pouring rights – a case study. presented by: charlene lydick, associate director of procurement ...
TRANSCRIPT
Presented by:
Charlene Lydick, Associate Director of Procurement
Mary Martin, Manager, Purchasing Services
Ron Ried, Director, Facilities Management Business Services, University of Colorado at Boulder
Chapters to be covered: Historical Situation
The First Steps
Writing the RFP
Proposal Evaluation Phase
Negotiation Phase
Contract Phase
Stakeholder DepartmentsUniversity of Colorado at Boulder: Athletics
Housing & Dining Services
University Memorial Center (Student Center)
Bookstore (Vending Services)
Vice-Chancellor Challenge: Kickoff Meeting: January, 2008
Nearing end of departmental contracts Time to re-evaluate pouring rights on
campus Driven by Athletics
Is there a “Wow” deal?
Stakeholder Concerns: Declining trends in contracts across the country
25-30% reductions seen in Big 12 Conference Vending sales/commissions going down Protect Product Price Protect Revenue Protect Customer Choice Beverage market changing Athletics would win; others would pay
Purchasing Concerns:
Ownership - who will administer the contract for the campus?
To the extent a consolidated contract is exclusive, somebody will likely not be happy
Moving forward:
March, 2008: RFP committee formed by Vice Chancellor for Administration
Buy-In from Stakeholder Departments
Vice-Chancellor Retires
Goals: Maximize beverage service opportunities
Increase net revenues
Advantageous pricing
Sponsorship
Long term partnership
Coming Together: Met as a group to review draft and write the RFP
Every word means something… Meticulously went through the document word by word to ensure it was correct
Met weekly for an hour over a 3 month time span
Major Discussion Areas: Exclusivity versus non-exclusivity in regards to:
- Venues (retail vs non-retail)- Special Events/Situations- Beverages - 3rd party agreements- Catered events
Firm product pricing first 3 years; future increases capped at CPI
Environmental / Recycling / Energy
10 year contract
Overall Exclusivity, Non-Exclusivity Language: Non-exclusive under all options
HDS convenience stores, UMC convenience stores and catering, and CUBS retail operations will be non-exclusive
Exclusions to RFP under all options: Milk and milk based drinks (such as shakes and malts), tap water, hot chocolate,
fresh squeezed juices, and bulk juice. Privately sponsored events where UCB provides the venue, provided the beverages
served are offered at no additional charge to the event attendees, and all residual bottles, cans, or other evidence of the beverages served are promptly removed at the conclusion of the event.
Non-university catered events Program Council for student entertainment events The consumption of beverages brought onto the campus by an attendee at an event
or by students, faculty, staff invitee, guests, or visitors of the university for personal consumption
The dispensing or serving of non-bottled coffee or coffee derived products such as cappuccinos or lattes.
The service of tea at University events, if such beverage is served in cups (as opposed to single serving cans/bottles).
Beverages containing alcohol Private retail food outlets leasing space or located on the UCB campus that have food
service contracts.
Athletic Dept Exclusivity, Non-Exclusivity:Category ExclusivityVendor will be granted exclusivity in the following categories – carbonated or non-carbonated, non-alcoholic beverages or soft drinks, including, but not limited to, carbonated soft drinks, fruit juices, fruit juice-containing drinks, and fruit-flavored drinks, tea products, and packaged waters.
Exclusion of Categories: CU Athletics Department Beverages which contain nutritional supplements and which are provided by team
trainers for team members. Isotonic beverage drinks including but not limited to (carbonated and non-carbonated
sports drinks, sports beverages, isotonics, oxygenated, flavored and/or vitamin enhanced water, electrolyte and fluid replacement beverages, including but not limited to PowerAde, All Sport, Ultima Replenisher, Penta-hydrate or Accelerade and Gatorade Energy Drink (which shall include beverages that deliver energy to the body through ingredients like carbohydrates, caffeine, or protein).
Energy drinks including but not limited to (Red Bull, Amp, Rockstar, Sobe, Adrenaline, etc.).
Supplemental beverage drinks including but not limited to (Muscle Milk, etc.). Packaged coffee beverages. This includes, but is not limited to, any Starbucks
branded coffee product available in individual cans, bottles, etc.
HDS & UMC Exclusivity, Non-Exclusivity:Category ExclusivityHousing & Dining Services:
Carbonated or non- carbonated, non-alcoholic fountain drinks for Dining Services meal plan board operations
Bottled and canned beverages (including water) sold as part of a meal-plan in Grab-n-Go operations
UMC: Carbonated or non-carbonated, non-alcoholic fountain drinks for UMC Alfred Packer Grill
only
Non-Exclusive Categories: Dining Services Retail/convenience operations Catering Concessions and special events, that are not part of a meal-plan or when event is
sponsored., such as Colorado Shakespeare Festival. Annual special events that require special packaging or considerations (such as zero-
waste events) Bottled and canned organic and natural beverages Bulk Juice Freshly brewed coffee and teas Milk and milk-based drinks Hot Chocolate
Milestones: October 31, 2008
RFP posted
November 6, 2008Optional Pre-Proposal Conference
January 5, 2009Proposals due
One year after project started!
Disappointment:
Received responses from Pepsi & Coke
Neither vendor responded in the format requested. Did not respond to specific evaluation criteria
Responses laden with marketing material
Coke Non-Responsive: Too many exceptions:
• Minimum mandatory• Re-defined beverages• Advertising/sponsorship• Signage rights• Non-exclusive categories
Pepsi Oral Presentation: Athletics marketing allocations
Vending
80% Pepsi distribution in retail outlets
Bottled water cost
Exclusions
Address details. . .
Pepsi 80/20 Rule: 80% distribution of all retail space
o Naked Juice and Izze fall into 20% categoryo Piazano’s must be 100% excluded due to
organic/natural nature of the venueo Non-University catered events must remain
100% excludedo University catered events included in 80/20 ruleo How does Pepsi define 80% of retail spaceo 3rd party contractors includedo UMC included in 80/20 rule
Ongoing Concerns:
Does the aggregate value warrant proceeding?
How to ensure that each stakeholder is made whole?
Athletics reconfirmed commitment
Internal Discussions/Letter to Pepsi: Formulate strategy
March 9, 2009 Letter to Pepsi
Outlines University’s final position
Content of Letter to Pepsi: Pepsi agreed that both PepsiCo brands, IZZE and Naked Juice will be included as part of
the 80% space allocation. Will Pepsi also agree to include Tropicana and all current and future Pepsi products (even those not distributed by PBG) in the 80% category?
Again, we stress that Piazano’s must be 100% excluded due to the organic/natural nature of the venue. Will Pepsi agree?
Pepsi verbally agreed that all Non-University catered events will remain 100% excluded. Please confirm in writing.
The University defines retail space as the percentage of product that faces the customer in a cooler or display. Does Pepsi agree?
Again, the University stresses that all private 3rd party retail food outlets leasing space or located on the UCB campus that have food service contracts be excluded. Will Pepsi agree?
The University requests the CU Book Store (CUBS) retail operations be 100% excluded. Will Pepsi agree?
The University is very concerned about bottled water pricing under the Pepsi proposal. The pricing proposed is 30+ % over our current pricing and will cause a significant negative financial impact on food services operations. The University could agree to water pricing at $6.02/case for 16.9 oz Aquafina 24/count case. Will Pepsi agree?
The “Multiple Iced-Tea Dispensing System” that is currently used in our Dining Operations has proven to be very popular. Would Pepsi consider submitting bid pricing for this product?
Please confirm in writing that special sponsored events such as the Colorado Shakespeare Festival will be excluded from a campus-wide beverage agreement.
Main Issues: Izze and Naked Juice Exclude Piazano’s Exclude all non-University catered events Exclude current 3rd party food vendors Exclude book store operations Water pricing Exclude special sponsored events
Internal Turmoil (March 2009): UMC elects not to support a consolidated
contract due to projected financial impact
Other stakeholders support consolidated contract
Step back - Non-partisan internal analysis of financial impact on all units involved
Can we move forward without the UMC?
April 27, 2009 Letter to Pepsi: Re-state our position on main issues
Request all UMC operations100% non-exclusive
Confirm all HDS non-retail, food service operations (meal plan board & Grab-n-Go) be 100% exclusive
May 6, 2009 – Pepsi Response Must include 80% distribution in the UMC
Agree that Book Store will be exempt from 80% space requirement, but Pepsi will place a cooler with Pepsi brands
Agree to sell water at $6.05/case, but economics require that Pepsi still recover the full $2.00 per case reduction. Based on estimated annual water volume, sponsorship funding reduction of $24,000 would apply
Internal Negotiations (May 2009):
The UMC is OUT !
Current HDS beverage agreement about to expire
Continue negotiations / Schedule face-to-face meeting
University Expectations for face-to-face meeting: Understanding that all UMC operations be
100% excluded
Firm commitment to Vending as proposed
Firm commitment to HDS as proposed
Firm commitment to HDS for transition/installation of equipment in dining centers (need in place by 8/7)
Commitment to Athletics; come with best offer
6/10/2009 meeting with Pepsi:
UMC opt-out huge issue for Pepsi
Value of the deal to Pepsi is based on campus exclusivity
Funding reduced by $137.5K annually, $1.295M over 10 years
How to get UMC back onboard?
We have a verbal agreement! (June 18, 2009): The UMC is back Athletics agrees to reduce their annual
sponsorship by a fixed fee of $25K annually to offset water pricing
Expectation that Pepsi will reinstate original financial proposal with the UMC back in the deal
University agrees to request all future 3rd party food vendors to distribute
Pepsi products
1st Draft:
Capture important elements of contract as negotiated for each stakeholder department
Allow stakeholders to review draft to make sure their needs are addressed and to get their buy-in
1st draft sent to Pepsi 7/1/2009
Pepsi Contract: Received 7/26/2009 Ignored our document & sent standard Pepsi
University Sponsorship Agreement Informed Pepsi the University’s contract format
must be used; contract back to Pepsi 8/5/2009
Contract Issues Athletics (advertising and interface w/Learfield,
sponsorship activation, sideline agreements) Exclusions Vending machine efficiency Organic/natural drinks Price Increases per CPI Material Breach Language Valuation in event of default Vending Commission Structure UBIT
Exclusions at end of deal: Privately sponsored events 3rd party catered events Products brought on campus for personal
consumption Athletics: nutritional beverages provided by
team trainers, isotonic drinks, energy drinks, supplemental drinks, packaged coffee drinks
Beverages related to Sideline agreements Piazano’s
Lessons Learned:
Buy-in and participation from key stakeholders is essential
Executive level support crucial Pepsi funding dependent on campus exclusivity & volume of product purchased
More Lessons Learned:
Bottled water is an important part of Pepsi’s business
No interest in Athletics only option – purposely bid low
Athletics was very supportive & considerate of the needs of all departments involved
Recommendations: Start Early!
Have face-to-face meetings
Always keep your goal in mind
Don’t give up
High-Level support from campus necessary to manage the contract and drive compliance long-term
Outcome:
Satisfaction!Feel consolidated agreement to be in the best interest of the campus. Although there were no significant new cash flows, stakeholders feel the terms offered by Pepsi are competitive and likely more advantageous than terms that would be received through individual department contracts.