Snapple in the Apple

Gulp! How Mayor Bloomberg's business pros dribbled their marketing mission

A big part of the rationale for electing a billionaire businessman as mayor was just that: Michael Bloomberg was a businessman, he'd made billions, ergo, he could get the job done.

But consider the flap—now in court—over the Bloomberg administration's maiden voyage into the brave new world of city marketing: its $40 million deal to sell Snapple Beverage Corporation the exclusive right to place its vending machines in city schools, along with a separate, $126 million pact to make Snapple New York's official brand.

Since Bloomberg announced the agreements last fall, city comptroller William Thompson has blasted them as tainted and improper. Last week, Thompson went to court to block the "official beverage" contract, arguing that Bloomberg's aides sidestepped City Charter rules in awarding it. Bloomberg, baring his new tough-guy sneer, dismissed the complaint as "political red tape." Such quibbling, he suggested, threatened some hefty corporate cash for New Yorkers. But just how businesslike has the performance of Bloomberg's team been in handling the Snapple affair?

Not very, according to an audit of the school vending machine contract released by Thompson last month. The audit depicts both outside expert consultants hired by the city and in-house bureaucrats as engaged in bumbling missteps and confusion, while promoting commercialism so crass that even Coca-Cola was appalled. Some examples:

With a pioneering, multimillion-dollar contract in the offing, exactly how did officials go about recruiting possible bidders? Answer: They made a couple of calls. According to the audit, Octagon, the high-priced private marketing firm retained by the Department of Education to handle the project, never sent solicitation letters to would-be vendors. Nor did it advertise. Instead, calls were made to two rather well-known companies, PepsiCo and Coca-Cola (Coke later dropped out, saying it couldn't get adequate information). The five other bidders all said they learned about the city's solicitation from "local vending machine operators." One company, Apple & Eve, told auditors that it learned about the contract opportunity in mid August, only one week before the deadline. In its response, the city said that advertising is ineffective and that Octagon called other firms as well—but they didn't apply.

How many vending machines can fit in the city's schools? This basic question, according to auditors, was a moving target. The outline provided by Octagon to bidders stated that there were 2,500 to 3,000 such machines in the schools. Was that a minimum? A maximum? A guess? One company, Veryfine, said that it was told that 3,000 was the limit. Snapple said it thought it was the minimum. Even those evaluating the bids expressed confusion. Octagon said it wanted to leave room for other vendors to provide milk and snack machines; agency officials said they wanted to keep the number secret to help evaluate the bids. The city response to the audit stated that Octagon and the agency "quite consciously" didn't set a figure.

Were teachers' lounges included? Three of five losing bidders said Octagon told them not to include them. Two others said they were told the opposite. The education department demonstrated just how confused it was on this score when it sought new bids for beverage vending machines in employee lounges just as it was agreeing to have Snapple provide 500 such machines. The new bids had to be cancelled.

How many ads can be beamed at school kids? Octagon's bidders' information package suggested that the lucky winner could place "six pages of advertising" in student planners, and affix its logo on "725 outdoor [basketball] backboards." Such product placements, Octagon said, offered a potential for 97.2 million annual "corporate identity impressions" on students. Logos placed in "general use facilities" could yield an additional 134 million such hits. Auditors said this approach runs afoul of state education policy, a claim the city denies. But Coca-Cola told auditors such direct targeting of students was "appalling," and even Snapple decided to forego the student planner and backboard ads.

Was Snapple's offer the highest bid? The mayor says yes; the comptroller said Snapple came in low, but hiked its bid significantly after Octagon and the director of the city's new Marketing Development Corporation drove to Snapple headquarters in White Plains to urge the firm to do so. Snapple was also preferable, the city said, because it is a popular brand with school kids. But Thompson said he found no evidence of market research to back the claim, despite city insistence that it had such information. Either way, both sides agree that the new 100 percent juice drinks proposed by Snapple for the schools had never been market tested anywhere before they were accepted by the city.

How did New York become Snapple country? The audit cites an exchange of e-mails between city officials and consultants, written on the eve of Snapple's selection, in which the controversial decision to dramatically expand the deal to include a citywide marketing arrangement was made. The decision was prompted by a desire to leave an opening for another city partnership with a carbonated soda firm, and also created a bias toward bigger firms that could handle a larger citywide deal, Thompson said.

In an April 12 letter ordering the comptroller to register the citywide contract, Bloomberg called the Snapple agreements "praiseworthy," but admitted problems. "They have not been the product of a perfected process that the city will seek to replicate in the future," wrote the mayor.

 
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