The Coke Machine (14 page)

In fact, the soda companies, led by Coke, had been slowly pushing open the door to school contracts for decades. In the 1960s and 1970s, sales of soda and other food of “minimal nutritional value” were strictly regulated during school hours. In the 1980s, the National Soft Drink Association fought back, suing the federal government on the grounds that the regulations were “arbitrary, capricious, and an abuse of discretion.” Though they lost in district court, the soda companies won on appeal when the court ruled the United States Department of Agriculture could restrict vending machine sales only during lunch hour. The USDA reluctantly revised its rulings, which went without challenge for more than a decade. When Vermont senator Patrick Leahy tried to bar soda machines again in 1994, Coke leaped to action with a letter-writing campaign that enlisted school principals, teachers, and coaches to complain about lost revenue. Unsuccessful in his efforts, a frustrated Senator Leahy complained that “the company puts profit ahead of children’s health. . . . If Coke wins, children lose.”

With the door now ajar to selling soda in schools, however, Coke pushed it open even further with a new strategy to win big in the hallways. So-called pouring-rights contracts began as agreements by soda companies to sell their products in fast-food restaurants, such as Coke in McDonald’s and Pepsi in Burger King. Sometime in the early 1990s, they began to expand into sports stadiums and state fairgrounds, gaining exclusive access to sell only their own brand’s products in exchange for a premium paid to the facility.

Based on this model, the first school contracts followed with little fanfare: Woodland Hills, Pennsylvania, for example, signed a ten-year contract with Coke in 1994 for twenty-five Coke machines in exchange for $30,000 up front and commissions on further sales. Sam Barlow High School in Gresham, Oregon, signed a contract with Coke in 1995 and received four scoreboards valued at $27,000.

For schools hamstrung by budget cuts, the contracts were a godsend, promising easy money for big purchases they couldn’t squeeze into their yearly numbers. After all, schools had recently been hit hard by the double whammy of the “tax revolt” in the 1980s that lowered property tax revenues and decreased federal funding in the 1990s. The soda money offered discretionary income administrators could use as they saw fit; some put the cash toward awards for gifted students; others funded field trips or parties. (A $2 million district-wide contract in DeKalb County, Georgia, even included $41,000 set aside for all fifth-graders to visit the World of Coca-Cola.)

In some of the contracts, schools could even earn additional money by selling more Coke. An early report to hit the media was the strange affair of the “Coke Dude”—the self-chosen moniker of John Bushey, a superintendent in Colorado Springs. Bushey wrote his principals explaining the district had to top 70,000 cases annually or risk reductions in the payments from Coke, which ranged from $3,000 to $25,000 per school. He suggested they place machines in classroom corridors and allow kids to buy drinks throughout the day. Even if soda wasn’t allowed in class, he urged teachers to consider allowing juices, teas, and waters. Sadly, the district fell short, in part because of loopholes that counted only direct sales from vending machines, and not Coke sales at sporting events. “Quite honestly, they were smarter than us,” Bushey later told
The New York Times
.

Coke sweetened the pot for some educational honchos, paying the heads of the National Parent Teacher Association and the National School Boards Association $6,000 each in “consulting fees” to fly to Washington and Atlanta as part of a group called the Council for Corporate and School Partnerships. In a testimonial on the group’s website that was later removed, a Coca-Cola official raved about the quality of consulting the educators provided, claiming, “They have become our friends!”

Perhaps the person most responsible for the growth in pouring-rights contracts nationwide, however, was a former college athletic director from Colorado named Dan DeRose, who reinvented himself as DD Marketing, a consulting company to guide schools on striking the hardest bargain with soda companies. Between 1995 and 1999, DeRose inked $300 million in contracts (the consultant pocketing a healthy 25 to 35 percent of the total).
⁴
“My basic philosophy,” he told
The Denver Post
in 1999: “Schools have it; they’re offering it. If we can assist them in maximizing their revenue then I think we’re doing a great, great service.” He even used his own daughter Anna to underscore the value of soda contracts, boasting to school administrators when his daughter was in first grade: “From now until she’s graduated, all she’ll drink is Coke. . . . She doesn’t even know how to spell Pepsi.”

As the contracts got more and more lucrative, however, some parents and activists began expressing misgivings about the amount of advertising by soda companies in schools. “There should never be a situation on public property where commercial advertising is permitted,” says Ross Getman, a self-described “obsessive-compulsive” from Syracuse, New York, who launched a website to track the contracts nationwide, starting with the one signed by Cicero-North Syracuse High School in 1998. That one included up-front payments from Coke of $900,000 to construct a new football stadium—in which the Coke logo would be prominently displayed on a six-foot-high scoreboard provided by the company, with athletes on the field required to drink out of red Coke cups.

The deal was inked with the help of the president of the state assembly, Michael Bragman, who had a home filled with antique Coca-Cola memorabilia that would set the collectors at the Gaylord Texan to drooling, including two fully stocked Coke machines in the basement. Over the years, Bragman had been a good friend to Coke, helping to repeal a 2-cent-per-container soda tax imposed back in the 1990s. In exchange, Coca-Cola had consistently been one of the biggest contributors to Bragman’s reelection campaigns.

Now, standing next to Bragman at the announcement, Coca-Cola Enterprises CEO Bob Lanz gave a heartfelt speech, saying that Coke “wanted to give something back to the community.” Neither of them mentioned that the majority of the money for the stadium—some $4.6 million—would come from state funds.

The floodgates had now been opened—the school stadium success was written up in Coke’s hometown newspaper
The Atlanta Journal-Constitution
, and once administrators began hearing about the cash payments, school districts from Portland, Oregon, to Edison, New Jersey, got religion in a big way. By 2000, according to the Centers for Disease Control and Prevention, 92 percent of high schools had long-term soda contracts, along with 74 percent of middle schools and 43 percent of elementary schools. And at almost all of them, the number of vending machines increased, jumping from a lonely Coke machine by the locker room to dozens of machines scattered around the cafeteria, the auditorium, or even in the halls outside classrooms.

 

 

 

While the additional revenue
for the company added only slightly to its massive balance sheet, the schools gave Coke access to customers at an early—and vulnerable—age. “If a high school student drinks a Coke while he’s at school, the likelihood that he’ll turn to Coke again when he’s outside school and actually has a choice becomes much greater,” says former brand manager Cardello. “Thus in the end, the goal is not just about getting kids to spend money, it’s about getting kids to choose the right brand.”

Getting inside the school building with the active support of administrators also gave Coke a back door around its long-standing strictures against advertising to children. For years, after all, Coke had directly targeted kids with special come-ons, from nature cards with the Coke logo in the 1920s to “Know Your Airplanes” decks of cards during World War II. Even back then, however, the company fretted about appearing to advertise a sugary drink to young children. The D’Arcy Agency’s ad rules included a proscription against showing “children under 6 or 7 years old,” which by the 1950s, McCann extended to children under twelve—a policy Coke supposedly continues to the present day.

Despite its restraint, however, Coke has been remarkably successful in penetrating even the youngest minds. Research has shown that babies recognize brands at anywhere from six to eighteen months, specifically requesting them by age three. Of those brands they know best, Coke is in the top five, along with Cheerios, Disney, McDonald’s, and Barbie. In a society where Coke is within an arm’s reach of desire—or part of a 360-degree landscape—even children can’t escape the ubiquitous Coke logo. But familiarity and brand loyalty, of course, are very different things. As another former Coke marketing chief once said, “With soft drink consumption, early preferences translate into later life preferences. It’s a lot easier than getting consumers to switch their brand preferences later on.”

And so, Coke has constantly found ways to do that. For decades, for instance, it has blithely produced “collectors’ items,” including Barbie dolls, playing cars, board games, delivery trucks, and other toys supposedly targeted to adults. Then there are all of those Santa ads, which subtly package the meaning of Christmas in the delivery of a bottle of Coke, imprinting the two concepts together in minds that aren’t cognitively well developed enough to distinguish the difference. Those cute polar bears serve a similar purpose. “You take any character that is cute and cuddly and fun and have them drinking down a Coca-Cola and smiling,” says Daniel Acuff, an industry ad consultant for years who created the M&M’s characters and worked on campaigns for Cap’n Crunch cereal. “That is very clearly playing on the soft spot in people in general and the cognitive un-awareness of children under twelve in particular.”

Coke has found other ways to get around its policies as well, especially on television, where it defines kids’ shows as those in which 50 percent of the audience is under twelve. At least since the last decade, however, the programs children watch most are those originally intended for teens or adults. In 2000, Coke helped foment the concept of “product placement” with a $6 million deal for primary sponsorship of the WB show
Young Americans
, in which characters were seen drinking Coca-Cola in ways one television critic called “ludicrously conspicuous.” But Coke found absolute product placement gold with its sponsorship of the runaway television hit
American Idol
, which happens to be the second most popular show among children under twelve (second only to
SpongeBob SquarePants
).

In addition to commercials during the program, Coke puts Coke cups into the hands of judges and brands a backstage “red room” with Coke pictures on the walls, Coke coolers, and a “red couch,” where performers are interviewed among Coke logos. “You couldn’t ask for better TV,” enthused one Coke VP in
USA Today
. “If you look at ratings, it’s got universal appeal—everything from kids to 35- to 64-[year-olds].”

Television shows aren’t the only realm where Coke has used product placement to appeal to kids. In 2001, Creative Artists Agency brokered a $150 million deal for Coke to be the exclusive sponsor for the Harry Potter movies—based on the wildly popular book about a child wizard that spurred a generation of tweens to start reading. In the deal worked out with Warner Bros., Coke wouldn’t appear in the movie, nor would any of the characters be seen drinking it (after all, the film’s young star, Daniel Radcliffe, was only eleven years old at the time). However, characters and symbols from the film were plastered on packages for Coke, Minute Maid juices, and Hi-C, leaving no doubt who the company was pitching to. “Kids love Harry Potter, and we are confident the affiliation will be very good for us,” said a spokesman for Minute Maid, even as a Coke spokeswoman insisted, “The target is really families and not
just
kids.”

The movie earned nearly $1 billion worldwide—the second-highest-grossing film at the time behind
Titanic
—and Coca-Cola Enterprises spokesperson John Downs called Potter the most successful campaign of the year. It was enough to spur a push to product placement in movies. Coke appeared in eighty-five of them between 2001 and 2009, third behind Apple and Ford in frequency. While many were marketed to adults, several were even more conspicuously aimed at kids, including the 2005 Dream Works film
Madagascar
, featuring animated zoo animals escaping from New York, as well as such preteen fare as
Elf
,
Are We There Yet?
,
Scooby-Doo
, and the Disney live-action princess fantasy
Enchanted
.

Finally, in 2002, Coke made the leap to online advertising with Coke Studios, an online world where users could create avatars called “V-Egos” and put together their own music mixes with different virtual instruments. In 2007, the company followed it up with an entire branded world, CC Metro—which must look much like what Doug Ivester imagined when he envisioned the concept of a “360-degree landscape” of Coke. In this world, avatars move around an entire three-dimensional city, buying cool clothes, riding on hovercraft and skateboards, and talking with fellow fans of Coke. And while they are doing all these cool things, they are surrounded by Coke’s advertising images—with logos on billboards, blimps, and park benches, fountains and statues in the shape of Coke’s hobbleskirt bottle, and various stores and restaurants where you can spend real money to buy virtual glasses and bottles of Coke products. (Strangely, there are very few ads for anything but Coke Classic.) Soon after it opened, it was getting more than 100,000 visitors a month—no doubt many of them children, given the video game interface and the range of activities available.

With that kind of success reaching young audiences, schools must have seemed to Coke just another avenue to “getting them young.” But in doing so, it failed to see how cynical it seemed to sell to children who had no other choice but to spend eight hours a day in the glow of the Coke machine.