Soda machines line the wall on the north side of Lodi High School. The soda machines generate money that goes into the Lodi Unified School District budget. (Jennifer M. Howell/News-Sentinel)

Lodi Unified School District's soda contract not adding up

In 1999, the Lodi Unified School District signed an exclusive 10-year contract with Coca-Cola Co. in hopes that the money earned from soda sales would help the district pay for extra-curricular student activities.

To some members of the community, such an alliance seemed dubious. After all, under the contract, the district was outfitting even elementary schools with soda machines. But parents and others were told that it was necessary, that anything other than a bare-bones education could not be covered by the district's general fund.

At the time, reported estimates of what the district could stand to gain from an exclusive contract ranged from $4 million to $8 million. Some LUSD officials reported that the district could not afford to say no to such a sweet offer.

"Back then it seemed like we had a good deal," said Trustee Richard Dean, who was on the board in 1999 and voted in favor of the exclusive contract with Coke.

Dean said that board members knew kids were buying soda anyway, and that the district was looking for a way to profit from that so that funds could be filtered back to the student body.

The anticipation was that the soda money would go to cover the costs of all the things that fall beyond curriculum, but still make up the high school experience -- athletic equipment, club materials and band uniforms.

So the contract was signed and Coke set up shop.

Now, five years into the contract, when the beans are gathered and counted, the actual profit estimates were much lower than the hype, and actual returns are lower still.

And the multi-million dollar dream that community members were hoping for boils down to a less than impressive set of numbers.

Follow the money

In the months leading up to LUSD's contract with Coca-Cola Co., possible returns for the district were given as high as $7.5 million, according to News-Sentinel archives. On Oct. 26, it was reported that LUSD had voted to accept a $4.8 million bid with Coke, with profits in the amount of $4 million going to fund student activities.

But according to the actual proposal brought before the board of trustees by DD Marketing, the contract would actually bring only $2.54 million.

The terms state that the district would receive an annual flat fee of $75,000 throughout the life of the contract, in addition to commission from the sales brought in from machines scattered throughout schools in the district.

LUSD receives half of all carbonated beverage and water sales, and 35 percent of non-carbonated beverage sales, which DD Marketing estimated to bring in about $179,000 per year over the life of the contract, said Douglas Barge, district chief business officer.

The profits from the flat fee are divided up among the district's 43 schools, while all the money earned from soda sales is distributed proportionately to only those schools that sold Coke products on campus.

After DD Marketing takes its 15 percent cut, the estimate is brought down to $2.15 million.

The contract has netted the school about $759,000 from November of 1999 to June of this year, Barge said. If the contract continues to earn money at this rate, the district will earn $1.6 million by the contract's end.

So, in reality, by 2009, the district will have made more than half a million dollars less than the lowest projected amount -- a far cry from $4 million.

"Are we making as much as they advertised here?" Barge asked, flipping through the contract proposal, each page boasting huge profits with exclamation points and snazzy graphics. "It doesn't look like it."

Dan DeRose, president of DD marketing, said the original $4.8 million figure included all soda sales -- such as those at football games -- and not just those from vending machines providing the district revenue. He said a variety of factors affect actual revenues, including vandalism and machines being unplugged for disciplinary purposes.

Dean said that trustees aren't too concerned the actual profits aren't in line with the estimated profits, as long as student bodies are seeing some kind of return.

Barge agreed, adding that something was better than nothing, because school clubs and athletic teams can't raise enough money themselves.

Bake sales, one popular method of fund-raising, were banned because of health risks, Barge said, and schools are not allowed to charge students for activity fees or club dues.

In 1999, Galt High School was also looking to fund its student activities and athletic teams, much like LUSD. But Galt administration chose a different path -- instead of turning to Coke, they turned to PepsiCo.

Now Galt High is in its last year of a five-year contract with PepsiCo, where the company provides the school with three soda machines and pays the school anywhere between $6,000 and $10,000 per year, said Darlene Waddle, Galt High assistant superintendent of operations.

The district has earned nearly $31,000 since the beginning of the contract. Galt High officials did not have information on what the profits were projected to be.

Who benefits?

Warren Sun, LUSD food services director, said schools need more money, so that campuses won't have to turn to vending machines. "The school or community should work with local legislation to push a bill for (more) educational funding," Sun said about using vending machine money to make up for a tight budget.

"Who are the victims now? Still the students, because students are paying for it."

But in Lodi and in Galt, students like Lodi High junior Stacy Rowe, who buys a bottle of soda two or three times a week will continue to buy soda in school as long as districts maintain contracts with soda companies.

The contract with Coke was supposed to generate in a year $16 for each of the district's 25,000-plus students.

But a student who buys three sodas in a week can spend as much as $225 in the course of a school year.

When Galt High's contract is up in November, the board of the Galt High Joint Union School District will vote on whether it wants to renew.

The board is not certain whether it would choose to renew, board President Pat Maple said.

Meanwhile, there has been little consideration yet of whether Lodi Unified will renew its contract with Coca-Cola Co. in 2009.