Schools Getting Raw Deal from Bottlers
Beverage Deals Not Very Lucrative According to Analysis of Beverage Contracts
December 6, 2006
WASHINGTON—Most school beverage deals aren’t very lucrative, raising an average of only $18 per student per year, according to the first-ever multi-state analysis of school systems’ contracts with beverage companies. The study, conducted by the nonprofit Center for Science in the Public Interest (CSPI) and the Public Health Advocacy Institute (PHAI), analyzed 120 contracts in 16 states and found that the majority (67 percent) of the revenue collected from drink sales goes to beverage companies, not schools. The $18 dollars per student raised represents only one quarter of one percent of the average cost of a student's education, which, according to the National Center for Education Statistics, is about $8,000 per year. The study was supported by the Robert Wood Johnson Foundation and the Argosy Foundation.
Annual revenue to schools ranged from $0.60 to $93 per student per year. Schools typically earn commissions on sales and cash advances. Some schools are clearly getting better deals than others, even with the same companies, according to the report.
One hundred eleven, or 93 percent of the contracts analyzed, were exclusive, meaning that they permit just one company to sell and market its beverages in schools, allowing them to cultivate brand loyalty. Sixty-four contracts were with PepsiCo, 53 with Coca-Cola, and three with smaller regional manufacturers. A bottler or distributor is typically the contracting party.
“Selling sugary drinks in vending machines and elsewhere in schools doesn’t pump money into the community, it drains it,” said CSPI nutrition policy director Margo G. Wootan. “It’s not philanthropic behavior on the part of soft drink companies, it’s predatory. When a kid puts a dollar in a soft drink vending machine, the school is lucky to keep 33 cents. And the money comes from parents’ and kids’ pocketbooks.”
In addition to simply selling soft drinks, companies negotiate other marketing privileges in schools, including putting their logos on signage, scoreboards, athletic equipment, book covers and the panels of vending machines themselves. Many contracts examined by CSPI and PHAI contain clauses penalizing schools for not meeting sales quotas, which gives school administrators an incentive to encourage soda consumption.
CSPI calculations based on sales data from the American Beverage Association (ABA) show that students are purchasing and consuming significant amounts of soft drinks at school. On average, high school students drink the equivalent of about 40 20-ounce bottles of non-diet soft drinks per year, or 8,577 calories’ worth. Middle schoolers drink about 14 20-ounce bottles, or 2,842 calories’ worth. Overall, soft drinks are the single-largest source of calories in teens’ diets.
Obesity is more clearly linked to soda consumption than to any other food. A Harvard study found that for each additional soft drink a child consumes per day, the chance of becoming overweight increases by 60 percent. Many studies have further shown that soda consumption displaces healthier beverages, such as low-fat milk and 100 percent fruit juice, from children’s diets.
“These contracts apply financial pressure on schools to encourage students to drink more of something that is harmful to their health,” said Wootan. “That’s the last thing schools should be doing, and it’s the last thing parents want when they send their kids off to school.”
Voluntary guidelines announced in May by former President Clinton, the ABA, the American Heart Association and leading soda companies would cap portion sizes and restrict soda sales in schools over the next three years. However, schools aren’t a party to that agreement, and it remains to be seen if schools will comply with the guidelines, according to Wootan. CSPI dropped a planned lawsuit against soda companies immediately after those guidelines were announced.
Many of the largest school districts in the country have gotten rid of soda, including Boston, Chicago, the District of Columbia, Las Vegas, Los Angeles, Miami, New York City, Philadelphia, San Francisco and Seattle. However, CSPI’s School Foods Report Card shows that the nation has a patchwork of policies addressing soda and junk foods in schools and that two-thirds of states have very weak policies, which were graded as Ds or Fs.
Given rising obesity rates and children’s poor diets (only 2 percent of American children eat a healthy diet, according to U.S. Department of Agriculture nutrition recommendations), it’s critical that the foods offered in school lunchrooms and hallways be as healthy as possible. CSPI is working with over 100 organizations, Senators Tom Harkin (D-IA) and Lisa Murkowski (R-AK), and Representatives Lynn Woolsey (D-CA) and Christopher Shays (R-CT) for passage of the federal Child Nutrition Promotion and School Lunch Protection Act. The bill would require the USDA to update its nutrition standards for foods sold out of vending machines, school stores, and other school venues.
“Schools, state lawmakers and members of Congress, who are considering replacing soft drinks in vending machines with healthier options, should be reassured by our findings,” said Wootan. “Generally, the revenue generated by soft drink sales in schools is modest and could be replaced by the sale of healthier beverages or by alternative fundraisers that don’t undermine children’s diets or health.”