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01.17.2018

Why Coke & Pepsi Care That the Healthcare Sector Now Employs the Most People in the U.S.

By Tim Richardson

With so many troubling and consequential issues swirling about in the minds of hospital executives these days, I bet that you are not wondering about what beverage company executives think about the large and growing number of employees on your campuses. 

That’s understandable, but, if so, you’re probably overlooking a sure source of significant cost savings and new, non-traditional revenue. 

In short, beverage company executives certainly know that the healthcare sector now employs the most people in the United States. And these same executives are eager to supply these workers with their full spectrum of products—especially all the healthier water, tea and juice beverages that have been launched in the last five to ten years. 

Your employees consume a lot of beverages during the course of their average day on campus, and they are precisely the kind of consumers that beverage companies want to attract: educated, discriminating, influential and affluent relative to the population at large.

By forming a direct, exclusive distribution partnership with a hospital system, beverage companies are assured of getting the two things they most covet—large, predictable volumes of product sold and regular opportunities to form positive impressions with highly desirable consumers.

It doesn’t matter if you self-operate your own cafeterias and patient feeding operations, or if you outsource all of this to a third-party concessionaire. Under either operating model, the beverage companies prefer to have a long-term, direct relationship with the party that ultimately owns and operates the campus, i.e., you.

Of course, beverage companies will collaborate with and work through intermediary parties like your cafeteria concessionaires (if you have them) or your GPO, but they would prefer to have a direct agreement with the hospital system itself. And your hospital system will definitely benefit the most from having its own, direct partnership with a beverage company. (This is analogous to the situation at every college and university in America. Most of these schools have cafeteria concessionaires and GPOs, but they all have their own, direct agreement with Coca-Cola or Pepsi.)

How much money are we talking about?

If your hospital system employs 2,000 or more people, you can save or make hundreds of thousands of dollars through a direct agreement with Coca-Cola or Pepsi. If your system employs 5,000 or more people, you can save or make millions. And this is all true, net, bottom line financial impact.

What does this phrase “save or make” mean? Simply put, if you are currently paying the bills for all the beverages distributed or sold on your campuses, then the typical beverage agreement would be structured to deliver the maximum possible savings on your current spend. Practically speaking, this means getting the lowest net invoice prices by having the greatest fixed marketing funds and volume-based rebates possible.

(As a quick aside, it is critically important that you understand that the large beverage companies are first and foremost consumer-focused packaged goods companies. They are brand-building, marketing companies. They are not commodity suppliers, and they never want to compete on price alone. Very low net prices are achievable, but only by securing significant marketing funds and marketing-augmented rebates. This is achieved by engaging with them as global marketing leaders, not as business-to-business suppliers eager to trade lower price for committed volumes.)

If you have a concessionaire who is currently paying the bills for all beverages, then the typical beverage agreement would be structured to deliver the maximum possible incremental funding that is paid directly to you for the exclusivity you grant on your campuses. This is exactly the kind of agreement that every sports stadium or concert arena has with Coca-Cola or Pepsi. In this scenario, the hospital system is awarded significant, new, incremental dollars that they previously did not get.

Exclusive Beverage Deals Increase Employee Satisfaction

After doing this work for over thirteen years now and negotiating exclusive pouring rights agreements for over 750 hospitals large and small, coast-to-coast, I know that sooner or later I will be asked this particular question by every hospital executive: “Won’t our staff get upset if we take away choice and consolidate down to one beverage company supplier?”

The answer, emphatically, is “no.” By way of explanation, I’ll cover just a three of the reasons why this is true.

First, if you currently have both Coca-Cola and Pepsi products on your campuses, you are already, by default, limiting consumer choice in the worst way possible. If this is your current situation, then both Coca-Cola and Pepsi are primarily merchandising and marketing their main core soft drink brands because they feel like they must. The shelves in your cafeterias are inevitably crowded with each beverage company’s top-selling, iconic brands, many of which are their least-innovative, least-healthy options: full sugar Coca-Cola, full sugar Sprite, full sugar Pepsi, full sugar Mountain Dew, etc. 

In this way, your patients, visitors and staff are presented with each beverage company’s biggest selling but least innovative brands at the expense of their newer, more innovative, healthier brands. For example, if you have both Coca-Cola and Pepsi competing for sales on your campus, Coca-Cola is not going to prominently market and merchandise its Zico Coconut Water product at the expense of its own classic soft drink brands and against Pepsi’s classic soft drink brands. But, if you have an exclusive partnership with Coca-Cola, then Coca-Cola will be free to prominently market and merchandise not only its core brands but also its newer, more innovative brands like Zico Coconut Water, Sparkling Dasani Water, Honest Tea and Odwalla organic juices. 

It may seem counter-intuitive, but it is precisely by going exclusive with one of the two major beverage companies that you ensure that your patients, visitors and staff will have the most variety of beverages to choose from.

Your employees—probably more so than the average American consumers—want to try and to keep drinking newer, healthier beverage products. By securing a direct, exclusive agreement with either Coca-Cola or Pepsi, you are ensuring that your employees will have more access to such products.

A second reason why exclusive pouring rights agreements don’t cause employees to feel like they have been denied choice is that they currently don’t have—and don’t expect—choice between Coca-Cola and Pepsi products in almost any other environment in which they find themselves.

When they are on a college campus, at a restaurant, at a sporting event, at the movie theater, on a plane, at a hotel, at a trade show, at a theme park, at an Interstate highway rest stop, or most anywhere else they find themselves, they do not have a choice between Coca-Cola and Pepsi products. All of these other venues are exclusive with one of the two big beverage companies.

Just about the only two places where consumers do see Coca-Cola and Pepsi products side by side are grocery stores and gas station convenience stores. That’s it. And they don’t expect to encounter both product portfolios anywhere else.

A third reason why employees are neutral to mostly positive in their reactions to an exclusive pouring rights agreement involves better beverage dispensing equipment. When done correctly, every new exclusive pouring rights agreement comes with brand new—and freely provided—fountain machines, coolers, ambient merchandising racks and the most modern vending machines. 

Employees on campus notice and appreciate the equipment upgrades. New equipment from both Coca-Cola and Pepsi increase choice at the point of sale, speed up the buying process, use less energy and are easier to stock and service than older equipment. Employees especially appreciate technology upgrades like cash-less vending machines that accept debit and credit cards. 

Leverage the Healthcare Sector’s Overall Employment Growth to your Benefit

The size of workforce in healthcare will continue to grow over the next few years. While this presents many challenges to hospital executives, it also presents opportunities. 

Securing a best-in-class exclusive pouring rights agreement with one of the big beverage companies is just such an opportunity. 

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Join over 10k other industry experts who receive Enliven's advice direct to their inboxes.

01.17.2018

Why Coke & Pepsi Care That the Healthcare Sector Now Employs the Most People in the U.S.

By Tim Richardson

With so many troubling and consequential issues swirling about in the minds of hospital executives these days, I bet that you are not wondering about what beverage company executives think about the large and growing number of employees on your campuses. 

That’s understandable, but, if so, you’re probably overlooking a sure source of significant cost savings and new, non-traditional revenue. 

In short, beverage company executives certainly know that the healthcare sector now employs the most people in the United States. And these same executives are eager to supply these workers with their full spectrum of products—especially all the healthier water, tea and juice beverages that have been launched in the last five to ten years. 

Your employees consume a lot of beverages during the course of their average day on campus, and they are precisely the kind of consumers that beverage companies want to attract: educated, discriminating, influential and affluent relative to the population at large.

By forming a direct, exclusive distribution partnership with a hospital system, beverage companies are assured of getting the two things they most covet—large, predictable volumes of product sold and regular opportunities to form positive impressions with highly desirable consumers.

It doesn’t matter if you self-operate your own cafeterias and patient feeding operations, or if you outsource all of this to a third-party concessionaire. Under either operating model, the beverage companies prefer to have a long-term, direct relationship with the party that ultimately owns and operates the campus, i.e., you.

Of course, beverage companies will collaborate with and work through intermediary parties like your cafeteria concessionaires (if you have them) or your GPO, but they would prefer to have a direct agreement with the hospital system itself. And your hospital system will definitely benefit the most from having its own, direct partnership with a beverage company. (This is analogous to the situation at every college and university in America. Most of these schools have cafeteria concessionaires and GPOs, but they all have their own, direct agreement with Coca-Cola or Pepsi.)

How much money are we talking about?

If your hospital system employs 2,000 or more people, you can save or make hundreds of thousands of dollars through a direct agreement with Coca-Cola or Pepsi. If your system employs 5,000 or more people, you can save or make millions. And this is all true, net, bottom line financial impact.

What does this phrase “save or make” mean? Simply put, if you are currently paying the bills for all the beverages distributed or sold on your campuses, then the typical beverage agreement would be structured to deliver the maximum possible savings on your current spend. Practically speaking, this means getting the lowest net invoice prices by having the greatest fixed marketing funds and volume-based rebates possible.

(As a quick aside, it is critically important that you understand that the large beverage companies are first and foremost consumer-focused packaged goods companies. They are brand-building, marketing companies. They are not commodity suppliers, and they never want to compete on price alone. Very low net prices are achievable, but only by securing significant marketing funds and marketing-augmented rebates. This is achieved by engaging with them as global marketing leaders, not as business-to-business suppliers eager to trade lower price for committed volumes.)

If you have a concessionaire who is currently paying the bills for all beverages, then the typical beverage agreement would be structured to deliver the maximum possible incremental funding that is paid directly to you for the exclusivity you grant on your campuses. This is exactly the kind of agreement that every sports stadium or concert arena has with Coca-Cola or Pepsi. In this scenario, the hospital system is awarded significant, new, incremental dollars that they previously did not get.

Exclusive Beverage Deals Increase Employee Satisfaction

After doing this work for over thirteen years now and negotiating exclusive pouring rights agreements for over 750 hospitals large and small, coast-to-coast, I know that sooner or later I will be asked this particular question by every hospital executive: “Won’t our staff get upset if we take away choice and consolidate down to one beverage company supplier?”

The answer, emphatically, is “no.” By way of explanation, I’ll cover just a three of the reasons why this is true.

First, if you currently have both Coca-Cola and Pepsi products on your campuses, you are already, by default, limiting consumer choice in the worst way possible. If this is your current situation, then both Coca-Cola and Pepsi are primarily merchandising and marketing their main core soft drink brands because they feel like they must. The shelves in your cafeterias are inevitably crowded with each beverage company’s top-selling, iconic brands, many of which are their least-innovative, least-healthy options: full sugar Coca-Cola, full sugar Sprite, full sugar Pepsi, full sugar Mountain Dew, etc. 

In this way, your patients, visitors and staff are presented with each beverage company’s biggest selling but least innovative brands at the expense of their newer, more innovative, healthier brands. For example, if you have both Coca-Cola and Pepsi competing for sales on your campus, Coca-Cola is not going to prominently market and merchandise its Zico Coconut Water product at the expense of its own classic soft drink brands and against Pepsi’s classic soft drink brands. But, if you have an exclusive partnership with Coca-Cola, then Coca-Cola will be free to prominently market and merchandise not only its core brands but also its newer, more innovative brands like Zico Coconut Water, Sparkling Dasani Water, Honest Tea and Odwalla organic juices. 

It may seem counter-intuitive, but it is precisely by going exclusive with one of the two major beverage companies that you ensure that your patients, visitors and staff will have the most variety of beverages to choose from.

Your employees—probably more so than the average American consumers—want to try and to keep drinking newer, healthier beverage products. By securing a direct, exclusive agreement with either Coca-Cola or Pepsi, you are ensuring that your employees will have more access to such products.

A second reason why exclusive pouring rights agreements don’t cause employees to feel like they have been denied choice is that they currently don’t have—and don’t expect—choice between Coca-Cola and Pepsi products in almost any other environment in which they find themselves.

When they are on a college campus, at a restaurant, at a sporting event, at the movie theater, on a plane, at a hotel, at a trade show, at a theme park, at an Interstate highway rest stop, or most anywhere else they find themselves, they do not have a choice between Coca-Cola and Pepsi products. All of these other venues are exclusive with one of the two big beverage companies.

Just about the only two places where consumers do see Coca-Cola and Pepsi products side by side are grocery stores and gas station convenience stores. That’s it. And they don’t expect to encounter both product portfolios anywhere else.

A third reason why employees are neutral to mostly positive in their reactions to an exclusive pouring rights agreement involves better beverage dispensing equipment. When done correctly, every new exclusive pouring rights agreement comes with brand new—and freely provided—fountain machines, coolers, ambient merchandising racks and the most modern vending machines. 

Employees on campus notice and appreciate the equipment upgrades. New equipment from both Coca-Cola and Pepsi increase choice at the point of sale, speed up the buying process, use less energy and are easier to stock and service than older equipment. Employees especially appreciate technology upgrades like cash-less vending machines that accept debit and credit cards. 

Leverage the Healthcare Sector’s Overall Employment Growth to your Benefit

The size of workforce in healthcare will continue to grow over the next few years. While this presents many challenges to hospital executives, it also presents opportunities. 

Securing a best-in-class exclusive pouring rights agreement with one of the big beverage companies is just such an opportunity. 

Subscribe to Enliven

Join over 10k other industry experts who receive Enliven's advice direct to their inboxes.

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We Don't Want Your Money

We want to dramatically increase how much money you make - or save - with respect to beverages. And then we want to take a small percentage of that new money that we earned for you. That’s our pay-for-performance model. It ensures that our incentives are aligned. It's why our clients think of us as a true strategic business partner and not just a vendor.

Let's Start a Conversation

We Don't Want Your Money

We want to dramatically increase how much money you make - or save - with respect to beverages. And then we want to take a small percentage of that new money that we earned for you. That’s our pay-for-performance model. It ensures that our incentives are aligned. It's why our clients think of us as a true strategic business partner and not just a vendor.

Let's Start a Conversation