent School District in Texas negotiated a 15-year Coca-Cola deal worth $2 million.

In 1997, Madison, Wisconsin’s second largest school district, signed a soft drink exclusive rights agreement. Coca-Cola’s contract with Madison promises commissions of 40 percent or more, a $5,000 annual "Teacher of the Year" scholarship, $5,000 to support students in annual marketing competitions run by the Distributive Education Clubs of America and funding for two $5 an hour Coca-Cola interns, one of whom would get a full-time post-graduation summer internship with Coca-Cola. The company has also committed to build back-to-school displays at large retail outlets to promote cola sales — with a percentage of revenues from each 24-pack sold in conjunction with the displays going to programs such as drug awareness or middle school athletics. David Kristal of the private consultancy Cum Laude, which helped negotiate the deal for the school district, estimates the deal will double the approximately 22,000 cases of products sold annually to students, teachers and adults at district schools.

Also in 1997, Jefferson County School District in Colorado gained national attention for setting a $10 million corporate sponsor goal, targeting hospitals, fast-food franchises, banks, newspapers, grocery stores and sporting good suppliers. In August 1997, the district negotiated an exclusive rights deal worth $7.3 million, giving Pepsi free reign in the district’s 140 schools. The deal included boosting vending machine commissions to 50 percent, a $48,000-a-year scholarship program, a student internship program and fund-raising opportunities for schools, such as selling Pepsi product coupons door-to-door.

Then, in 1998, exclusive rights deals between public school districts and cola companies skyrocketed, according to Andrew Hagelshaw, senior program director at the Center for Commercial-Free Public Education (CCFPE). Between June and December 1998, exclusive contracts tracked by CCFPE more than doubled, from approximately 50 schools in June to 110 in December. "They’ve increased exponentially," says Hagelshaw, "happening so fast we can’t keep track of them."

Spokespersons for both Coke and Pepsi declined to comment on the number of school districts they had cut deals with, their annual expenditures on exclusive cola contracts, or their market share.

Nutritional Woes of the "Next Generation"
Many school officials never question why students drink so many Coke and Pepsi products in the first place or whether their schools should be curbing rather than further encouraging soft drink consumption.

According to the USDA 1994-96 Continuing Survey of Food Intakes by Individuals, two-thirds of teenage boys drink nearly three 12-ounce cans worth of soft-drinks per day, a three-fold increase since 1977-78. Two-thirds of teenage girls drink nearly two cans daily. One of the reasons for the rise is the increase in soda bottle and can sizes from 6 to 12 to 20 ounces, and the introduction of much larger servings at 7-11 and other convenience stores.

October 1998’s "Liquid Candy: How Soft Drinks are Harming Americans’ Health," by the Center for Science in the Public Interest, reports that teen boys and girls meet USDA recommended sugar limits from soft drinks alone.

The increase in soft drink consumption has been at the expense of fruit and dairy products. With young people now drinking twice as much soda as milk — a reversal from 20 years earlier — only 29 percent of boys and 10 percent of girls consume the recommended amount of dairy products. Only 11 percent of boys and 16 percent of girls consume the recommended amount of fruit.

Soft drinks have many adverse health effects, and may be factors in a wide range of ailments including obesity, osteoporosis, tooth decay, heart disease, kidney stones and caffeine addiction.

The soft drink industry vigorously defends its products against claims of unhealthfulness.

"Soft drinks have a place in [a balanced] diet," the National Soft Drink Association wrote in a letter to the Center for Science in the Public Interest. "Soft drinks are an enjoyable, inexpensive refreshment product. They can help to provide the 64 ounces each person requires daily for hydration. ... Scientific evidence showed no link between soft drinks and health problems mentioned in your report. ... Consumers are capable of making wise choices."

Consumers might be capable of making wise choices, but it is hard to see how advertising, promotions and exclusive marketing deals help. Beverage companies far outspend all advertising and public service campaigns promoting fruit, vegetables, low-fat milk and healthy diets, notes "Liquid Candy."

According to Beverage Digest, the four largest companies spent a total of $631 million on advertising in the United States in 1997.

"Our advertising is really to create a hip, younger, more cutting edge, more fashionable [image]," says Pepsi public relations manager David DeCecco. "It all goes back to entertainment and that kind of thing — and fun — it’s really about having fun."

Similarly, Coke spokesperson Scott Jacobson emphasizes Coke’s desires to appeal to a young people,

"It is true that Coke is classic but it’s also authentic, genuine, real," Jacobson says. "It’s very youth focused. The current generation of young people is very savvy — they appreciate things that are authentic."

Both Coke and Pepsi decline to comment on whether or not there should be a limit to how much soda and juice children should drink during the school day.

The cola marketing juggernaut is bad for public health, concludes Howell Wechsler, health scientist at the CDC Division of Adolescents and Health, which lumps anything that’s not 100 percent juice together with carbonated beverages, "If they were pushing 100 percent juice we wouldn’t raise too much objection for that — from a public health perspective you couldn’t. When they go the extra step, when they’re actually pressuring or just facilitating children to consume things they don’t need and that are probably harming them, it’s totally inappropriate."

Schools on Commission
Underlying the exclusive cola deals is an explicit assumption that students will drink soft drinks no matter what, so schools might as well make money off of it. But the notion that corporations’ massive investment in advertisements only affects market share is supported by neither common sense nor evidence. Moreover, many of the exclusive deals pay schools, in part, by commission, meaning the schools have an incentive to promote soft drink consumption.

Early indicators are that this incentive structure may encourage startlingly aggressive salesmanship by school districts.

Colorado Springs District 11 signed a $8.1 million 10-year contract with Coca-Cola in August 1997 with an additional $3 million guaranteed if the district sells 70,000 cases of Coke products during one of the first three years.

A year into the contract, the district had only sold 21,000 cases of Coke products, less than 30 percent of the goal. With only two years to more than triple sales, John Bushey, the district’s executive director of school leadership and point person on the Coca-Cola deal, sent out a desperate two-page letter in September 1998 to the districts’ principals, urging them to do everything possible to boost sales.

"If 35,493 staff and students bought one Coke product every other day for a school year (176 days)," Bushey wrote, "we would double (130,141) the required quota needed. We only need to beat the 70,000 case once in the next two years."

Bushey offered seven ideas for how to boost sales, including:

• Circumventing rules prohibiting carbonated vending machines being on during lunchtime by moving such machines "outside the meal service area."

• Allowing students to purchase and consume vended products throughout the day except for the hour before and after lunch, and recommending that teachers consider allowing juices, teas and water in case that soft drinks are not allowed in the classroom.

• Locating machines where they are accessible all day. "Research shows that vender purchases are closely linked to availability," Bushey wrote. "Location, location, location is the key. You may have as many machines as you can handle. Pueblo Central High School tripled their volume by placing vending machines on all 3 levels of their schools. The Coke people have surveyed the middle and high schools this summer and have suggestions on where to place additional machines."

Bushey concluded with an enthusiastic, "If we all work together, we can guarantee our future," and signed the letter, "The Coke Dude."

In an interview, Bushey acknowledged that he had been unaware of the magnitude of selling 70,000 cases. He failed to answer directly whether or not anyone negotiating the contract had grasped its sheer volume, relative to pre-contract sales.

According to Bushey, the Coke contract was intended to consolidate the individual contracts of the district’s 53 schools to allow volume buying. The district, faced with a $45 million cut in state funding, solicited bids for exclusive contracts and received offers from Coca-Cola, Pepsi-Cola and 7-Up.

"Bidders came in with different proposals and ways they wanted to partner up with the school district, to emphasize education," says Bushey. "It had nothing to do with pushing soda."

The winning Coke contract guarantees elementary schools $3,000 a year irrespective of whether they generate any sales, an eight-to-tenfold increase from pre-contract days. Middle school income jumped more than 15 times, to $15,000; high schools earn $25,000, more than eight times more than prior arrangements.

The Coke revenue goes into principals’ discretionary funds. Some schools used the money to upgrade student desks, buy cafeteria tables and purchases instruments, according to Bushey. One principal put the money toward plane tickets so that a student from a single income family was able to travel to Washington, D.C. with her mother and teacher to accept a national science award. "I find no reason for myself or the school district or anyone else to apologize or be apologetic for doing good things for kids," Bushey says.

"If you’re saying, ‘Geez, you know we shouldn’t have advertising — the last bastion of sanctity should be the schools,’ then we should be meeting the students at the front door and not allowing them to wear Tommy Hilfiger jackets, their Nike swoosh t-shirts, Reebok, Levi jeans. Kids are walking billboards."

Commercializing Curricula
The case for exclusive deals is simple: They bring in new money to underfunded school systems. In practice, however, money from cola contracts sometimes seems to go to new programs, such as Coke interns, which directly benefit the Coca-Cola company, rather than identified school needs.

"The contract was not screened for educational value even though it affects curricula" says Matt Nelson, a student teacher in the Madison School District, of the school system’s deal with Coke.

"It’s shocking to hear school board members think so short term — ‘Here’s the money now’ — when education is about cultivating young people to be citizens throughout life."

In March 1998 the student government of Greenbriar High School in Evans, Georgia sponsored "Coke in Education Day" to compete for a $500 prize offered by the Augusta-based Coca-Cola Bottling Co. and a $10,000 national "Team Up With Coca- Cola" award. Students and teachers created an entire curriculum revolving around Coke. A Coke marketing executive discussed his profession with economics students. Chemistry classes measured the sugar content of a can of Coke. Social studies teachers lectured on overseas Coke markets. The culmination of the day saw the entire student body, all clad in red and white Coke t-shirts, spelling out the word "Coke" for a school photo.

It was at this moment that student Mike Cameron chose to pull off his shirt to reveal a Pepsi work shirt. For this act of "rebellion," Cameron was suspended for one day. Greenbriar Principal Gloria Hamilton did not return repeated phone calls to discuss her decision. While Greenbriar High School does not have an exclusive rights contract, its actions highlight the tremendous influence cola companies can have on curricula and student speech.

"If we end up having this sort of corporate involvement in schools," warns Wisconsin State Representative Marlin Schneider, D-Wisconsin Rapids, "we will end up with schools controlled by corporations. One sees more and more of that occurring and the potentialities for advertising effecting young minds with name products, I think is detrimental and unfair — to teachers in terms of academic freedom and to young people who are virtual captives to the pollution of corporate influence and advertising."

Independent Firms Join the Frenzy
Independent firms are the new element in the cola-bidding scene. Consultants such as the Minnesota-based Cum Laude and Colorado-based DD Marketing offer school districts advice in negotiating and managing exclusive rights deals in exchange for flat fees or a percentage of the deals.

The "marketing firms that promote these contracts," says Alex Molnar, professor of education at the University of Wisconsin-Milwaukee and author of Giving Kids the Business: The Commercialization of America’s Schools, "have set up a situation where bottlers feel that if they don’t enter a contract, they will be at competitive disadvantage, and if schools don’t, they’ll lose a chance at free money. The firms exploit that dynamic."

Sixty school districts have hired DD Marketing, run by Dan DeRose, former athletic director at the University of Southern Colorado, to pursue corporate dollars in the past three years — dozens of them resulting in exclusive public school soft drink contracts. DeRose declined to answer questions for this article. Similarly, the director of Cum Laude did not return phone calls.

Critics of commercialism in schools who call the DeRose’s business "parasitic," have a surprising ally: cola companies. Pepsi’s guidelines for structuring relationships with school programs specifically state that the company will avoid third-party brokers when possible. Coke and Pepsi have both publicly stated that brokered deals divert funds which could otherwise have gone to schools.

"Here’s an area where there’s a lot of revenue involved," notes Coke spokesperson Scott Jacobson, "and folks not in the business of working out five- and ten-year deals with suppliers have people preying on them — taking 20 to 30 percent. We think money should go to the school district, not the broker."

But many schools which lack negotiating expertise welcome third parties with open arms, convinced they help divert money to schools that companies would otherwise keep for themselves.

More and more school districts actively solicit firms to take on this role. In May 1998, for instance, the Cedar Rapids Community School District, Iowa’s second largest, placed an ad in Education Week in which it solicited "proposals from nationally known consultants with proven expertise in assisting school districts in the development of exclusive supplier soft drink requests for proposal, (RFP) and negotiating multi-year exclusive soft drink contracts."

Fighting Back
A growing movement, including students, parents, teachers, politicians and independent bottlers, is emerging to oppose the exclusive cola deals for public schools. CCFPE has worked with 12 school districts that have considered but then rejected cola deals. The Center has contacted 40 to 50 additional school districts about setting commercialism guidelines before corporations come along. It also hopes to find a dissatisfied school district, such as Madison, willing to break its contract and set a precedent for other school districts to follow. In Portland, Oregon, high school students rose up against the school board when it formed a committee to consider the best cola deal offers. In response to the petition the students circulated to the public, the school board disbanded the committee and is currently not seeking a contract.

In Berkeley, California, the sophomore awareness committee organized a debate about the role of big business on their campus in response to a potential Pepsi deal which would bring $100,000 to the high school. Over 150 people attended, mostly students.

Sarah Church, 16, very vocal at school board meetings and with the press, said she opposed the contract, "I think that any sort of commercial deal is a slippery slope that leads to more and more dependence on corporations for public funding for schools, and that’s a very dangerous place to go. It could have an effect on what is taught — on things they don’t want us to know." The school district eventually rejected the deal and is now working to develop guidelines on corporate sponsorship.

The movement may have an unlikely ally in independent bottling companies that cannot match the bidding power of Coke and Pepsi, the companies that supply them with much of their product. In Wisconsin and elsewhere, bottlers are now considering legal action to challenge the exclusive deals, on the grounds that they are monopolistic.

The movement is also gaining support from state legislators. In January 1998 Wisconsin, Representative Marlin Schneider introduced a bill to stop school districts from signing exclusive marketing and advertising contracts with soft drink companies and any private business. The state’s largest teachers union, the Wisconsin Education Association Council, endorsed the bill, but it was opposed by the Wisconsin Association of School Boards. The bill did not pass, but bipartisan agreement emerged on the need to limit commercialism in schools.

In January 1999, Democratic California Assembly Member Kerry Mazzoni introduced a bill to prohibit the governing board of any school district from entering into a contract that grants exclusive advertising rights within the district to a person, business or corporation. If passed, it would make any corporate exclusive rights public school deal illegal and abolish already existing deals.

But while resistance is growing, it is often overwhelmed by school administrators who are eager to take cola dollars, and willing to circumvent or manipulate democratically elected school boards to do so.

In Seattle, a huge battle erupted after the school district secretly negotiated a 10-year exclusive rights soft drink deal with Coca-Cola in 1998. The deal promises revenues of more than $6 million, based on a commission rate of 55 percent and cash payments of $2.5 million — more than double the current rate. Disclosed to the school board in August, the proposal came just as school board subcommittees had concluded that the district should lessen commercialism in schools. Opponents of the deal mobilized an aggressive campaign against the deal, but despite a major organizing effort and introducing lots of expert opinion on the harms of commercialization into the debate, they could not override the influence of the school administration.

In Madison, champions of the district’s deal with Coke tried but failed to bypass the school board by letting school principals decide on details of their own arrangements with Coke. A valiant organizing attempt to block the district’s deal with Coke succeeded in defeating a wide-ranging Coke promotional proposal, but failed to to stop the exclusive pouring rights arrangement.

"If we go into completely derailing what education is for and turning schools into malls," says Brita Butler-Wall, a professor of education at Seattle University, mother of two children in Seattle public schools and a leading opponent of Seattle’s Coke deal, "I would like to think that this is a decision that people made consciously with their eyes wide open — as opposed to what is currently happening, which is the back room deals, corrupt school boards, euphemisms, calling things partnerships when what they really are sales mechanisms."

Resource: Center for Commercial-Free Public Education Tel 510-268-1100.

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