Inside Iowa State
December 10, 1999
Committee studies a single soft drink contract
by Anne Krapfl
An Iowa State ad hoc committee is studying the possibility of asking a single soft drink company to supply all the pop-providing units on campus. If it happens, the key units would include the Memorial Union's food operation, the athletic department (concessions at Jack Trice Stadium), Iowa State Center (catering and concessions), Veenker golf course, ISU vending (for which the Memorial Union currently contracts) and Iowa State's biggest soft drink consumer, the residence department.
The motivation behind the study is revenues, said vice president for business and finance Warren Madden, who appointed the advisory committee and also hired a Minneapolis consultant to study the issue. Soft drink companies pay schools for the right to be the only brand on campus. Coca-Cola and Pepsi are the big players nationally, but Madden said all soft drink companies could submit proposals.
"We don't know how much income this could bring Iowa State. We don't know yet what 'our price' might be," Madden said. "That's something the consultants will be able to help us with."
He noted that similar contracts at peer schools -- Nebraska, Kansas, Missouri, Iowa, Minnesota, Penn State -- have brought in millions of dollars. The number depends on several factors, including a soft drink company's perceived value of Iowa State, the level of exclusivity Iowa State would be willing to promise and the number of years in the contract (more years translates to bigger revenues for the school). Five- to 10-year contracts are typical, Madden said.
At some universities, athletic venues are the big draw for beverage companies, for example, football stadiums that seat 70,000 or 100,000 and sell out regularly, or a 20,000-seat arena used heavily by athletic programs and national musical performers. Madden said Iowa State's trump card is its large residence system, where more than 8,500 students eat three meals daily.
Madden said schools tend to use their soft drink revenues for student-centered services and programs, including scholarships, diversity efforts and, occasionally, facility improvements that benefit students. If Iowa State opted for a campus-wide contract, a university group would develop a plan for using the contract revenues.
Beverage contracts, regardless of the exclusivity level, in no way affect employees and students' freedom to carry and keep their favorite sodas on campus, Madden said. Employees can stock the brands they like in office refrigerators. He noted that with current grocery store prices, this practice appears to be increasing.
The consultant and Arlo Meyer, ISU purchasing and chair of the ad hoc committee, interviewed several faculty, staff and student group representatives this fall.
Madden said the campus community is divided on the idea of exclusivity. Some are concerned about a lack of brand choices on campus. Madden said he thinks an ISU beverage contract, if it happened, would stop short of total exclusivity. He pointed to convenience stores in the residence system, Onion's in the Memorial Union and similar operations where the expectation is that many brands will be sold. He also noted that some franchised food outlets in the Memorial Union food court must honor the franchises' national contracts with beverage suppliers.
Others on campus, pointing to Coca-Cola signs already at the football stadium, Hilton Coliseum and atop the Iowa State Center marquee, are concerned about the university "selling its soul." Advertising requirements likely would be part of the bidding process, Madden said, but advertising is not the company's primary interest in campus contracts.
"They want that chance to influence students' soft drink preferences now, so they'll drink them for a lifetime," he said. "They're hoping for 40 years of sales, not four or five."
Meyer, who heads the advisory committee, said students who were interviewed preferred to have a choice. "But they also told us that if they give up choices, they'd like the beverage contract to provide benefits such as new scholarships, student activity sponsorships and additional student-focused events," he said.
Recommendations due this month
The consultant's report and recommendations are due by the end of December, and will be shared publicly. Members of the university community are invited to respond to it. If the consultant recommends one contract and the advisory committee concurs, bids would be sought sometime spring semester.
Madden said he would look for a high level of service and fair prices in any bids Iowa State receives. He said Iowa State is not interested in bringing in more revenues through high pop prices.
If a satisfactory bid were received, conversion to that company's products would be completed over the summer in time for fall semester 2000, Madden said. Because current beverage contracts on campus don't end at the same time, a new contract would be phased in as existing ones expire.
Members of the ISU community with opinions on the beverage study may share them with Madden (firstname.lastname@example.org) or Meyer (email@example.com).
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