THE PEPSI/COKE BATTLE
October 18, 2006
by: jovial_cynic
by: jovial_cynic
Waitress: Can I get you something to drink?
Me: Um... do you guys have Coke or Pepsi here?
Waitress: We have Coke.
Me: Oh, that's terrible. I'll have water.
When it comes to colas, I strongly prefer Pepsi to Coke, such that I'll stop going to particular restaurants on account of their contracts with Coke. Coke leaves a terrible aftertaste in my mouth (I've been told it's the nutmeg), whereas Pepsi always leave me refreshed and wanting more. What can I say? I'm picky. But I also realize that there are picky folks on the other side of the cola debate that won't eat at KFC, Taco Bell, or Pizza Hut on account of their Pepsi-only drink menu, as they're all owned by Pepsi.
I don't want a Pepsi-only world. I just want options. I don't really want water with my sandwich, you know? I'd just rather have water than Coke. If companies moved away from these exclusive contracts, I imagine that consumers like me (although I don't know of my other folks that prefer water to their non-preferred soda at restaurants) would start buying more soda, adding to the restaurants' profit margins.
I'm not the only one suffering from the fallout of exclusive soda contracts. When 75% of US high schools have exclusive contracts with either Coke or Pepsi, you have situations like the following:
Here's an example. In 1998, Hills-boro School District, a district near Portland with approximately 19,000 enrolled students, signed a 12-year exclusive contract with Coke. In exchange for about 30 percent of the sales revenue, plus a $300,000 upfront cash payment and a $1 million all-weather playing field, the district granted the company exclusive rights to sell and advertise its products on school campuses.
Over the course of the contract, our study reveals, Hillsboro students will have to spend about $10 million in order to purchase the minimum sales volume of 10,800,000 beverages guaranteed by the district in the contract. Based on its 30 percent commission rate, the district will receive about $3 million of this total amount spent; the company will gain the remaining $7 million. Clearly, the majority of money generated by the contract is coming from students, not from the $1.3 million in upfront company fees. And the company takes the majority of money that students spend.
It's a terrible situation, really, but I don't know if I should blame the cola companies for preying on cash-strapped schools, or the schools for being stupid enough to accepting such horrible contracts.
In any event, I'm writing all this while drinking a Pepsi, and I don't see myself quitting any time soon.
Me: Um... do you guys have Coke or Pepsi here?
Waitress: We have Coke.
Me: Oh, that's terrible. I'll have water.
When it comes to colas, I strongly prefer Pepsi to Coke, such that I'll stop going to particular restaurants on account of their contracts with Coke. Coke leaves a terrible aftertaste in my mouth (I've been told it's the nutmeg), whereas Pepsi always leave me refreshed and wanting more. What can I say? I'm picky. But I also realize that there are picky folks on the other side of the cola debate that won't eat at KFC, Taco Bell, or Pizza Hut on account of their Pepsi-only drink menu, as they're all owned by Pepsi.
I don't want a Pepsi-only world. I just want options. I don't really want water with my sandwich, you know? I'd just rather have water than Coke. If companies moved away from these exclusive contracts, I imagine that consumers like me (although I don't know of my other folks that prefer water to their non-preferred soda at restaurants) would start buying more soda, adding to the restaurants' profit margins.
I'm not the only one suffering from the fallout of exclusive soda contracts. When 75% of US high schools have exclusive contracts with either Coke or Pepsi, you have situations like the following:
Here's an example. In 1998, Hills-boro School District, a district near Portland with approximately 19,000 enrolled students, signed a 12-year exclusive contract with Coke. In exchange for about 30 percent of the sales revenue, plus a $300,000 upfront cash payment and a $1 million all-weather playing field, the district granted the company exclusive rights to sell and advertise its products on school campuses.
Over the course of the contract, our study reveals, Hillsboro students will have to spend about $10 million in order to purchase the minimum sales volume of 10,800,000 beverages guaranteed by the district in the contract. Based on its 30 percent commission rate, the district will receive about $3 million of this total amount spent; the company will gain the remaining $7 million. Clearly, the majority of money generated by the contract is coming from students, not from the $1.3 million in upfront company fees. And the company takes the majority of money that students spend.
It's a terrible situation, really, but I don't know if I should blame the cola companies for preying on cash-strapped schools, or the schools for being stupid enough to accepting such horrible contracts.
In any event, I'm writing all this while drinking a Pepsi, and I don't see myself quitting any time soon.
