A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, WAIVING, BY 5/7TH VOTE, THE FORMAL COMPETITIVE BIDDING REQUIREMENT, FINDING SUCH WAIVER TO BE IN THE BEST INTEREST OF THE CITY, AND AUTHORIZING THE CITY MANAGER TO NEGOTIATE AN AGREEMENT WITH COCA-COLA BEVERAGES FLORIDA, LLC (COKE FLORIDA) AND RED BULL NORTH AMERICA, INC. (RED BULL), FOR AN EXCLUSIVE NON-ALCOHOLIC BEVERAGE MUNICIPAL MARKETING AGREEMENT FOR VENDING AND DISPENSING ON CERTAIN CITY-OWNED PROPERTIES, BASED UPON THE ESSENTIAL TERMS SET FORTH IN THE CITY COMMISSION MEMORANDUM ACCOMPANYING THIS RESOLUTION, FOR A TERM OF TEN (10) YEARS FOR COKE FLORIDA AND FIVE (5) YEARS FOR RED BULL; FURTHER, AUTHORIZING THE CITY MANAGER TO FINALIZE AND EXECUTE THE AGREEMENTS, SUBJECT TO FORM APPROVAL BY THE CITY ATTORNEY; AND FURTHER AUTHORIZING THE CITY MANAGER TO EXTEND, ON A MONTH-TO-MONTH BASIS, THE CURRENT AGREEMENT WITH COKE FLORIDA, WHICH IS SET TO EXPIRE ON DECEMBER 31, 2021, FOR A PERIOD NOT TO EXCEED SIX (6) MONTHS.

Due to the City’s current agreement with Coke Florida as the non-alcoholic beverage partner, expiring on December 31, 2021, the City's municipal sponsorship consultant, Spectra Partnerships, initiated a selection process for a new official non-alcoholic beverage partnership agreement for the City. Spectra Partnerships has developed and cultivated successful non-alcoholic beverage partnerships for 150+ clients across North America and has identified multiple opportunities to grow the financial, brand, product, and sustainability contributions for both the City and its residents and visitors. The relationship is not only intended to increase the presence of the brand and recycling programs in our City, but to also generate volume sales for the beverage companies. 

Current Opportunities:

Comparable to the previous partnership, 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, including, but not limited to the Miami Beach Convention Center, the North Beach Bandshell and Flamingo Park Tennis Center as examples. Pouring rights refers to dispensed non-alcoholic beverages or beverages sold via concession, as compared to being sold through a vending machine.

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, to benefit the City directly.

Process:

Spectra Partnerships managed the process relating to the exclusive beverage partner program on behalf of the City. In summary, Spectra Partnerships’ process involved the initial identification of potential respondents; an invitation for those companies to submit proposals; the selection of the best potential partnership offers for the submission of a "best and final" offer; and the recommendation of a final offer for the City to consider.

Spectra Partnerships’ involvement has included analysis of comparable partnerships, negotiation on sponsorship deal points, and providing these potential partners with information relating to the City and opportunities. Spectra Partnerships remained in contact with potential partners before and during this process. This included gathering information on current venues, volumes and deal structures.

Spectra Partnerships has been the point of contact with potential respondents and has been in regular communication with those entities.

Proposal Components:

Spectra Partnerships 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 volumes, venues, current pricing, etc., Spectra Partnerships also advised the prospective proposers of the City’s interest in securing a partner that provided an annual sponsorship fee, a comprehensive marketing plan, and a sustainability and recycling strategy to enhance the presence of both the partner brand and the Miami Beach brand to ensure that this became a 360 degree integrated sponsorship plan, and not simply an exchange of money. Spectra Partnerships recommended a minimum ten-year term for the partnership which is not only consistent with typical non-alcoholic beverage partnerships, but also creates an incentive for prospective proposers — as the selected partner will have exclusive rights for an extended time — sufficient to amortize any capital investment, and to establish their presence in the market. Coca-Cola Beverage Florida, LLC (Coke Florida) and PepsiCo (Pepsi) submitted ten-year proposals; Red Bull North America, Inc. (Red Bull) submitted a five-year proposal.

Best and Final Offers:

Based on Spectra Partnerships review of the initial proposals submitted, Coke Florida, Red Bull, and Pepsi were each invited to submit a “best and final" offer. Coke Florida and Pepsi control the largest share of the non-alcoholic beverage industry, with the leading bottled water and CSD (carbonated soft drink) brands. Each company offers 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 coffees and teas, among other products. Red Bull offers products in the energy drink category exclusively.  All three 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.

Coke Florida, Red Bull, and Pepsi each presented proposals that provided a combination of an annual "sponsorship" fee, 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 each also offering a rebate program. All companies provided product pricing proposals, as it was essential that proposed pricing be competitive with current pricing in the overall market and at City of Miami Beach 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 Coke Florida proposing a more comprehensive sponsorship fee and offering to open its previously contracted exclusivity in the energy drink category, to allow Red Bull to partner with the City of Miami Beach in this heavily sought after category. 

Below are the major deal points of the proposals:

·         Sponsorship fee: Coke Florida, Red Bull and Pepsi each submitted proposed annual sponsorship fees.

·         Commissions / Pricing / Rebates: Each proposer submitted similar commission structures (30 - 40%) for vending. The City's revenues from commissions would increase as business is built over the term of the agreement. 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 machines, consistent with the current city-approved vending program), as well as the implementation of smartphone and credit card readers on all vending machines to assist with touchless payment processes and to help expedite the overall process.

·         Exclusivity waiver:  Significantly, Coke Florida is exempting its previous requirement of exclusivity to allow Red Bull to enter the market in the Energy Drink category (currently the second fastest-growing segment in non-alcoholic beverages, behind sparkling water), with Red Bull being the #1 energy drink in the world.

·         Other: While there were differences in the initial sponsorship fee support, the proposals also varied in the proposed additional components.

·         Sustainability:  Coke Florida’s sustainability priorities and investments include -

o   Offering a recycling trailer for permanent use at all City events and programs

o   Certifying its local manufacturing facilities as Zero Waste to Landfill through their third-party partner, GreenCircle Certified, reducing their carbon footprint throughout the entire supply chain

o   Adapting Source Water Vulnerability Assessments (SVA) & Water Management Plans (WMP) to address identified vulnerabilities within communities, restoring the water used in their finished beverages to communities and nature in critical watersheds

o   Equipping tractor trailers with solar powered liftgates and pallet jack charging capabilities

o   Developing Climate Resiliency and Risk Mitigation Toolkits for all Coke Florida  territories

·         Marketing:  Coke Florida is offering the City a commitment of $100,000 annually for marketing programs and event activations, and Red Bull is committed to exploring activations with the City as they are currently building out their 2022 and beyond activation strategy (“Event Enhancement Program”).

·         Product Support:  Coke Florida has committed to provide 500 cases of product and Red Bull has committed to 15,000 cans of product annually. These products can be used by the City at its discretion.

PROPOSALS:

Exhibit A outlines the financial proposals submitted by Coke Florida and Red Bull. These proposals delineate the general responsibilities of each party during the term of the Agreement. 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, Coke Florida’s and Red Bull’s respective legal teams on proposed language submitted by all parties.

Estimated Total Value:

As reflected in the attached proposals, the estimated total value of the proposed exclusive beverage partnership with Coke Florida and Red Bull over the term of the agreement is approximately $5,350,000, inclusive of the annual sponsorship fees ($2,175,000); estimated cash commission (approximately $977,300); marketing program ($1,125,000); Coke Florida’s recycling program (estimated $55,000 value); and annual equipment investment.

The total product bank includes 500 cases of product (Coke Florida) and 15,000 cans of product (Red Bull) provided to the City annually. 

Spectra requested best and final proposals from the relevant non-alcoholic beverage companies in the South Florida market – Coke Florida, Pepsi (which includes distribution of Dr. Pepper), and Red Bull.   When the final proposals were reviewed, the Coke Florida financial commitment exceeded the Pepsi proposal by $241,930 in year 1, and by approximately $200,000 each year of the term.

The following charts provide a breakdown of the value of the proposed partnership between the City of Miami Beach, Coke Florida, and Red Bull (cash and non-cash):

TOTAL VALUE (CASH AND OTHER):  $5,364,300

Pursuant to the terms of the City's agreement with Spectra Partnerships, Spectra Partnerships is entitled to commission on revenues to the City based on a sliding scale formula.

Based on Spectra Partnerships’ agreement with the City, the commission payment to Spectra Partnerships in year one will be $75,046. The total amount to be paid to Spectra Partnerships 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 $300,000.

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 city-owned vending locations and venues, which is beneficial for both parties, both Coke Florida and Red Bull identified in their proposal certain areas of support required from the City.

As further delineated in Exhibit A, support will include: recognition of the partnership as the official non-alcoholic beverage of Miami Beach; and the official energy drink of Miami Beach, respectively; recognition as the beverage 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 Coke Florida and Red Bull products at City events (the agreement negotiated will be subject to any existing contractual rights that the city has with other parties, and will allow the City a certain number of waivers per year as exists in the current contract); provision of tickets for events at City venues to Coke Florida and Red Bull for their use (as may be available).

The concept of an Official Beverage partner (non-alcoholic) provides an opportunity for the City to partner with two globally recognized brands in an effort to continue to build brand affinity with the City’s brand, while expanding marketing opportunities and added revenue streams for the City.

Coke Florida and Red Bull are both excellent, well-established companies that would be exceptional partners for the City. In reviewing the proposals submitted, Spectra Partnerships evaluated the short and long term benefits, both financial and intangible, to the City. Spectra Partnerships, in conjunction with the administration recommends that the City enter into negotiations with Coke Florida and Red Bull as the City's official non-alcoholic beverage and energy drink partners pursuant to the proposals in Exhibit A. 

Based upon the foregoing, the City Manager recommends waiving, by 5/7^th vote, the formal competitive bidding requirement, as permitted in Section 2-367(e) of the City Code, and authorizing the City Administration to negotiate an agreement with Coke Florida for a term of ten (10) years, and an agreement with Red Bull for a term of five (5) years, based upon the proposals and the financial terms set forth in the City Commission Memorandum accompanying this Resolution.