Agenda Item No. V. B. 1. e.

Washburn University Board of Regents





SUBJECT: Exclusive Pouring Rights Contract





BACKGROUND:



In 1984 Washburn made the decision to self-operate vending on campus. In order to minimize labor, vehicles, ordering, warehouse space, and to maximize profits, the University decided to offer exclusive pouring rights in return for service and a good price. The resulting contracts drastically decreased the cost of goods for Washburn's auxiliaries and aided in their ability to be self-supporting. The pouring rights contract was re-bid in 1989, 1992, and 1997. The existing contract expired June 30, 2002, and we are currently operating on a month-to-month extension of that contract.



Eighteen years ago pouring rights contracts were rare and Washburn was interested only in exceptional service and a low cost product supply. In the time that has passed, it has become common to use exclusive pouring rights as a funding source for activities outside of the auxiliary operations, most commonly athletics. In 2002 the University chose to issue a request for proposals instead of a strict invitation to bid on a commodity. The RFP described ways for the vendor to support Washburn's initiatives in athletics, student life, and academics and allowed for the vendor to share in growth potential by operating the vending service and paying commissions to the University.





DESCRIPTION:



On July 2, 2002 we mailed a 49-page request for proposals to seven local bottlers and vending operators.



Coca-Cola Bottling Company of Mid-America, Topeka KS

Pepsi-Cola of Topeka, Topeka KS

Seven Up Bottling Company of Topeka, Topeka, KS

LinPepco, Lincoln NB

Treat America, Overland Park KS

Drink-O-Mat, Topeka KS

Schmidt Vending, Topeka KS



The bids were opened July 31, 2002 and there were two proposals received. Coca-Cola Bottling Company of Mid-America teamed with Drink-O-Mat to offer a combined proposal for beverage and snack vending. Pepsi-Cola of Topeka offered a comprehensive proposal. Both companies proposed a ten and a five year contract.



The proposals were evaluated by representatives from Dining Services, Vending/Concessions, Business Services, and Purchasing. After this evaluation we determined there was no compelling reason to commit to the ten-year contract. The proposals are based on recent sales history while enrollment has been low and sales have slumped. We believe there is great potential in both enrollment and sales, and the conditions will have completely changed by the time we request proposals again after five years. We are, therefore, recommending a five-year agreement.





FINANCIAL IMPLICATIONS:



There are eight elements of the proposals that were considered and assigned a value. They are the cost of products, commission paid on beverage sales, commission paid on snack sales, performance incentives, academic support, student activities support, athletics' scoreboard allowance, and the overall exclusivity grant. These elements were evaluated based on no growth in sales (conservative columns) and with attainable growth as currently budgeted (growth columns). The total value of the Pepsi-Cola proposal is clearly better in either example.



Five year conservative Five year growth
COKE PEPSI COKE PEPSI
   
Added cost of goods:*

(157,843.00)

(165,599.10)

(473,529.00)

(496,797.30)

Price support:

0.00

50,000.00

0.00

50,000.00

Beverage commission:

250,000.00

225,000.00

725,000.00

652,500.00

Snack commission:

25,085.66

49,955.20

41,071.33

99,910.40

Performance incentives:

0.00

7,500.00

0.00

12,500.00

Academic programs:

0.00

25,000.00

0.00

30,000.00

Union Program support:

1,250.00

25,000.00

2,500.00

25,000.00

Loss of activities grant:

(25,000.00)

(25,000.00)

(25,000.00)

(25,000.00)

Scoreboard grant:

15,000.00

100,000.00

15,000.00

100,000.00

Exclusivity grant:

120,000.00

137,000.00

120,000.00

137,000.00

   
CONTRACT VALUE:

228,492.66

428,856.10

405,042.33

585,113.10





*Current Pepsi contract is a product only contract. The added cost of goods represents the cost of product under the new contract versus the cost of product under the current contract.





RECOMMENDATION:



President Farley recommends the Board of Regents authorize the administration to enter into a five-year exclusive pouring rights contract with Pepsi-Cola of Topeka.





______________________ __________________________

Date Jerry Farley, President


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