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Are universities getting hooked on Coke?

by Archives February 2, 2005

OTTAWA (CUP) — The first in a series of controversial cola deals on Canadian university campuses will expire this summer, putting the spotlight on whether schools are so cash strapped they’ve become dependent on corporate funding to provide essential student services.

The University of British Columbia (UBC) was the first Canadian school to sign an exclusivity deal with Coke, making the cola giant the only beverage supplier on campus. The 10-year deal, negotiated in 1995 by the university administration and the student union, provided $8.4 million to UBC.

A new proposal from Coke has been presented to the university president’s office, said Stacey Chiu, the vice-president of finance for the student union. Chiu expects more details to be available by the end of the month.

Chiu said any new deal between UBC and Coke should be watched closely because it will set a precedent for future contracts on other campuses.

The decision to enter into another exclusive beverage contract lies with the senior UBC administration, said Arlene Chan, who does marketing and business development for the university.

Chan confirmed Coke has made a new proposal, but said it is too early to tell if there will be a new contract. However, Chan did say the university would negotiate differently than 10 years ago.

Since UBC’s was the first Canadian deal, the contract was largely based on consumption rates at U.S. universities — rates that turned out to be drastically higher than what UBC students drank. This shortfall translated into Coke’s exclusive access to UBC being extended until 2007, for free.

Since the first deal was signed, there has been concern that student unions and universities would become reliant on sponsorship from corporate powerhouses like Coke and Pepsi to provide student services.

Chui said the student union has leased portions of their building to fill the void of two years without Coke money, but said the cola cash will be missed.

Carleton University is halfway through its Coke contract. Bryan Zimmerman, vice-president of finance for Carleton’s student union, said the cola money has become an essential crutch to fund student services.

“A lot of things the fund covers should come out of the university’s pocket,” he said.

The University of Ottawa has been a Coke campus since 1997. David Mitchell, vice president of university relations, admitted that some services the university provides are dependent on the cola money. If the university doesn’t renew their deal, new sources of external funding would have to be found, he said.

Mitchell said he will watch what happens at UBC closely, but said any new contract at the University of Ottawa would need more provisions for the university.

“The world has changed over the past 10 years,” Mitchell said. “If we are going to renew in Ottawa, we will be looking for more flexibility and transparency.”

Shannon Denny, a spokesperson for Coke, declined to comment on which campuses in Canada have exclusive contracts with the company, or on which campuses Coke is currently negotiating with.

But Denny did say Coke considers the contracts a success.

“We will continue to partner with schools as long as they value our partnerships and that they request it,” Denny said.

Coke has seen its net income — profit after expenses, but before taxes — double since 1995, the year it signed the first campus deal.

While Coke has grown, it is difficult to know how much it profits from partnerships with universities, said Richard Girard, who recently profiled Coke for the Polaris Institute, an Ottawa-based social-policy think-tank. Girard said this is partly because of the secrecy around the deals.

“These corporations, they just don’t want you to know,” he said.

But exclusive campus access does translate into some profits for Coke, said Michael Mulvey, a marketing professor at the University of Ottawa.

“When your (product) is the only one available within a geographic region, it really increases the odds,” Mulvey said. “People may prefer Pepsi over Coke, but not enough to walk across the block to the convenience store to get one.”

Mulvey said the contracts are also a sensible option for universities struggling to provide more than their government funding will allow.

“They have to find money,” Mulvey said. “This is a pretty sensible, pragmatic solution.”

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