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New skirmish in Illinois cola wars

Posted September 11, 2007 11:00 pm

Mike Ramsey

The state's recent decision to award an exclusive vending contract to Pepsi has left a bad taste with rival Coca-Cola officials, who have challenged the pending deal.

The Illinois Department of Revenue announced in late July it intends to strike a 10-year arrangement with PepsiAmericas Inc. of Schaumburg to stock soft drinks in nearly 2,400 vending machines at most state-owned properties. The deal would net for state government coffers and four participating universities between $14.4 million and $64.2 million over a decade, depending on sales, the agency has estimated.

The other soda giant that sought the contract, Coca-Cola Bottling Co. of Chicago, is formally protesting Pepsi's selection. Kevin Morris, the company's vice president of public affairs and communications, sent an Aug. 3 letter to Revenue officials alleging the state did not provide "critical information" to Coke earlier this year as it sought to make an offer.

Morris on Tuesday said Coke did not submit a formal bid because the bottler needed clarifications about the state's "request for proposals," or RFP, on the soda contract. He said the company instead provided the state with the "general financial parameters" of a proposal while seeking the details.

Among the questions Coke had, Morris said, was whether the company was obligated to install debit-card technology on all soft-drink vending machines. Coke also wanted an explanation of the circumstances under which the state could cancel the contract on short notice, he said.

"We were trying our very hardest to respond to state's request," Morris said.

Revenue department spokeswoman Katherine Ridgeway said agency officials are reviewing Coke's objection, a process that will delay finalization of the Pepsi contract. A written response to Coke was expected "soon," she said in an e-mail.

Ridgeway declined to respond to Coke's central complaint - that state officials ignored the company's inquiries.

"There are pretty narrow grounds on which a protest can be made," she said. "Not liking the outcome is not one of them."

Morris, in his protest letter to the Department of Revenue, said Coke representatives attempted to get information from state officials in correspondence, meetings and phone conversations between late February and late June. Ridgeway said the deadline for submitting a final bid was Feb. 23.

The revenue agency said late last year that it would seek an exclusive soft-drink vending arrangement to replace the patchwork of contracts at public sites that generate, collectively, about $400,000 each year.

The centralized deal with Pepsi would cover state buildings, parks, interstate rest stops and prisons under the jurisdiction of Gov. Rod Blagojevich's administration, but not Springfield's state Capitol complex, which is under the secretary of state's office. It also would include vending rights at the Illinois State Fair.

The four universities that would take part in the Pepsi deal are Northeastern Illinois University in Chicago and the University of Illinois campuses in Champaign-Urbana, Springfield and Chicago. The Champaign-Urbana campus has had an exclusive vending agreement with Coke, university spokesman Thomas Hardy said.

Although the universities can still opt out of the Pepsi-only deal, the U of I intends to participate, Hardy said.

The Pepsi contract, if it comes to fruition, would be the first statewide beverage deal in the nation, state officials have said. They have acknowledged that consumers who prefer Coke may be disappointed with the Pepsi deal.

Under it, the state reportedly would get a 45 percent to 50 percent commission on Pepsi sales. The state and four universities would be guaranteed a minimum of $14.4 million over the 10-year contract but are expected to collect much more, the revenue department has said.

PepsiAmericas is represented by lobbyist William Filan, a cousin of top Blagojevich aide John Filan. Ridgeway, the revenue agency spokeswoman, said the lobbyist's relationship had no bearing on the awarding of the contract.

Mike Ramsey can be reached at (312) 857-2323 or ghns-ramsey@sbcglobal.net.

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