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Campus cola wars: beverage giants battle for exclusivity rights

Imagine a town without Coke. At any convenience store or soda fountain, at every restaurant or bar or from any vending machine within the city limits of this fictional place, inhabitants can buy only products sold by Pepsi-Cola Canada Ltd.-no Coca-Cola, no Fruitopia drinks (bottled by Coke), and no beverages produced by small, independent companies. Now, envision another town just down the road where the same rules apply, only in reverse: Pepsi is out, Coke is it. Sound far-fetched? Well, for students at an increasing number of Canadian universities, the hegemony of a single soft drink is becoming a fact of life. Forget about shopping malls and TV advertising: the two giants of the soft-drink industry have mobilized their forces onto campuses, dunking it out for the right to sell their products to a captive audience. And the winners in these cola wars are determined not by taste tests-but by who has the deeper pockets.

Coca Cola
Coca Cola

At the heart of the trend is a new willingness among many universities and food-service providers to enter into so-called exclusivity agreements with Coke or Pepsi. Typically under such deals, the soft-drink company acquires the right to be the sole provider of non-alcoholic beverages on campus. In exchange, the institution gets what all Canadian universities are desperate for: money. But while boosters from industry and universities hail the soda agreements as triumphs in fund-raising, many students are concerned that they are harbingers of increased corporate control over campus life. “Pop is not the hugest deal in the world,” acknowledges Vivian Hoffmann, director of finance for the Alma Mater Society (student union) at the University of British Columbia. “But people see it as the thin edge of the wedge.”

UBC, in fact, took the first-and most influential-kick at the exclusivity can back in 1995, when it signed on with Coca-Cola Ltd. in exchange for a rumored $8 million to $10 million over the 10-year life of the agreement. The deal set off howls of protest among students, but the Alma Mater Society voted in favor of it-after it, too, received a share of the Coke money. Since then, a number of universities have followed UBC’s example. Soon to join the Coke camp is the University of Regina, currently finalizing a long-term exclusivity deal. In Edmonton, meanwhile, University of Alberta officials say they expect to announce an agreement with one of the major soft-drink companies by the end of the month. Meanwhile, the University of Manitoba is a Pepsi campus. And the University of Calgary last year signed a letter of intent for a 10-year deal with Pepsi that included a share of sales plus cash and support for extracurricular activities, particularly athletics. “We’ve lost more than $30 million in provincial grants over three years, and that places a lot of stress on the system,” says Stu Reid, the university’s executive director of external relations. “The revenue from the Pepsi agreement is going to enhance the academic environment.”

Pepsi-Cola Canada chief executive officer David Shaw says that, so far, his company and Coca-Cola have about the same number of universities signed on to some type of exclusivity agreement. (Because each arrangement is different, often with multiple parties, neither bottler could provide exact numbers.) From an industry perspective, the university market is vital. For one thing, Canada is considered a growth market: Canadians drink about half the soft drinks, per capita, that Americans do. Exclusivity agreements are a way to snare younger customers who, according to industry research, tend to take their beverage preferences with them as they age. But more to the point, says Shaw, such deals blend good business with good corporate citizenship. “This is enterprise at its best,” he adds. “Everyone comes out with a win-win, because we provide funding which benefits the university, and they provide us access to consumers who-at the end of the day-have a thirst to satisfy.”

Some students, however, are not so enthusiastic. Back in late 1996, Nova Services-the main food-and-beverage provider for Memorial University in St. John’s, Nfld.-signed an exclusive distribution agreement with Coca-Cola Ltd., which put in the most competitive bid on a three-to-five-year contract. Memorial’s 17,000 students still had access to Pepsi products: the student union building is not served by Nova, so it maintained a pocket of Pepsi availability. But the Coke agreement set off what student president Keith Clarke calls “a kerfuffle.” And the objections went beyond the limits on choice. Many students took offence that Nova signed the deal even though Coca-Cola had closed its Newfoundland bottling operations. Others, like Clarke, had deeper worries. “There were concerns about the morality of doing it, especially on a university campus,” says Clarke. “I mean, where exactly is this corporatization of universities going?”

Pretty far, it seems, at least when it comes to exclusivity. At the University of Alberta, director of housing and food services David Bruch says that beverage distribution “isn’t the only form of single-sourcing we’re considering.” UBC, too, is investigating exclusivity deals with banks and travel agencies. As the stakes get higher and the monopolies more widespread, universities and their corporate partners may well face a groundswell of resentment among students. At UBC, Hoffmann says it has already begun-sparked by the Coca-Cola deal in the first place. “It had a lingering impact on the way people think about things,” she adds. “Education-which is the purpose of a university-and maximizing profits are completely different things.” But in the cash-strapped world of postsecondary education, maintaining that distinction might prove a luxury few universities can afford.

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