Facts on the Coca-Cola Contract
The contract was signed on August 1, 1994 and was set to expire on July 31, 2004. After facing pressure from student groups to break the contract, the University extended their contract another
year to give themselves time to make a decision. In May 2005, the University broke their contract with Coke to sign a 10-year contract with Pepsi for $1.7 million a year.
While students were disappointed to see the University sign another exclusive contract, it is considered a victory that a major university was able to kick Coca Cola off campus.
The following points are highlights from the contract.
-Exclusivity for Coca-Cola:
-Within the product lines of Coca-Cola, no beverage product other than Coca-Cola products can be offered in Rutgers University cafeterias, concession stands, vending machines, stadiums, and student center franchises owned by Rutgers (i.e. Sbarro, Dunkin Donuts).
-Product lines include: Coke, Diet Coke, Sprite, Mr. PiBB, Minute Maid soft drinks and juices, Power Ade, Nestea, and Dasani water.
Benefits/Consideration for Rutgers:
- Lower prices on all Coca Cola products.
- Coca-Cola pays the University $1,000,000 per year for 10 years.
- $601,000 is paid in cash per year
- $400,000 is paid through sales commissions from vending machines (Rutgers makes 40% commission from beverage machine sales, and 22.5% commission from Snack sales.
- Allocation of the total $1 million is as follows:
- 40% Dining services (to reduce costs)
- 35% Athletic Programs
- 25% Unknown (Administration's discretion)
Additionally Coca-Cola pays:
- $45,000 Rutgers to promote products (signs, promo materials, etc).
- $15,000 for University's discretional use.
- $15,000 for mutually agreed allocation.
Benefits/Consideration for Coca-Cola:
- Sales/Market share: 40,000 daily consumers for 10 years.
- Advertising benefits:
- Advertising space in scoreboards
- Advertising in the back of all tickets of athletic programs
- Advertising in cups of University sporting events
- Live announcements at sporting events such as "Always Rutgers, Always Coca-Cola"
- Brand recognition and future consumption by university students after graduation.
- 48 season tickets for every athletic program in order for Coke executives to observe advertisement and monitor consumption.
Implications & Impacts:
The contract is more than "just a soda contract." It sells a logo and an idea. It seeks mind share, not just market share. The contract seeks to create an atmosphere in the university where students will identify with the beverage choices provided and idolize Coca-Cola as a company which supported the university and its athletic teams.
The contract was not inclusive of student input or faculty input during its signing. Although its largest asset is the student force, or consumption force, that Rutgers generously offers, students have been conveniently excluded from the negotiation or dialogue tables.
By offering a commission to the university, for vending sales, the company has successfully placed Rutgers in a position where it is no longer the customer, or consumer, but rather the retailer of Coca-Cola products. The public facilities are being used for private profit, and the promotion, sale, and profit from these goods is inconsistent with the university's mission.
The local monopoly does not allow for fair competition and small businesses that wish to supply the university with their products.
Social and Environmental Impacts
The university exclusively supports the social and environmental irresponsibility of the corporation. Google: "Human Rights" along with any of the following combinations:
Coke +Colombia. Coke +"South Africa". Coke +India. Coke +"recycled content".
Rutgers was among the first 5 schools to sign an exclusive contract with a beverage company. Now, more than 300 universities have similar contracts. If the Rutgers example were to be followed by all universities, local monopolies would extend across the nation, blocking any possibility of competition from companies that cannot afford $10 million dollar kickbacks. Therefore, Pepsi and Coke would finally conquer the soda, juice and water market. Afterwards it would be a matter of who has more contracts, and seeing which company starts outbidding the other before culminating in a global monopoly.
The actions of the university must be consistent with its principles and its teachings. This is not fair competition or even primitive capitalism.
The university is in clear urgency of establishing an ethics review board that oversees these relationships and guarantees that they are consistent with the universitys mission and principles. Additionally, an ethics review board can develop a policy for sustainable purchasing, annually report progress and include all major stakeholders (students, faculty and administration) in the decision making process by allowing a room for input and criticism. Above all, the board would strive for transparency within the board and throughout the university.