2011-27704 Reso RESOLUTION NO. 2011 -27704
A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY
OF MIAMI BEACH , FLORIDA, APPROVING THE SUBSTANTIVE TERMS
OF AN AGREEMENT BETWEEN THE CITY AND COCA COLA FOR AN
EXCLUSIVE NON - ALCOHOLIC BEVERAGE MUNICIPAL MARKETING
PARTNERSHIP FOR VENDING AND DISPENSING IN CERTAIN CITY -
OWNED PROPERTIES, WITH SAID PROPOSED AGREEMENT HAVING
AN INITIAL TERM OF TEN(10) YEARS; AUTHORIZING THE CITY
MANAGER AND CITY ATTORNEY'S OFFICE TO NEGOTIATE AND DRAFT
THE FINAL AGREEMENT, BASED UPON THE APPROVED TERMS (AS
FURTHER REFERENCED IN THE TERM SHEET ATTACHED AS EXHIBIT
"A" TO THIS RESOLUTION); AND AUTHORIZING THE MAYOR ANb CITY
CLERK TO EXECUTE THE FINAL AGREEMENT; PROVIDED, HOWEVER,
THAT IN THE EVENT THAT THE FINAL NEGOTIATED AGREEMENT
INCLUDES ANY TERM OR TERMS WHICH SUBSTANTIALLY DEVIATE
FROM THE APPROVED SUBSTANTIVE TERMS (AS REFERENCED IN
THE ATTACHED TERM SHEET), OR CONTAIN NEW AND /OR
ADDITIONAL TERMS WHICH, IN THE CITY MANAGER AND CITY
ATTORNEY'S OPINION, MATERIALLY ALTER THE PROPOSED
TRANSACTION (AS REFERENCED IN THE APPROVED TERM SHEET),
THEN REQUIRING THAT THE FINAL NEGOTIATED AGREEMENT TO BE
BROUGHT TO THE CITY COMMISSION FOR ITS CONSIDERATION.
WHEREAS, the City has been actively pursuing opportunities to leverage its strong
brand presence by partnering with corporate entities in a manner that generates good publicity
and marketing for the City, while at the same time generating revenue or providing savings to
the City; and
WHEREAS, the City's municipal marketing consultant, The Superlative Group (TSG),
worked with staff to identify priorities for their initial efforts in securing municipal marketing
partners, and identified non - alcoholic beverage partnerships as a target category!,; and
WHEREAS, TSG initiated a selection process to identify and recommend an
exclusive /official non - alcoholic beverage partner for the City, with the goal of identifying a
partner that would be interested in a brand affiliation relationship with the City, and providing a
marketing benefit to both parties, as well as revenue generation for the City; and
WHEREAS, TSG initiated a process that involved the initial identification of potential
respondents; an invitation for those companies to submit proposals; the selection of the best
two potential partnership offers for the submission of a "best and final" offer; and the
recommendation of a final offer for the City to consider; and
WHEREAS, TSG invited two proposers to submit "best and final" offers and, subsequent
to their submission and presentation, recommended to the City the selection of Coca -Cola
Refreshments (Coca -Cola) as the City's exclusive non - alcoholic beverage sponsor, based on
the terms proposed and attached hereto as Exhibit "A "; and
WHEREAS, at its April 27, 2011 meeting the Finance and Citywide Projects Committee
discussed and approved the proposed partnership agreement between the City and Coca -Cola,
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subject to clarification of certain items required by the City, which has been obtained and
incorporated into the attached term sheet; and
WHEREAS, the Administration has reviewed the proposal submitted by Coca -Cola and
finds it to be in the best interest to the City by providing both a financial and marketing benefit of
more than $7 million to the City over the proposed ten -year term of the partnership (cash and
non -cash value).
NOW, THEREFORE, BE IT RESOLVED BY THE MAYOR AND CITY COMMISSION
OF THE CITY OF MIAMI BEACH, FLORIDA, that the Mayor and City Co mission hereby
approve the substantive terms of an agreement between the City and C ca -Cola for an
exclusive non - alcoholic beverage municipal marketing partnership for vending a d dispensing in
certain city -owned properties, with said proposed agreement having an initial term of ten (10)
years; authorizing the City Manager and City Attorney's office to negotiate and draft the final
agreement, based upon the approved terms (as further referenced in the term sheet attached as
Exhibit "A" to this resolution); and authorizing the Mayor and City Clerk to a ecute the final
agreement; provided, however, that in the event that the final negotiated agr ement includes
any term or terms which substantially deviate from the approved substa tive terms (as
referenced in the attached term sheet), or contain new and /or additional terms hich, in the City
Manager and City Attorney's opinion, materially alter the proposed transaction (s referenced in
the approved term sheet), then requiring that the final negotiated agreement to bje brought to the
City Commission for its consideration.
PASSED and ADOPTED this / 3i day of Tilly , 2011.
ATTEST:
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CITY CL T , � � �� 4 AYOR
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APPROVED AS TO
FORM & LANGUAGE
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COMMISSION ITEM SUMMARY
Condensed Title:
A Resolution Of The Mayor And City Commission Of The City Of Miami Beach , Florida, Approving The Substantive
Terms Of An Agreement Between The City And Coca Cola For An Exclusive Non-Alcoholip Beverage Municipal
Marketing Partnership For Vending And Dispensing In Certain City -Owned Properties,' With Said Proposed
Agreement Having An Initial Term Of Ten(10) Years; Authorizing The City Manager And City Attorney's Office To
Negotiate And Draft The Final Agreement, Based Upon The Approved Terms (As Further Referenced In The Term
Sheet Attached As Exhibit "A."
Key Intended Outcome Supported:
Improve the City's Overall Financial Health and Maintain Overall Bond Rating;
Supporting Data (Surveys, Environmental Scan, etc.): N/A
Issue:
Shall the Mayor and City Commission approve an exclusive non - alcoholic beverage partnership agreement with Coca -Cola,
providing revenues and marketing opportunities with a value (cash and non -cash) of more than $7 million over the term?
Item Summary/Recommendation:
The City has been actively pursuing opportunities to leverage its strong brand presence by partnering with corporate
entities to enhance marketing /brand awareness for the City, while also generating revenue or savings to the City. The City's
municipal marketing consultant, The Superlative Group (TSG), identified an exclusive non - alcoholic beverage partnership
as a viable concept for the City and initiated a process on behalf of the City to recommend a municipal marketing partner for
this area. This process concluded in the receipt of two "best and final" proposals, from Pepsi Bottling and Coca -Cola
Refreshments, each of which included revenue and marketing components. Based on the proposals received, TSG
recommended the selection of Coca -Cola as the exclusive non - alcoholic beverage sponsor. The proposed initial term of the
partnership agreement is for ten (10) years. Coca -Cola proposes to pay the City a signing bonus, annual sponsorship fee
and a percentage commission on vending. Additionally, Coca - Cola's proposal includes a total of chore than $2,000,000 in
value of marketing support, as well as investing in recycling as official sponsor ($15,000 - $25,000), an equipment
investment, an additional $17,500 in community support (cash), products for a Product Bank ($40,500), the Coca -Cola
would become the exclusive beverage sold /served at our Golf Clubs, Convention Center and public beachfront
concessions, as well as in vending machines and City- sponsored events . Additional terms and conditions are delineated in
the Term Sheet attached. The total value (cash and non -cash) of the agreement is more than $7 rhillion over the term of the
agreement (almost $5 million in cash).
The City currently has a vending machine program, and our City -owned assets currently have individual beverage
agreements with different terms and benefits; the development of this program allows the City to package these resources
together in a manner that provides not only greater benefits for the City. Coca -Cola is an excellent, well - established
company with the top two "sparkling" drink brands in the market, providing opportunities for the City to leverage their
marketing strength. It is recommended that the Mayor and Commission approve the proposed partnership
agreement with Coca -Cola.
Advisory Board Recommendation:
Finance and Citywide Projects Committee 4/27/11; approved and forwarded to Commission with request for clarification on
certain City requirements.
Financial Information:
Source of Funds: Amount Account Approved
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OBPI Total
Financial Impact Summary: Total cash value to City is estimated at $4,658,470 over the 10 -year term: $400,000,
signing bonus; $325,000 per year sponsorship fee; $900,970 estimated Commissions, per year; recycling program cash
investment (one- time): $15,000 - $25,000; community support investment (one- time): $17,500. First year payment to be
adjusted for credit to Coca -Cola of $29,615.30 for remaining Convention Center contract term. Non -cash value
approximately $2.4 million over term. TSG will receive commissions based on the commission structure in their consultant
agreement with the City, net of any credit due the City pursuant to their consultant agreement(s).
City Clerk's Office Legislative Tracking:
Sign -Offs:
Department Director Assi t " Manager ity Manager • .../T/ 1 � '
MIAMIBEACH AGEND ITEM /??,/.
DATE x7//.34117 a
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n MIA AA BEACH
City of Miami Beach, 1700 Convention Center Drive, Miami Beach, Florida 33139, www miamibeachfl.gov
COMMISSION MEMORANDUM
TO: May y Matti Herrera Bower and Members of the City Commission
FROM: Joie e j onzalez, City -
DATE: July 13, 2011
SUBJECT: A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI
BEACH , FLORIDA, APPROVING THE SUBSTANTIVE TERMS OF AN AGREEMENT
BETWEEN THE CITY AND COCA COLA FOR AN EXCLUSIVE NON - ALCOHOLIC
BEVERAGE MUNICIPAL MARKETING PARTNERSHIP FOR VENDING AND
DISPENSING IN CERTAIN CITY -OWNED PROPERTIES, WITH SAID PROPOSED
AGREEMENT HAVING AN INITIAL TERM OF TEN (10) YEARS; AUTHORIZING THE
CITY MANAGER AND CITY ATTORNEY'S OFFICE TO NEGOTIATE AND DRAFT THE
FINAL AGREEMENT, BASED UPON THE APPROVED TERMS (AS FURTHER
REFERENCED IN THE TERM SHEET ATTACHED AS EXHIBIT "A" TO THIS
RESOLUTION); AND AUTHORIZING THE MAYOR AND CITY CLERK TO EXECUTE
THE FINAL AGREEMENT; PROVIDED, HOWEVER, THAT IN THE EVENT THAT THE
FINAL NEGOTIATED AGREEMENT INCLUDES ANY TERM OR TERMS WHICH
SUBSTANTIALLY DEVIATE FROM THE APPROVED SUBSTANTIVE TERMS (AS
REFERENCED IN THE ATTACHED TERM SHEET), OR CONTAIN NEW AND /OR
ADDITIONAL TERMS WHICH, IN THE CITY MANAGER AND CITY ATTORNEY'S
OPINION, MATERIALLY ALTER THE PROPOSED TRANSACTION (AS REFERENCED
IN THE APPROVED TERM SHEET), THEN REQUIRING THAT THE FINAL
NEGOTIATED AGREEMENT TO BE BROUGHT TO THE CITY COMMISSION FOR ITS
CONSIDERATION.
BACKGROUND:
The City has been actively pursuing opportunities to leverage its strong brand presence by partnering with
corporate entities in a manner that generates good publicity and marketing for the City, while at the same time
generating revenue or providing savings to the City. The City's municipal marketing consultant, The
Superlative Group (TSG), worked with staff to identify priorities for their initial efforts, while other activities
were identified that would be pursued internally with the City's Development Coordinator. The Development
Coordinator serves as the contract support staff for TSG.
TSG's initial efforts focused on identifying potential municipal marketing partners in target categories, and
reaching out to these potential partners to gauge interest. The current economic conditions have impacted
the marketing budgets for many large corporations that have a history of engaging in these types of
partnerships. As you may be aware, municipal marketing efforts are funded principally from marketing
budgets as they serve the primary purpose of promoting the corporation's brand and /or product. Not
surprisingly, marketing budgets in large organizations have been impacted and are often the first areas
affected when cost - cutting measures are initiated.
While we continue to pursue various efforts both in municipal marketing as well as new advertising
opportunities, we made considerable progress in the area of securing an Exclusive /Official citywide non-
alcoholic Beverage partner.
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Exclusive Non - Alcoholic Beverage Partnership
ANALYSIS:
TSG initiated a selection process for the identification of an exclusive /official non - alcoholic beverage partner
for the City. TSG has managed successful non - alcoholic beverage partnerships in the past and identified this
as an area of opportunity for both the City and the municipal partner. The goal of the process was to identify a
partner that would be interested in a brand affiliation relationship with the City that provides a marketing
benefit to both parties. The relationship, however, is not only intended to increase the presence of the brand
in our City, but also to generate volume sales for the beverage company. As such, any potential exclusive
non - alcoholic beverage partnership would consider the opportunities available in our City not only for
marketing purposes in terms of impressions, but also opportunities for the sale of their beverage program.
In developing the concept of a non - alcohol beverage partnership for the City, it was considered that marketing
opportunities perhaps most often pursued by non - alcoholic beverage sponsors might not be as readily
available as in other cities or public institutions. For example, certain marketing opportunities may be limited
in our City in light of preferences in terms of the preservation of our historic areas and the resulting limitations
likely to be imposed relative to any logo placement, signage, etc. In terms of sales opportunities, they would
relate only to facilities under the control (direct or indirect) of the City.
Current Opportunities:
Comparable to other, similar partnerships, the selected entity would have exclusive vending rights at all City
facilities, as well as "pouring rights" at certain City -owned facilities, including those currently managed by third
parties for the City. Pouring rights refers to dispensed non - alcoholic beverages or beverages sold via
concession, as compared to being sold through a vending machine. Because the City's vending program is
currently very limited with only 45 beverage vending machines on average in operation in City -owned
facilities, for purposes of maximizing the benefits for a potential beverage partner, the proposed partnership
includes pouring rights in both of our golf clubs, the Miami Beach Convention Center and our public
beachfront concession areas (currently nine public concession locations).The management or contracted
companies for these respective City facilities will be required to participate in the City's selected beverage
program, with all revenues relating to sponsorship and commissions, as well as marketing support, benefiting
the City directly.
Process:
As noted in the attached letter to the City from TSG (Exhibit B), TSG managed the process relating to the
Exclusive Beverage Partner program on behalf of the City. In summary, TSG's process involved
• the initial identification of potential respondents;
• an invitation for those companies to submit proposals;
• the selection of the best two potential partnership offers for the submission of a "best and final" offer;
and
• the recommendation of a final offer for the City to consider.
TSG's involvement has included analysis of comparable partnerships, and providing these potential partners
with information relating to the City and opportunities. TSG remained in contact with potential partners before
and during this process. This included gathering information on current venues, volumes and deal structures.
TSG has been the point of contact with potential respondents and has been in regular communication with
those entities.
A "Question and Answer" session with prospective partners was held on January 18 Three prospective
partners attended: Pepsi Beverages Company (Pepsi), Dr. Pepper /Snapple and Coca -Cola Refreshments
(Coca - Cola). Following the Q and A session, prospective partners were offered the opportunity to tour the City
to see the current vending locations, as well as to visit the golf clubs, convention center and public beachfront
concession areas to see their current operations and opportunities; all three prospective partners toured the
City. All prospective partners were advised that the City would be open to additional vending machine
locations, subject to our review and approval.
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Exclusive Non - Alcoholic Beverage Partnership
Representatives from key departments (Parks and Recreation, Tourism and Cultural Development, Real
Estate, Housing and Community Development/Asset Management), the City Manager's office and from the
golf clubs and convention center were present as the two "best and final" offers were presented in person to
TSG. The City representatives had an opportunity to ask for clarification or additional information on the
proposed partnership plan, if needed. The two presentations were from Pepsi Beverages and Coca Cola.
Proposal components:
TSG advised prospective proposers of the City's interest in an Exclusive Non- Alcoholic �Beverage Partner and
the availability of opportunities from this partnership. In addition to information on vol mes, venues, current
pricing, etc., TSG also advised the prospective proposers of our interest in securing a partner that provided
an annual sponsorship fee, as well as a comprehensive marketing plan to enhance the presence of both
brands, and in particular the Miami Beach brand. TSG recommended a minimum ten -year term for the
partnership which is not only consistent with typical Exclusive Non - Alcoholic Beverage partnerships, but also
creates an incentive for prospective proposers — as the selected partner will have xclusive rights for an
extended time — sufficient to amortize any capital investment, and to establish their presence in the market.
Best and Final offers:
Based on TSG review of the initial proposals submitted, Pepsi and Coca -Cola were invited to submit a "best
and final" offer. Pepsi and Coca -Cola control the largest share of the non - alcoholic beverage industry, with
Coca -Cola owning the top two brands for "sparkling beverage" — Coke and Diet Coke. Both companies offer a
diverse sampling of products, ranging from the traditional carbonated drinks, to bottled water, juices (fruit and
vegetable), sport drinks, energy drinks and ready to drink teas, among other products. Both are full - service
companies, meaning that they will provide all vending and dispensing equipment, as well as the required
servicing /maintenance, and handle all distribution to the venues and machines. Each has embarked on new
programs and strategies relating to their equipment, such as cashless vending (credit card reader machines)
and interactive vending machines. Both companies enjoy a strong brand presence, with existing partnerships
that include professional sports and large events, as well as well -known venues. Each company represents a
great potential partner.
Both Pepsi and Coca -Cola presented proposals that provide for a combination of an annual "sponsorship" fee
and an initial ( "signing ") bonus, as well as a structure for additional revenues to the City from sale of product
(either vending or dispensed). The additional revenue is mainly derived from commissions on sales, with
Pepsi also offering a rebate program. Both companies provided product pricing proposals, as it was essential
that proposed pricing be competitive with current pricing at our venues. The proposals also delineated
potential marketing opportunities from the partnership. While the financial proposals varied, so did the
approach to the marketing partnership, with Coca -Cola proposing a more comprehensive marketing program
to the City. Below are the major deal points of the proposals:
• Sponsorship fee: Both Coca -Cola and Pepsi submitted a proposed annual sponsorship fee
• Signing fee: Both proposers submitted signing bonuses. These are one -time payments made at or
shortly after execution.
• Commissions /Pricing /Rebates: Both proposers submitted similar commission structures ( %) for
vending. The City's revenues from commissions would increase as business is built over the term of
the agreement. Needless to say, it is in both the City and the partner's best interest to increase
potential sales volumes, and volumes are expected to increase based on the proposed marketing
approach and placement of additional vending machines (from 45 to 100, consistent with the current
city- approved vending program), as well as the implementation of credit card readers on vending
machines. It is important to note that the City's current beverage vending program, as well as the
beverage vendor for the golf clubs, convention center and for our public beachfront concessionaire, is
Coca -Cola. In terms of pricing it was desired that the unit pricing proposed provided an equivalent or
better deal for our current third -party operators, such as the convention center, golf clubs and public
beach concessions. As all three City vendors (PCM, Global Spectrum and Boucher Brothers)
negotiated their agreements independently with Coca -Cola, the current pricing for these three entities
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Exclusive Non - Alcoholic Beverage Partnership
is not the same for all products. Additionally, a rebate program currently ex at the golf clubs, but
has not been included in the Coca -Cola proposal (but was included by Pepsi). Not only can the
management of a rebate program be cumbersome (compilation and submission of documentation for
a refund), but the product pricing proposed and the sponsorship funds provide a greater return for the
City. Coca -Cola has indicated that in lieu of a rebate program, they increased their investment in the
Sponsorship fee.
• Other: While there were differences in the initial sponsorship fee support, the proposals also varied in
the proposed additional components. In particular, Coca -Cola presented several additional proposals
as part of their partnership of interest to the City, and include:
o Recycling Partnership: While Coca -Cola has been engaged in recycling efforts through new
product components (such as greener plastic bottles), hybrid delivery fleet, etc., the company
has a comprehensive program that they propose to roll out in the City. This includes, but is not
limited to, the provision of recycling bins (at no cost to the City) for interior and exterior
locations, including temporary bins that can be used at parks events; recycling education
program through their mobile recycling vehicle and program; Assistance to the City in
consumer messaging on recycling; and roll out of their "crusher" — reverse vendor — machine
placed alongside of certain vending machines to provide a mechanism for recycling (fully
serviced by Coca - Cola);
o Marketing: A large investment would be made by Coca Cola in creating a co- branded
presence promoting the exclusive partnership between the world's number one beverage
brand and the City of Miami Beach. These include:
• Strategic partnerships available for marketing activation: Coca Cola currently has
existing partnerships with major existing brands, such as the NCAA, Disney, Target,
major airlines (Delta, American, United), Live Nation, etc. Coca Cola would develop
marketing opportunities linking these partners (such as in sweepstakes, cross
promotions, etc).
• Participation in popular rewards program: The My Coke Rewards program is currently
the leading consumer goods loyalty program in the country. The program provides
rewards to consumers who redeem points earned for products or services.
Promotional opportunities offered through My Code Rewards include: sweepstakes,
rewards, instant wins, charitable donations and donations to schools. Coca Cola has
proposed two concepts, which can be further explored or modified; these are a reward
program for a weekend getaway to Miami Beach, and a link with NASCAR. The high
utilization of this, or a similar, Coca Cola loyalty program provides an excellent value
for the City, especially as this extends beyond the local market.
• Co- promotion with Lebron James: Already linked with the City through his "bring his
talents to South Beach" statement, Coca Cola has a marketing relationship with
James through their VitaminWater and Sprite brands. Potential opportunities offered
include "meet and greet" and appearances at City events; sweepstakes /promotions
that include James.
• Advertising /Promotion exposure for the City: The City would be provided opportunities
for promotion of city events or messages on products, including truck -back advertising
on delivery trucks; and Papa John's Pizza Box toppers (or other similar high - visibility
program). The truck -back and box topper programs have a value of almost $50,000,
and provide both in market (pizza box) and out market (truck -back)
advertising /promotional potential.
• Touring Promotion: Currently the "Open Happiness Tour," this viral marketing concept
places a "live" machine in a high visibility area and generates social media
impressions. These promo events can be added to existing city events.
• Integrated logo: a new logo that integrates both the Miami Beach brand with the Coca
Cola brand provides increased visibility and ties the marketing approach into a
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recognizable and consistent program. This would be used in all promotional activities.
o Vending approach: The proposal looks at establishing a unique Conn ction between Coca
Cola and the City through the vending products, with opportunities fo City messaging. The
proposal looks at assessing current fountain dispensing and vending equipment and
upgrading as necessary, the use of vending machines with ad panels for city ads, as well as
providing additional products to increase "point of purchase" opportunities. For example, for
our convention center this may include menu boards, custom cups, and consumer
promotions. Other venue promotional products, such as banners, will be made available to the
venues for use at their discretion. Coca Cola proposes to work with the City to establish a
messaging program for the beachfront public concession stands that addresses our concerns
regarding aesthetics, while providing opportunities for messaging not just the products but
other messages of interest (e.g. recycling, no litter, etc). The vending approach also includes
the introduction of an interactive vending machine that can be placed at select locations, as
well as the placement of cashless vending at appropriate locations.
o Community Support Program: Funding is allocated for the purchase of equipment or materials
to support a city program. For example, this could include bicycles for our code compliance
division to help monitor quality of life issues. A "Product Bank" of 450 cases per year would
also be established. This Product Bank can be used by the City for Parks events and
programs, city special events, ribbon cuttings, etc.
FINANCE COMMITTEE DISCUSSION:
The proposed partnership agreement was presented to the Finance and Citywide Projects Committee at their
meeting on April 27, 2011. The committee discussed the components of the proposed partnership, including
the monetary value of the proposal. As presented, it was explained that the City's current vending program
does not generate substantial revenue for the City, and that it was necessary to incorporate other City assets
into a package to make a sponsorship program feasible. As proposed, the City would receive all sponsorship
fee revenue directly, as well as commissions on sales or other cash /noncash component of the partnership.
The discussion also touched on some of the expected partnership contributions by the City. In particular, the
impact of exclusivity on City's ability to secure other non - alcoholic beverage sponsors for City events, and
questions about Special Event benefits requested by Coca -Cola. Both of these issues have been discussed
and clarified with Coca -Cola. The proposed Term Sheet, provided as Exhibit A, reflects the result of these
discussions. In summary, Coca - Cola's annual sponsorship fee is intended to secure exclusive rights to the
sale or distribution of their products at City events, venues and rights -of -ways. The cash value of any
sponsorship provided by other non - alcoholic beverage providers has been nominal in most cases
(approximately $10,000 /year), far less than the benefits of the Exclusive Partnership offered by Coke. In
terms of Special events, they will be entitled to the waiver of only the Special Event Application Fee and
Special Event Permit fee for up to two Special Events per year. They are responsible for all other costs
associated with the production of the Special Event, and the Special Event permit is subject to availability and
Coca -Cola meeting all other requirements of the Special Event Permit process.
PROPOSED TERMS:
Exhibit A delineates the proposed terms of an Agreement pursuant to Coca - Cola's submitted proposal.
These terms delineate the general responsibilities of each party during the term of the Agreement and
incorporate suggested changes made by the Finance Committee, submitted by Coca -Cola, or otherwise
requested by the City. As noted, several points remained under discussion at the time this agenda item went
to print, pending further clarification and agreement by the City's and Coca - Cola's legal teams on proposed
language submitted by both parties. These items on the City's version of the Term Sheet and Term Sheet
Exhibits (attached) may be addressed by the time the item is considered by the Commission at the July 13,
2011 meeting. The following are the major deal points of the proposed Agreement, as referenced in the
Attached Term Sheet.
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Exclusive Non - Alcoholic Beverage Partnership
Estimated total value:
As reflected in the attached Term Sheet, the estimated total value of the proposed Exclusive Beverage
Partnership with Coca -Cola over the term of the agreement is approximately $ 7 million, inclusive of the cash
signing bonus and annual sponsorship fee ($3.725 million); estimated cash commission (approximately
$901,000); marketing program ($2 million value); recycling program ($15,000 - 25,000 value); and equipment
investment ($320,000). The Community support program also provides $17,500 in cash for equipment, with a
total Product bank of 450 cases of product provided per year (value of $40,500). By comparison, Pepsi's
proposal provided a total partnership value of $2.3 million in cash, with an additional $1.1 million in marketing
support (non -cash convertible) and equipment/service. (Note: Coca -Cola will be required to demonstrate
expenditures on their behalf equivalent to the non -cash values reflected above)
The following chart provides a breakdown of the value of the proposed partnership between the City of Miami
Beach and Coca -Cola (cash and non - cash):
1 Year Over 10 -year Term
Signing bonus $475,000 $ 475,000
Sponsorship Fee (annual fee) 325,000 3,250,000
Commissions (estimate - annual) 85,445 900,970
Marketing Value (annual value) 200,500 2,005,000
Recycling Program Value 15,000- 25,000 15,000- 25,000
Equipment investment 320,420 320,420
Community Support (cash) 17,500 17,500
Community Support (Product Bank) 4,050 40,050
TOTAL VALUE (CASH AND OTHER) $1,442,915 $7,023,940
Pursuant to the terms of the City's Agreement with TSG, TSG is entitled to commission on revenues to the
City based on a sliding scale formula. However, TSG's agreement provides for a credit to the City from any
commissions that would be received by TSG (for any sponsorship agreement payments to the City pursuant
to a TSG- negotiated agreement), of 50% of the costs paid to TSG for Phase One of the Agreement with TSG
(total credit of $19,500), as well as a credit to the City from the commissions that would be received by TSG
(for any sponsorship agreement payments paid to the City pursuant to a TSG- negotiated agreement), of the
amounts advanced in the draw payments to TSG pursuant to the current agreement with TSG ($49,500).
Based on these credits to the City, the payment to TSG will be adjusted in year one by $69,000. The total
amount to be paid to TSG will be calculated once the payment schedule is determined for the various cash
components of the agreement above; the City's net revenues for year one of the partnership agreement are
likely to still exceed $800,000.
In addition, Coca -Cola will be credited $29,615 30 against their first -year payment for the remaining portion of
the sponsorship fee they paid the Miami Beach Convention Center through December 31, 2011.
Requirements of City:
As is common in these types of partnerships, there are certain expectations with regards to the non - alcoholic
beverage partner's role. In addition to supporting the efforts of expanding the sales of the products through
our vending locations and in our venues — something that is mutually beneficial — Coca -Cola identified in their
proposal certain areas of support required from the City. While other municipal and institutional proposals we
have reviewed reflect that Cities often provide the beverage sponsor with signage and other visible
advertising rights, etc., this proposal only addresses that component in the public beach concession areas
(and it is agreed that the final design /use recommendations will be subject to the review of the City to ensure
that it meets our expectations). Other components, as further delineated in the attached Term Sheet, include:
recognition of the partnership as the official non - alcoholic beverage of Miami Beach and South Beach;
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Exclusive Non - Alcoholic Beverage Partnership
recognition as the official recycling partner; exclusive sampling rights on public rights of way, with a waiver of
certain permit and application fees for a limited number of sampling events on public property (mutually
agreed upon); agreement and recognition of the integrated logo, with a right to use the logo; City use of only
Coca -Cola products at City events; provision of tickets for events at City venues to Coca -Cola for their use (as
may be available); and the inclusion of the Fillmore Miami Beach (and any other concession agreement now
in place such as at 21 /46 street and at South Pointe Park) in the program once that agreement is up for
renewal. In reviewing other partnership agreements with other Cities or institutions (such as universities), the
beverage partners are frequently provided with comparable services by their partner, and often are also
provided signage and logo placement opportunities far above the limited opportunity described above.
CONCLUSION:
The concept of an Exclusive Beverage partner (non - alcoholic) provides an opportunity for the City to partner
with a well - established brand in an effort to generate marketing opportunities for the City, in addition to added
revenues. The City currently has a vending machine program, and our City -owned facilities currently have
individual beverage agreements with different terms and benefits. The development of this program allows
the City to package these resources together in a manner that provides not only greater benefits for the City
in terms of pricing, etc. for these individual components, but creates a more attractive package for potential
sponsors.
In reviewing other partnership packages in place or that have been negotiated in the past in other cities or
public institutions, it is difficult to find a similar contract to compare. For example, we have found agreements
for larger cities that generate both greater or fewer sponsorship dollars, but typically with far more extensive
visible branding of the partnership than we would be interested in (hence additional revenues to the public
entity for this opportunity to the sponsor). The limited number of locations currently available for vending in the
City also impacts potential volume sales. For example, universities present excellent partnership opportunities
because of the high number of vending machines that can be placed (in classroom buildings, dormitories,
etc.) providing both increased sales and well as high visibility for the product through the vending machine
presence, as well as the extensive, well -used food dining systems that support the campus life (not to
mention the media impressions connected with their sponsorship of the University's athletic programs, which
is high visibility).
Both Pepsi and Coca -Cola are excellent, well - established companies that would be exceptional partners for
the City. In reviewing the proposals submitted, TSG evaluated the short and long term benefits to the City of
each partnership — both financial and in other intangibles. As reflected in TSG's letter attached, they
recommend the selection of Coca -Cola Refreshments as the City's exclusive non - alcoholic beverage partner
(pursuant to the terms in Attachment A), which is also the recommendation of the City Administration.
ATTACHMENTS:
EXHIBIT A — Term Sheet and Term Sheet Exhibits (City Revision)
EXHIBIT B — Letter from The Superlative Group
JMG /hmf
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