Vending machines source of revenue for schools

Long Island schools are getting sports scoreboards, computer software and tens of thousands of dollars in exchange for exclusive rights to sell Pepsi and Coca-Cola products in vending machines and at sporting events.

While the money is used for things like scholarships and extracurriculars, some experts warn the enticements undermine efforts to serve healthier cafeteria meals.

"Schools should not be profiting on beverages that are detrimental to children's health," said Lilian Cheung, a registered dietitian at the Harvard School of Public Health. "Schools need to set an example."

The machines typically sell beverages such as sports drinks, water and juices. Some sell soda, which under state policy can't be sold until after school hours.

In most cases, the districts get a percentage of the sales revenue as a commission.

A Newsday review of contracts and other vending financial information for about 40 districts found:

The Westbury school district is receiving $140,000 over seven years from Coca-Cola. Pepsi agreed to give seven scoreboards to Bethpage. Lynbrook, Islip and Rockville Centre are among those receiving money -- as much as $21,000 -- for scholarships. None of the Pepsi and Coke contracts examined gave any of the commissions to the school food program.

Seaford Superintendent Thomas Markle said vending in schools has traditionally been a way to fund extracurricular activities. When asked whether vending profits should benefit school food programs, he said, "I'm not sure I would have tied those two directly. I see them as serving different purposes and therefore different focuses."

Study: Deals not lucrative

In one of the nation's largest school beverage vending deals, the 1.1-million-student New York City school system earned $3.7 million in profit in the 2008 fiscal year from Snapple, a Board of Education spokeswoman said. The money was used to fund middle and high school athletics.

Usually, the districts -- and the money -- involved are much smaller in scale.

In December 2006, the Center for Science in the Public Interest conducted a study of beverage vending contracts with districts in 16 states, not including New York, and concluded that the arrangements are desirable but not that lucrative for schools.

"While this amount is typically a small fraction of a school's overall budget, it is valued highly by many school principals and administrators since it is a flexible source of revenue available for meeting program needs at their discretion," the report stated.

From July 2007 to December 2007, for example, Rockville Centre received about $2,900 in commission from sales of Pepsi products. For the 2007-08 school year, Westbury received about $2,200 in commission for Coke products. From May 2007 to December 2007, Hauppauge received about $4,800 in commission from Pepsi.

That is the model for "exclusive pouring rights" in school vending contracts nationwide.

Beverage companies say they are making strides toward stocking school vending machines with healthier items.

"We're providing more lower-calorie, smaller-portion beverages," said Tracey Halliday, spokeswoman for the American Beverage Association, which represents Coca-Cola and Pepsi, among other beverage companies. "We believe all our beverages can play a role in a healthy diet."

A healthy pledge

In May 2006, Cadbury Schweppes, Coca-Cola and Pepsi -- the three largest soft drink companies -- announced a collaboration with the Alliance for a Healthier Generation, pledging to remove full-calorie sodas from all schools by the 2009-10 school year and to implement guidelines, including selling only 100 percent juice with no added sweeteners in elementary and middle schools.

However, the guidelines are voluntary and allow for some low-nutrition drinks including sports drinks, said Margo Wootan, director of nutrition policy at the Center for Science in the Public Interest.

Besides beverages, some school districts offer vending with snacks such as chips and ice cream. Those contracts are often with smaller companies, but nutritionists say they send an equally bad message.

Districts can control student access to vending machines. Bethpage Superintendent Richard Marsh said district machines are on timers, set to go on after school.

Marsh also said soda is being removed in favor of fruit juices and water. "We've replaced the beverages that were high in sugar and products that were not favorable to healthy diets," he said.

Kramer Lane School has an allergy-free machine, Marsh said, with products that are free of gluten, dairy and nuts.

Though vending machines have been in schools for years, their presence expanded greatly over the past two decades.

From 1991 to 2005, the percentage of middle schools with vending machines went from 42 percent to 82 percent, according to a federal government study cited by Wootan. The increase in high schools over the same period was 76 percent to 97 percent.

Marketing strategy Some school vending contracts include incentives in exchange for marketing provisions. Bethpage's 13-year contract with Meadowbrook Distributing Corp. in Amityville, which sells Pepsi products, grants exclusive rights for the brand to be the "official soft drink" of the district, provides a football field concession stand and places seven machines throughout the high school. Meadowbrook reserves the right to "place full trademark panels" on all sides of the machines.

Wootan said school officials should be concerned about marketing provisions that flood students with soda brands that create "lifelong loyalty."

Halliday said vending panels with logos are starting to be replaced with depictions promoting physical activity.

Alan Van Cott, who retired recently as superintendent of Islip schools, said students face branding in all aspects of their lives.

"A student walks into school with a lacrosse stick on his shoulder that has a logo on it," he said. "There's sneakers with a logo on it."

'Balancing act'

Islip's seven-year deal with Coca-Cola that ended last school year required that sports teams that consume sports drinks use "approved cups." It also brought the district $5,000 in "upfront scholarship fees," $7,000 in "marketing support," $14,000 in "student activation support" and $84,000 in "sponsorship support."

"It's a balancing act between an opportunity for additional revenue for schools," said Van Cott, adding a new contract was under negotiation.

While Halliday would not comment on contracts, she said the companies are able to provide financial support schools need. "Revenues have helped provide things such as athletics and arts education," she said.

Westhampton Beach's 10-year contract with Coca-Cola Bottling Co. of New York details an 18 percent commission and monetary rewards: $62,500 for the Booster Club, $5,000 for "support student activities" and $10,000 that "shall be used to support the School District's educational mission in the schools."

Records show the district received about $3,200 in commission checks last school year.

The contract also throws in 10 cases of Fruitopia drinks to be distributed to students for free. For every Fruitopia machine placed at each school, the district gets its choice of one of three kinds of educational software valued at $400. And for every POWERade machine, the district gets an "On the Field" kit, valued at $750, and containing items including coolers, squeeze bottles, towels and clipboards. Kathy O'Hara, Westhampton's business official, said the district did not opt for any Fruitopia machines.

Westbury's seven-year contract with Coca-Cola shows that the district gets a 20 percent commission. In addition to the $140,000, the district also receives $21,000, distributed in installments, for scholarships.

Wootan said it's better for fees to districts to be paid over the course of the contract because large upfront payments make it harder for districts to get out of agreements if necessary.

Most contracts with Coca-Cola and Pepsi include a clause that requires the district to pay a fee if the contract is terminated early.