“Thanks for choosing Pepsi.”
That’s the slogan slapped on each of the 106 brand-new, high-visibility University vending machines that exclusively house Pepsi products.
At a price tag of more than $3,000 each, the machines have all the bells and whistles needed to catch the eyes of thirsty students. More impressive, though, is the stronghold the dispensers symbolize.
Thanks for choosing Pepsi?
It’s not like there’s a choice.
The vending machines mark the final piece of the puzzle for Pepsi. From its shelving contract with Erb Essentials to the new vending machines, to fountain drinks at restaurants to its agreement with the residence halls, the cola maker now has a monopoly on campus.
Pepsi is everywhere, and its competitors are not. Sound like an advantage?
“We’d like to think so,” said Tim Larkin, food service director of Eugene’s Pepsi distribution.
But for Pepsi, campus supremacy didn’t come cheap.
In August, Coca-Cola’s five-year vending machine contract with the University expired. With Pepsi agreements already in place at the residence halls and on restaurant fountain drinks that run midway into 2003, the company outbid Coke for a three-year vending machine deal — with two additional two-year options — that locked up the University’s tastebuds, at a minimum, through the academic year.
But what Pepsi didn’t know is that it outbid Coke by a long shot.
During blind negotiations, Coke offered the University about 40 percent of vending machine revenues plus about $3,500 a year in contributions, Food Service Director John Costello said.
Pepsi presented a more lucrative deal, offering the University a 48-percent take of its sales and donations of about $35,000 a year, he said.
If demand is equivalent, simple math shows Pepsi outbid Coke by more than $30,000 per year. Despite that, though, the University still lost.
“Neither bid was as favorable as (the one) we had with Coca-Cola,” Costello said.
From August 1997 until August 2002, Coke paid the University 62 percent of its vending sales and gave another $100,000 per year to various University funds.
While the University earned about $125,000 in sales revenues from Coke last year, Costello said the arrangement often put the beverage company in the red. Meanwhile, the University’s vending machine agreement grossed the school almost a quarter of a million dollars last year.
Historically, soft drink producers have shelled out large sums of money to buy their way onto campuses. Strangely enough, though, coffee sells better than any other food or beverage at the University. In fact, Costello estimated only about 25 percent of sales are soda-related.
“We really took a chance,” Larkin said of Pepsi’s decision to purchase the University’s vending machine rights.
So why do it?
“I think (distributors) see it as a healthy and growing market,” Costello said.
Literally.
Not only does the University’s enrollment continue to grow, but so to do its students.
“Typically,” Larkin said, “I think brand loyalty starts to form at a younger age.”
But when students want soda, they want soda. Enter Pepsi — better late than never.
“We think (loyalty is) really important,” Larkin said. “I think it’s the lifeblood of any big brand.”
So far, opinions on Pepsi’s domination have varied. Pepsi drinkers love it, Coke drinkers hate it.
At Erb Essentials, where Pepsi’s bottling agreement will expire in 2003, Assistant Food Service Director Victoria Varble-Goss said she sometimes hears complaints about the one-sided selection.
Varble-Goss won’t say what she’ll stock when the store’s agreement expires, but she does say it will have variety.
And that sits just fine with sophomore Kate Workman, who’s forced to bring her Coke from home.
“Normally,” she said, “if I’m
going to buy or order a drink, I
order Coke.
“You like what you like.”
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