Coke or Pepsi? US universities choose their sponsor

May 28, 1999

American students about to graduate from secondary school face big choices at this time of year about the university they will attend: public or private, full-time or part-time, two-year or four-year, vocational or liberal arts, big or small, local or far away, Coke or Pepsi.

An increasing number of US universities are reaching lucrative agreements with the soft-drink manufacturers to sell one brand exclusively - deals the companies hope to introduce overseas.

The so-called "pouring rights" agreements are worth millions of dollars to schools that badly need the money for facilities and scholarships. For their part, the beverage makers can solidify their brands with lifetime consumers in the fiercely competitive $54 billion soft-drink market.

"It's a win-win for both parties," said Steve Hudson, president of Public Enterprise Inc, a company that brokers such deals. "Domestically, Coke and Pepsi face a marketplace that is not growing from a new-user standpoint. Their objective is to help solidify their brand with students. Meanwhile, what the university is looking for is an opportunity to create some revenue."

The practice dates to 1992, when giant Pennsylvania State University needed money to build a basketball arena and wanted Pepsi to be a sponsor. Instead, the university and the company reached a deal under which Pepsi got the exclusive rights to sell its soft drinks on the campus.

The university also agreed that Pepsi would be the only beverage advertised in the basketball arena, and that its logo would appear on the scoreboard. In exchange, Penn State got $14 million over ten years. Some of the money went to scholarships, the library and the student union.

Soon, other large universities - mostly large schools with televised athletic programmes - were proposing similar agreements. Virginia Commonwealth, Villanova, the University of Nebraska and the University of Maryland signed with Pepsi. The universities of Missouri, Massachusetts and Minnesota teamed up with Coke.

The amounts also spiralled upward. Missouri got $16 million for its ten-year pact with Coke in 1995. Minnesota was given $28 million in its ten-year contract with Coke the same year. Last year, the University of Maryland got $58 million from Pepsi in a 15-year deal.

As well as securing exclusive access for their products in vending machines, cafeterias and privately operated snack bars on campus, the soft-drink companies get identical privileges in athletic facilities and even university-affiliated hospitals.

Not everyone is happy with the arrangement, which critics say commercialises the universities. Students, who jealously guard their freedom of choice, often complain. And some universities say soft-drink prices to students have gone way up since they signed agreements with Coke or Pepsi.

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