It’s evident from the number of shiny, red Coca-Cola machines dotting the Ohio State landscape that Coke Is It.Since last July, when the major soft drink manufacturer beat competitors Pepsi and R.C. Cola in the battle for the exclusive OSU market, Coke has pulled in about $29 million in revenue. That comes from exclusive pouring rights in the OSU stadium, as well as a lucrative arrangement giving complete domination over all of the soda machines on campus.Although the final contract is still locked up in private negotiations, OSU officials are calling the 10-year Coke agreement – which will include a lump sum payment to OSU of at least $20 million – the largest between Coke and any university in the country. To clear the first hurdle in completing the deal, Coke promised to help student organizations at OSU – yet even Coke admits it has donated only $16,000 to such organizations over the past year. Bundled in a shroud of attorney-client privilege, most OSU officials refuse to talk about the Coke contract until it is signed. But bits and pieces of the picture are slowly emerging, pointing to one inevitable conclusion: Something big is on the horizon, and OSU students are the heart of it all working.
We’re in the money?
Unnoticed by some, the not-yet finalized Coke contract has been somewhat operational since last summer. With OSU’s blessing, Coke began wheeling its vending machines onto OSU grounds in July 1998 and promptly began reaping millions of dollars in revenue, thanks to the steady supply of tens of thousands of thirsty students, faculty and staff roaming the campus at all hours. According to Coke officials, there are now roughly 450 Coke machines scattered across campus, 85 percent of them vending $1 bottles instead of 60-cent cans. Each machine distributes about 70 cases of Coke products per week during the fall, winter and spring. During the summer, demand drops to 50 cases a week. OSU receives 15 percent of sales from Coke vending machines and hot dog carts. Even the hot dog vendors are required to sell Coke products, but they did get their Coke umbrellas for free. And the OSU students … well, Diet Coke addicts are rejoicing. Coke did make some “philanthropic donations” this year to various student organizations on campus, consisting of $8,000 in free Coke, $1,000 for banners and $7,000 in Lantern advertising. In all, Coke pulled in about $29 million from the OSU community in the past year, and the students got $16,000 in return.
Bargaining chips
Why are OSU officials singing the praises of the Coca Cola partnership?Coke – and Coke alone – has been given the proverbial “key to the kingdom.” And they are going to have to pay for it. The question is, how much?”We know we have a valuable market and we need to be compensated for it,” said David Williams II, OSU’s vice president for student affairs.OSU delivers a huge number of young consumers – the key market for soda distributors – and landmarks like the Ohio Stadium that tend to pop up on television sets around the world during football season, bearing advertisements for all to see. But how do you put a price on a concrete Horseshoe?While OSU and Coke attorneys continue to haggle in the boardroom, 1998-1999 sales from the Coke vending machines quietly pumped roughly $5.2 million into last year’s operating budget, which ended June 30. Figures for revenue obtained from 1998 sales inside the stadium were unavailable.There are reasons OSU embarked on this strategy to pad its coffers. Drastic budget cuts in the early 1990s, coupled with stagnant state tax support throughout the decade, has forced many of Ohio’s public universities to seek funding from alternative sources. Tuition hikes are capped by the state at 6 percent and federal funding only goes so far. Given these restraints, OSU is exploring the value of a corporate partnership.Several other schools in Ohio have ventured along a similar path. Wright State University completed a deal with Pepsi last November whereby the university will receive $2.55 million over the next 10 years in direct payments, athletic signs, scholarship funds, marketing support and free products.The University of Dayton has a similar arrangement. The extra money UD receives from Coke is divided between the athletic department and student activities.
Playing hardball
With a multi-million dollar contract like the one with Coke, one does not sit down and ink the deal in a weekend. OSU lawyers and administrators have been bartering with the soda giant for more than a year to finalize the mammoth deal.”They (Coke) are a very big company, very bright and tough to negotiate with,” Williams sighed. “The large monies that come out of this contract will not come until we sign it.” OSU officials came to the table last year with 80 demands to be met, he said, but the list has since been whittled down.There is still talk of internships at Coke headquarters in Atlanta for two OSU graduate students, and jobs for three or four OSU law students. Coke will probably give some support to the OSU honors program and the university’s diversity initiatives. It may even pay for some speakers to come to campus – of Coke’s choosing.”This one has been a very, very long negotiation process,” Williams said. “It’s kind of like getting married. You pick one and say, ‘OK, now let’s negotiate to see if we really can get married.'” Williams remained optimistic that once the Coke contract is signed and “the money is in,” funds would flow through the provost “to the academic side of the house.””But that will have to work through a budget process,” he added.
You can’t always get what you want
Kathleen Carberry, president of the OSU Council of Graduate Students, appeared exasperated. “You’d think for a campus this size that we’d have more student events,” Carberry said. “I don’t see Ohio State doing the kind of student programs that other schools do. The amount of money that goes to fund student events is really, really small.”Representing a graduate community of 10,000 students, Carberry’s organization struggles to plan meaningful activities with an annual budget of $27,000. But promises made to Carberry last year of financial assistance from Coke raised her hopes and expectations that more money was on its way.”A year ago, David Williams held a meeting, talking about all the things we could do with the (Coke) money,” Carberry said. “He told us about study-abroad scholarships, inviting a panel of recent graduates to come back, and money for concerts. He rattled off a number of things.”The sight of the new Coke machines rolling onto campus last July only fueled the excitement.”The machines came very quickly,” Carberry said. “And we assumed the contract was in place.”Carberry said Coke sent marketing representatives to meet with the student government organizations and an offer for free Coke products followed. So did assistance with purchasing advertising and a few banners. All of the items were clearly stamped with the Coca Cola logo. Suspicions began to emerge that the soda giant was simply using the students to further advance its marketing program. “Philanthropy isn’t marketing. There’s a big difference,” Carberry said adamantly. “Philanthropy would be initiatives and programs that students want, and I haven’t seen that yet. There’s a big need for that here.”When asked about its philanthropic activities for the students, a Coke representative had a quick reply.”We want to be involved with the students, offering internship opportunities with the company, as an example,” said Jason Graves, Coke’s account manager for OSU. “I’m sure that students will eventually see benefit.””The internships are very much a marketing thing,” Williams admitted.In the meantime, Carberry remains frustrated. “We’ve only asked for product because there’s no process by which we can ask for anything else,” she said.