Subject: CONCESSION AGREEMENT WITH PEPSI BOTTLING GROUP
Adoption of Resolution Authorizing the Director of General Services to execute a five-(5) year concession agreement with Pepsi Bottling Group to provide fountain and vending products, equipment, and marketing opportunities for Happy Hollow Park and Zoo.
BACKGROUND
Happy Hollow Park and Zoo is open to the public daily throughout the year, providing services to over 380,000 people annually. In addition to providing a zoo, playgrounds, puppet theatre and amusement rides, Happy Hollow operates a food and beverage concession. Ongoing efforts to reduce costs, improve efficiency, enhance services to the public and offer a variety of quality products to customers at competitive prices prompted Happy Hollow to solicit proposals from major soft drink vendors to provide a service addressing pricing, equipment, servicing and promotional benefits. In December 1997, the City entered into a five (5) year concession agreement with Pepsi Cola Company to provide beverages, equipment, and marketing support. The agreement expired in August 2001. The current vendor has continued service on a month to month basis pending the outcome of the RFP process.
Parks Recreation and Neighborhood Services Department evaluated the benefits and services and elected to proceed with an RFP to continue with this type of agreement for Happy Hollow Park and Zoo.
A request for proposal was issued August 17, 2001 and was sent to three (3) major beverage vendors, Coca-Cola, 7-Up and Pepsi Cola. On September 14, 2001 two (2) proposals were received; Pepsi Bottling Group and Coca-Cola Bottling Company. An evaluation panel consisting of members from Parks Recreation and Neighborhood Services and General Services Purchasing Division evaluated the two proposals with respect to pricing, marketing package, servicing, and potential profits.
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Pepsi Bottling Group |
Coca-Cola Bottling |
Pricing |
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Post Mix syrup/gal |
$7.61 +$.25/gallon rebate $6.91 for allied brands |
$ 8.40 |
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20 oz. Bottles/case |
$13.96 |
$14.96 |
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20 lb. CO2 |
$15.00 |
$13.00 |
Marketing |
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$5,000 – one time payment first year $4,000 – toward custom vending fronts $1,000 – payment for umbrella and menu boards $3,000 – payment for 600lb ice machine $.25/ gal. rebate toward marketing expenses |
$3,000 annual |
Service |
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Free service and repair of equipment |
Supply, install and maintain fountain equipment |
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Potential Revenue |
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a. Pricing option |
$1.50 – retail price 20oz. vended bottle set by Happy Hollow |
$1.25- retail price 20oz vended bottle set by Coca-Cola |
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b. Vending options |
Offers both full and self service vending options. Self service option will result in commission of 61%, equal to a profit of $21.44/case |
Offers only full service option with a set commission of 35%, equal to a profit of $10.50/ case. |
The panel concluded that Pepsi Bottling Group offered better product pricing, a superior marketing package and greater revenue potential due to the vending/pricing options offered. The service proposal on both bids appeared equal.
The panel determined that Pepsi Bottling Group provided the most advantageous proposal for the City and met all the requirements of the RFP.
Although product expenses for this beverage concession come from the General Fund, product costs have been established so that revenue exceeds expense and thus there is a net gain from beverage sales. In addition, this agreement results in direct marketing support of $5,000 and in-kind support as detailed in the table above.
City of San Jose website.
This memorandum has been coordinated with the City Attorney’s Office, Parks Recreation and Neighborhood Services, and the Budget Office.
Fund: General Fund - 001
Amount: $59,572,435
Budget Document: 2001-2002 Adopted Operating Budget, Page 384
JOSE OBREGON
Director of General Services Department