Incentives and penalties tied to sales volume in contracts between beverage companies and public universities in the United States

Figures & data

Table 1. Definitions of specific types of financial incentive, penalty, and marketing provisions in contracts between Coca-Cola and pepsi and large public universities.

Variable	Definition
Commission	University received a percentage commission on the sales of vended products. The commission rate multiplied by the unit vending price produces the per unit commission revenue earned by the university.
Rebate	University received a dollar amount per case or gallon of product purchased from the company. The price per case/gallon minus the rebate equals the net cost to the university.
Volume Incentive	University received a cash payment, rebate, or other financial benefit triggered once some minimum amount of product is sold or some minimum percentage growth above some volume threshold is achieved.
Volume Minimum	Minimum volume of product the university was required to purchase or sell to avert a penalty; alternatively, university may be penalized if volume decreases. Does not include provisions describing adjustments to payments or contract termination due to campus closure, canceled athletic events, or any other factor other than volume of product purchased or sold.
Volume Minimum- Adjustment	Contract allows the company to adjust payments to the university and/or requires the university to reimburse the company some amount of money if the volume of beverage product purchased by the university decreases by some percent compared to the previous year or if the university fails to meet some minimum volume threshold.
Volume Minimum- Termination	Contract allows the company to terminate the contract if the volume of beverage product purchased by the university or revenue earned by the company decreases by some percent compared to the previous year or some predetermined baseline, or if the university fails to meet some volume threshold.
Volume Minimum-Extension	Contract requires that if the university fails to meet some volume threshold, the contract term is automatically extended until the volume threshold is met.
Annual Contract Cash Revenue	Estimated annual cash value of a contract to a university based on the sum of cash payments university receives from the company, divided by years the contract is active. Does not include value of in-kind donations or potential earnings from volume incentives, unless otherwise specified.
Official Sponsor Designation	Contract explicitly permits the company to refer to itself as an exclusive, official, or proud sponsor of the university or some part of the university.
Official Beverage Designation	Contract explicitly permits the company to refer to its products as the official beverage of the university or some part of the university.
Use of University Marks	Contract explicitly grants the company the right to placement, use, and/or licensing of the university’s marks and/or logos.
Sampling	Contract permits the company to conduct sampling of products on campus.
Surveying	Contract permits the company to conduct surveys on campus.
In-Kind Beverage Product	Company commits to providing the university with a specified number of cases or cash value worth of free or donated beverage product.
In-Kind Equipment and Merchandise	Company commits to providing the university with equipment or merchandise, or cash to be used toward equipment or merchandise, such as t-shirts, water bottles, coolers, or recycling bins.

Figure 1. University inclusion and exclusion.

Figure 2. Prevalence of different combinations of incentives and penalties tied to sales volume in 131 contracts between beverage companies and large public universities in the United States.

Not pictured:

Commission & Volume Minimum: n = 14; Rebate & Volume Incentive: n = 0; No volume-based provisions: n = 6; Unclear whether contract contains volume-based provisions due to redaction: n = 1

*Numbers represent unique contracts.

Table 2. Prevalence of financial incentives and penalties tied to sales volume in contracts between Coca-Cola and Pepsi and large public universities.

	n (%)	Coca-Cola, n (%)	Pepsi, n (%)
Total Contracts	131 (100)	64 (100)	67 (100)
At least 1 type of financial incentive or penalty	124 (95)	60 (94)	64 (96)
Multiple	73 (56)	34 (53)	39 (58)
None	6 (5)	3 (5)	3 (4)
Unclear	1 (1)	0 (0)	1 (1)
Commissions	104 (79)	49 (77)	55 (82)
Uniform across beverage types	55 (42)	17 (27)	38 (57)
Varies across beverage types	43 (33)	28 (43)	15 (22)
Uniform or Variable, depending on setting	1 (1)	1 (2)	0 (0)
Redacted	5 (4)	3 (5)	2 (3)
Rebates	44 (34)	17 (27)	27 (40)
Cases of Bottles and/or Cans	39 (30)	16 (25)	23 (34)
Uniform across beverage types	23 (18)	8 (13)	15 (22)
Varies across beverage types	13 (10)	7 (11)	6 (9)
Redacted	3 (2)	1 (2)	2 (3)
Gallons of Postmix Product	13 (10)	2 (3)	11 (16)
Volume Incentives	49 (37)	20 (31)	29 (43)
Cash payment after minimum volume sold or minimum % growth over previous year	10 (8)	3 (5)	7 (10)
Simple	2 (2)	1 (2)	1 (1)
Stepped	8 (6)	2 (3)	6 (9)
Rebate effective after minimum volume sold or minimum % growth over previous year	35 (27)	16 (25)	19 (28)
Simple	20 (15)	11 (17)	9 (13)
Stepped	15 (11)	5 (8)	10 (15)
Other	5 (4)	2 (3)	3 (4)
Volume Minimum^a	51 (39)	31 (48)	20 (30)
Adjustment	39 (30)	29 (45)	10 (15)
Termination	6 (5)	2 (3)	4 (6)
Extension	5 (4)	1 (2)	4 (6)
Other	8 (6)	3 (5)	5 (7)

All percentages are column percentages.

a Significant difference in prevalence of provision type among Coca-Cola versus Pepsi contracts at p < 0.05 based on χ² test.

Table 3. Cash value of annual revenue from commissions, rebates, and volume incentives in contracts between Coca-Cola and Pepsi and large public universities.

	n	Mean (s.d.)	Min	Max
Commission Revenue ($/bottle)
CSD	83	0.67 (0.16)	0.20	1.06
Water	79	0.65 (0.17)	0.20	1.05
Difference for CSD vs water	79	0.02 (0.06)	−0.10	0.32
Rebate Amount ($/case)
CSD	31	2.14 (1.76)	0.00	8.20
Water	31	2.17 (1.66)	0.00	8.20
Difference for water vs CSD	31	0.03 (0.66)	−2.00	2.00
Minimum or Guaranteed Annual Cash Revenue from… ($)
Incentives^a	38	253,423 (207,604)	25,000	775,000
Total Contract	38	930,153 (745,586)	128,000	2,944,385
Proportion of Annual Contract Cash Revenue from… (%)
Incentives^a	38	29 (19)	9	100

CSD = carbonated soft drink.

a Includes Commissions, Rebates, and/or Volume Incentives.

Table 4. Prevalence of select marketing provisions in contracts between Coca-Cola and pepsi and large public universities.

	Overall n (%)	Coca-Cola, n (%)	Pepsi, n (%)
Total Contracts	131	64	67
Official Sponsor Designation	96 (73%)	45 (70%)	51 (76%)
Official Beverage Designation	96 (73%)	48 (75%)	48 (72%)
Use of University Marks	113 (86%)	54 (84%)	59 (88%)
Sampling	93 (71%)	48 (75%)	45 (67%)
Surveying^a	53 (40%)	46 (72%)	7 (10%)
In-Kind Beverage Product	109 (83%)	52 (81%)	57 (85%)
In-Kind Equipment and Merchandise^a	73 (56%)	29 (45%)	44 (66%)

All percentages are column percentages.

a Significant difference in prevalence of provision type among Coca-Cola versus Pepsi contracts at p < 0.05 based on χ² test.