CU’s Pouring Rights Contract with Pepsi Pushes Out Local Brands

For the past two academic years, students at the University of Colorado at Boulder’s Leeds School of Business have been fueling up on coffee from Method Coffee Roasters, a local company started by two CU alumni. The Method kiosk sold non-coffee drinks, too, like Rowdy Mermaid kombucha, Pressery juices, and Teakoe teas, all made by Centennial State companies with similar values to Method’s.

But the Method kiosk isn’t there anymore, and it’s not just because of a construction project at the school. CU is currently in the end stages of re-negotiating its pouring rights contract with PepsiCo., an agreement that grants Pepsi the right to exclusively sell its products on CU’s campus—and market the heck out of them—in exchange for giving CU millions of dollars. The university is doing its due diligence by ensuring that all of the vendors on campus are pouring only Pepsi-owned products, which go well beyond soda. Method’s owners, Alex Rawal and Kade Gianinetti, had to decide whether they’d start selling Pepsi-owned beverages (which meant ditching their local partners) or stand by their local and sustainable business model. They didn’t choose Pepsi.

“We don’t want to distribute what we don’t believe in,” Rawal says. “We wanted to create a homegrown coffee spot here on campus, sourced from local makers.”

Soda corporations—mainly Coca-Cola and Pepsi—pay big money to be the exclusive thirst-quencher at schools. Those pouring contracts are worth millions to colleges and universities, many of which have seen their budgets slashed in recent years. CU signed a decade-long deal with Pepsi in July 2010 for about $6.5 million, and it’s currently working out the final details of an amendment to extend that contract. (The university declined to reveal any details about the new contract under negotiation.)

It’s a good investment for the soda companies because they’ve got a ripe, captive audience, most of whom are making their own eating and drinking choices for the first time. Whoever gets to them now could have customers for life. It’s a unique and valuable marketing opportunity, one that Pepsi values at about, oh, $650,000 a year.

Big Soda’s money isn’t exactly paying for student scholarships, though. Most of the money—a whopping 82 percent of the existing CU contract—goes to athletics via sponsorship fees, product donations, and marketing programs.

“They’re [Pepsi] taking over a campus of over 35,000 students and faculty and only giving true benefits to a single part of it, which is basically Folsom Field and the CU Events Center,” Rawal says, referring to CU’s football and basketball programs.

Besides swaying current and future consumers, Pepsi can use all of CU’s marks—from the interlocking CU emblem to the Buffs nickname—license-free in ads, promotions, and packaging. Pepsi can plaster itself all over CU football and basketball games, marketing itself as the official beverage sponsor of CU and all its teams. The current contract also gives Pepsi advertising spots on the Buffalo Stampede TV show, football radio, and men’s and women’s basketball radio. What company wouldn’t want to be associated with the health, youth, and vibrancy of college athletics?

But this is Boulder, where healthy living, tree hugging, and entrepreneurship are core values. And this is also Pepsi, a giant corporation which isn’t known for being, well, those things. Some see the contract as CU selling out both the environment and its students’ health.

“For the University of Colorado to be so sustainability- and health-focused and to take this money from a company who’s probably one of the largest plastic polluters in the world…” Rawal says, trailing off. “And it’s soda. They’re pushing high fructose corn syrup into all the students. The students aren’t even aware that they don’t have a choice when it comes to their beverages. They aren’t aware that Pepsi has the rights to pour everything on campus.”

Travis Torline, the University of Colorado Student Government (CUSG) Sustainability Chair, agrees that the average student isn’t aware of the Pepsi contract and the negotiation process, but he says that CUSG is part of the conversation with Pepsi. Student government funds two major campus spots where Pepsi products are sold, the University Memorial Center (UMC) and the Student Recreational Center.

A few years ago, San Francisco State University students took it upon themselves to end the pouring contract at their school. Student activists argued that selling pouring rights privatized their public education, and it didn’t help that the private corporation attempting the stronghold is best known for its sugary soft drinks.

CU’s existing contract with Pepsi allowed for exceptions: The CU Bookstore was able to have a cooler that sold competitive products; the organic grab-and-go restaurant Piazano’s was excluded; and up to 20 percent of shelf space at Housing and Dining Services retail locations was open for Pepsi’s competitors. Everything else had to be all Pepsi, all the time.

With a business school construction project underway, Method was supposed to move to a temporary space this year. Rawal says that he received an amended lease for the new space with the 47-page Pepsi contract attached—the first time he’d learned of the exclusivity agreement.

“They were telling us, ‘This isn’t a big deal. If Pepsi has a comparable product (sell it).’ They seem uneducated on how big Pepsi is. We were like, ‘No, they own everything,’” Rawal says, citing that Pepsi owns Tropicana, Naked juices, and KeVita kombucha, which meant the Method kiosk could no longer sell his local partners’ products. “We let them know we didn’t feel comfortable signing something and then not complying with it.”

Rawal and partner Gianinetti asked if they could speak with someone making the Pepsi contract decisions. They were told that no exceptions could be made, and that since they wouldn’t sign the Pepsi-amended lease, the university would look for another vendor to take over the coffee cart and send Method an official termination of the lease.

The university couldn’t discuss the new contract while still in negotiations with Pepsi but did issue a statement on behalf of CU deputy chief financial officer Carla Ho-a regarding the benefits CU reaps from the partnership.

“Our longstanding relationship with Pepsi provides the university with marketing support, student internships, program sponsorship, and student scholarships. Pepsi has been a great partner in supporting the university’s sustainability goals. Our commitment is to become a zero-waste campus by 2025.”

According to the current contract, Pepsi gives to student scholarships and sustainability efforts; $10,000 each year goes to both a scholarship and recycling fund. An additional $12,500 a year goes to a UMC student development fund.

Compared to the hundreds of thousands of dollars earmarked for athletics, though, the money benefiting non-athlete students isn’t much. Part of Method’s business plan includes donating 5 percent of sales to student scholarships; its single café donated $16,000 in scholarships during its two years of operating at CU. Pepsi, with selling rights for the entire campus and a total revenue of $64.66 billion in 2018, donated $20,000.

This issue is not just about CU, and it’s not just about Pepsi. As society becomes more concerned about plastics and the soda-obesity link, due attention is being paid to these sorts of relationships. Soda sponsorship agreements used to exist at elementary, middle, and high schools, but these days that’s rare. They’re still commonplace at colleges and universities, though, and one 2017 pouring rights story listed the University of Denver, Colorado State University, Northern Eastern Junior College, and the 12 schools within the Colorado Community College System as all being under exclusivity contracts with Pepsi.

Method Coffee Roasters was scheduled to move into their new space and resume business at CU on November 1. It won’t be there, though, and, as an extension, neither will other local brands like Rowdy Mermaid, Pressery, and Teakoe.

“I guess we’re being stubborn,” Rawal says. “It just felt like our school turned its back on us.”