By Del Stover
2/22/05 -- Watch out, Coke and Pepsi. After years of dominating the beverage market in school vending machines, you’ve got a serious new competitor -- the milk industry.
As many as 8,000 vending machines now serve milk in schools today -- up from practically nothing two years ago, reports the Beverage Marketing Corp., an industry consulting firm.
“We did a test of milk vending machines about three years ago, because the dairy industry wanted to see if there was any potential [in boosting sales],” says Julia Kadison, a senior vice president at the firm. “What we found was that there was a lot of potential.”
The timing couldn’t have been better for the milk industry. Concerns about the rising incidence of childhood obesity, coupled with new rules in the Child Nutrition Act of 2004, are encouraging school officials to take a closer look at the nutritional value of vending machine beverages.
One result is a backlash against one of milk’s major rivals -- the soda industry, whose exclusive vending machine contracts once were welcomed by budget-tight school systems as a source of needed revenue.
Milk producers have not been shy about seizing the opportunity. The industry successfully lobbied Congress last year to expand the variety of milk, including flavored milk, offered in school lunch programs. New rules also make it easier for schools to offer milk anytime and anywhere at school, ending restrictions on milk sales that sometimes were inserted in soft drink vending contracts.
The industry also has worked with local bottlers to introduce milk vending machines into schools and replace the dull and clumsy milk cartons of the past with colorful bottles that studies show boost sales among students. Also introduced have been new product lines with a variety of kid-friendly flavors, such as strawberry, banana, and root beer.
Such efforts, along with the industry’s successful “Got Milk?” campaign, promise a rosy future for the dairy industry. One study suggests school milk consumption could increase by 16.3 million gallons a year if milk vending machines become widespread.
“We do think this is a wonderful time for milk,” says Victor Zaborsky, senior marketing manager for the Milk Processor Education Program (MilkPEP), which is helping lead the industry’s marketing efforts.
So what do the big soda companies think about this turn of events? Coca-Cola Co. spokesperson Kari Bjorhus says her firm has no problem with school boards wanting a wider variety of healthy drinks in schools and supports “the rights of school boards to make decisions that are appropriate . . . for their students.”
That doesn’t mean the big soda companies are going to let milk -- or calls for more nutritious drinks -- push them out of the school market. They worked hard to become the 800-pound gorillas in school vending machines, and non-milk beverages (including other vendors) now account for 40 percent of all beverages sold in schools, and 98 percent of sales away from the regular lunch line.
“Coke and Pepsi have so many of these contracts wrapped up, and they’re trying to figure out how to keep them wrapped up,” Kadison says. “They’ve responded by expanding their offerings.”
That strategy makes sense given Coca-Cola Co. and PepsiCo. are multibillion-dollar conglomerates that can tap a huge consumer product line, including bottled water, sports drinks, and fruit juices. The companies also are trying to get into the the milk market themselves, with mixed success, by developing a line of milk-based beverages.
And it’s not clear that sodas are going to disappear from schools entirely -- at least not anytime soon. Although some states and school districts have banned or curbed the availability of sodas in schools, others are debating policies to simply ensure a more healthy mix of available beverages.
For local school boards, all of this can only result in more nutritious beverages for students. But one concern lingers: Will schools lose revenue as sodas are edged aside by milk, bottled water, and other drinks?
School board members can rest easy, industry observers suggest. Although schools can see a temporary dip in sales when healthier beverages are introduced to vending machines, there’s no evidence to suggest that long-term sales are hurt.
A recently released Arizona study, for example, found that schools that replaced sodas with water, juice, and low-fat milk made as much money or more from their vending machines. The Beverage Marketing Corp. reports similar findings.
In Wisconsin, where two-thirds of the state’s high schools have milk vending machines, Laura Wilford, director of the Wisconsin Dairy Council, says her experience is that students welcome an option to soda.
“We see kids choosing milk at a time when before they could only choose soda pop,” she says. “We’re also seeing kids have a lot of it before and after school.”
In Los Angeles, where the school board banned sodas more than two years ago, board member Marlene Canter says it’s worked out fine. The school board is now seeking a new districtwide vending contract that should net the schools a sizable chunk of funding.
And money isn’t everything, she says. “From a governance point of view, as a board member, kids have to come first,” she says. “Economics cannot sway this equation.”