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By Zach Thomas
Arizona Daily Wildcat
June 10, 1998



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Arizona Daily Wildcat

Arizona Summer Wildcat

Pepsi is the name and campus vending is the game.

That announcement came Friday as the University of Arizona, PepsiCo Inc. and the local Pepsi bottler agreed to a 10-year beverage deal that is worth nearly $16 million for the UA.

The agreement, which takes effect July 1, guarantees Pepsi 85 percent of the of the UA beverage market. In return, the international soft drink giant will provide cash and marketing assistance for the duration of the contract,

including $3.4 million up-front to help fund Memorial Student Union renovations.

"The referendum last fall spelled back to us that students thought we ought to be a lot more creative in financing the Student Union," said Dan Adams, who heads the Student Union. "Every dollar I bring in is one less dollar that I have to turn to the students and ask for."

Students last November defeated a referendum that would have imposed a mandatory $40 fee per semester to fund $31.5 million of the proposed $70 million in Student Union renovations.

The new contract marks the first time in about 25 years that a vendor has been given primary rights to market and sell soft drinks at UA soda fountains and vending machines.

Still, Sprite lovers can take heart. Competitors are allowed to fill up to 15 percent of shelf space under the new contract.

"We have a provider now, but not an exclusive provider," Adams said.

In the past, the UA awarded shorter-term contracts for beverage service. The current contract splits soft drinks between Pepsi, Coke and Kalil Bottling Co., which markets R.C. Cola, among others.

By combining these services into a single bid and extending the contract period to 10 years, the university was able to negotiate support for student services.

"In return for an extend opportunity, we asked how could they step forward and help the university," Adams said.

Aside from the $3.4 million in Student Union funding, the UA will receive $1.9 million during the first contract year for the athletic department's new strength and conditioning room for student-athletes. Pepsi also will provide Spring Fling with cash and marketing assistance for the duration of the contract.

During the next nine years of the contract, the UA will receive $2.95 million to be split between the athletic department and the Student Union.

A $50,000 annual chunk of that Student Union money already is earmarked to fund student programs, some of which have been slashed during tight budget years.

With the pending departure of Dan Maxwell, who heads the Department of Student Programs, Adams was unsure how the annual student program contribution would be spent. He said he thought it might be funneled into the University Activities Board.

"I see it going into a general budget to enhance activities and programs for students on campus," Adams said.

Pepsi-Cola Bottling Co. of Tucson outbid the local Coca-Cola distributor and Kalil for the deal.

"Everybody had a shot at it and they came up with the most money," said Jimmy Curry, who runs Coca-Cola Bottling Co. of Tucson and offered a $12 million package for the vending rights. "We go through these bids day in and day out. Things go on, and it's not that devastating to anybody."

Coke products have made up the majority of UA beverage sales during the last 11 years, Curry said.

Although calling the deal a "strong win-win situation" for both Pepsi and the UA, Adams said the agreement had negative aspects also.

"I think this particular contract is one of the potential success stories for outsourcing," he said. The downside of course, is what happens to those [Student Union Vending Services] employees."

Fourteen full-time employees now work for Student Union Vending Services. All of their jobs are in jeopardy during the Pepsi transition, which will fully privatize the vending operations.

University spokeswoman Sharon Kha said the current employees would be given application priority for the vending positions under Pepsi, but no guarantees remain.

Tim Wagner, 22, now a UA vending route driver, said he planned to go back to school full-time. He said he didn't know of any current Vending Services employees who anticipated to work for Pepsi when the company takes over July 1.

"A couple people found (outside) jobs," he said. "It's not as hostile as it was before."

When news of the pending contract came to light in April, some students expressed concerns that funds from recycling could take a hit because the new vendor might switch to plastic, which is a less valuable recyclable than aluminum. The Department of Residence Life took in almost $2,900 from recycling during the 1996-1997 school year.

Adams said he and the contract team had addressed those concerns by pledging to make up any difference to residence hall recyclers.

"There will be some changeover to plastic, but there would have been anyhow," Adams said. "The industry is going that way. As the industry goes, so do the machines."

He added, "We made sure they won't lose that income."

From Pepsi's side, David Lane called the deal a feat for his company.

"To be affiliated with the university and to have our products be their primary products is a real coup," said Lane, who heads Pepsi-Cola Bottling Co. of Tucson.

Privatization, though, was not such a positive topic for Tim Finan, director of the bureau of applied research in anthropology, who questioned the ongoing UA trend toward outsourcing.

"It's clear to me that I'm not a very radical individual, but there is something nagging about this tendency to rely on these kinds of partnerships-particularly from a public university," Finan said.

While the financial side is attractive, other aspects ought to have been given higher priorities, he added.

"It's this provisioning of advertising and being associated with an advertising campaign," Finan said. "I don't feel that the university should be endorsing Pepsi or any other group."

Adams said that outsourcing is not necessarily the way to go all the time.

"If we're being successful in running operations and the campus likes the business and the service and the way it's being done, why would you contract it just for the sake of contracting it?" he asked. "It's a case by case review, rather than you must contract everything.

"In terms of a contract, it may not be as flashy as some, for this campus, it may be one of the best ones I've seen."

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