A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, AMENDING RESOLUTION NO. 2022-32091, AND APPROVING THE NEGOTIATED TERMS OF THE CITY’S AGREEMENT WITH PEPSICO FOR THE EXCLUSIVE NON-ALCOHOLIC BEVERAGE POURING RIGHTS (EXCLUDING THE ENERGY DRINK CATEGORY); AND FURTHER AUTHORIZING THE CITY MANAGER AND CITY CLERK TO EXECUTE THE FINAL AGREEMENT WITH PEPSICO, CONSISTENT WITH THE TERMS SET FORTH HEREIN.

The Administration recommends that the Mayor and Commission approve the final business terms of the contract with PepsiCo Beverage Sales, LLC.

On March 9, 2022 the Mayor and Commission approved Resolution 2022-32091 (attached), 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 PepsiCo Beverage Sales LLC. (PepsiCo), for an exclusive non-alcoholic beverage (excluding the energy drink categories) municipal marketing agreement for vending and dispensing on certain city-owned properties, based upon the essential terms set forth in the City Commission Memorandum, for a term of ten (10) years; and further, authorizing the City Manager to finalize and execute the agreement, subject to form approval by the City Attorney.

The Administration and PepsiCo began contract negotiations and in addition to the agreed upon terms set forth in the March 9, 2022 City Commission agenda item, the Administration agreed to include additional benefits to PepsiCo, as it was deemed to be favorable to both entities in terms of financial impact and brand awareness.

The City's month to month extension with Coke Florida expires on June 30, 2022. The Administration does not want to be in a position where vending and concessions operations within City facilities are halted without a contract in place, so final approvals on the additional business terms are needed from the Mayor and Commission prior to June 30, 2022.  If approvals are not received, the Administration will need to negotiate an extension of the Coke Florida month to month contract (should the vendor be in agreement), or be without vending services for the period of time between July 1, 2022 to the date of contract signing.

The existing Coke Florida month to month extension does not include any financial incentives for the City, as it was executed as a bridge contract to ensure continuity in vending services, so the sooner the Administration is able to execute the contract with PepsiCo, the sooner the City will start to receive revenues from product sales and vending commissions.

In addition to the business terms outlined in the March 9, 2022 City Commission Agenda, the Administration would like to add the following items to the final agreement, which having a financial component, require approval from the Mayor and Commission:

1. PepsiCo Corporate Entity - Contract entity to be PepsiCo Beverage Sales, LLC, a Delaware limited liability company; and

2. Pricing on Packaged Products may be changed by PepsiCo each Year during the Term, provided however, price increases in any Year shall not exceed 4% from the prior Year; and

3.  Waiver of Special Event Permit Fees - waiver of any Special Event Permit and/or Permit Application Fees for PepsiCo’s use for one (1) mutually agreed upon event per Year, based on availability and meeting all approvals as set forth in the City’s Special Event Permit approval process.  For purposes of the Special Event Permit and / or Permit Application Fee waiver, these Facilities shall include public beachfront areas, and Parks and Recreation facilities where Special Events are permitted.  The City shall only waive fees up to a maximum of $25,000 per event, and solely for permit or square footage fees for which the city has no hard cost.  All other costs and ancillary fees including but not limited to production, taxes, security, audio/visual, decoration, parking or food and beverage shall be the responsibility of PepsiCo.  Rights may not be transferred or assigned and do not carry over into future Years.

The Administration is in support of this benefit as we feel that PepsiCo is positioned to partner with some globally recognized events and this benefit will incentivize them to bring those events to Miami Beach with zero cost to the City.

4. MBCC Fee Waiver - waiver of any rental or use fees for PepsiCo’s use of certain Miami Beach Convention Center Facilities (ballroom space or meeting room space) for one (1) mutually agreed upon event per Year, based on existing bookings and building availability, up to a maximum of $25,000 per event.  Waiver shall pertain to the costs associated solely with room rental fees for which there is no hard cost to City or third-party management company. All other costs and ancillary fees including but not limited to taxes, security, audio/visual, decoration, parking or food and beverage shall be the responsibility of PepsiCo.  Rights may not be transferred or assigned and do not carry over into future Years

The Administration in partnership with Spectra is in support of this benefit, as it will incentivize PepsiCo to bring a new meeting to the MBCC, where the City and Spectra will be positioned to see increased revenues on all ancillary fees (parking, food and beverage, audio / visual).  The benefit allows Spectra to approve the room rental waiver only when the schedule allows to ensure no disruption to existing meeting and convention business.

5. Product Sampling - Up to one (1) royalty free Product sampling permit per month (up to $2,500 per permit per month, and up to $30,000 per Agreement Year), to a maximum of twelve (12) permits per Year.  Permit waiver shall only cover permit fee costs for which the City has no hard cost. If PepsiCo does not use all twelve (12) permits by the end of the Year, any remaining permits will not roll-over to the following Year and will be forfeited.  All other fees and costs of production, including but not limited to taxes, security, audio/visual, decoration or food and beverage shall be the responsibility of PepsiCo.  Rights may not be transferred or assigned and do not carry over into future Years.

The Administration is in support of this benefit as sampling activations will not only bring awareness to our new partnership, but will also bring brand awareness to PepsiCo with the intent of driving sales at City owned venues, resulting in higher consumption and financial rebates back to the City.

6. Advertising Benefits.  PepsiCo shall have the following advertising benefits, which do not have an actual out-of-pocket expense to the City:  (1) one (1) royalty free advertisement in any City-produced event collateral as the “Official Non-Alcoholic Beverage of Miami Beach”; (2) one (1) royalty free PepsiCo PSA or message per year to be aired on MBTV; and (3) one (1) royalty free PepsiCo PSA or message per year to be aired on the Miami Beach trolley video screens, with above advertising benefits having no additional costs to the City; and

The Administration is in support of all of the above mentioned advertising benefits as we will be partnering with one of the most recognizable non-alcoholic pouring rights brands in the world, which will draw attention to our new partnership, while elevating the Miami Beach brand and driving consumption and sales, resulting in higher revenues for the City. 

7. Rounds of Golf.  PepsiCo shall be granted up to twelve (12) rounds of golf each Agreement Year (max of six during peak season; nor more than six at Miami Beach Golf Course) with an approximate value of $131.00 - $235.00 per round of golf, depending on the season; and

The contained items will have the following financial impact:

Special Event Permit - up to $25,000 per permit x 1 permit = $25,000 in fee waivers per Contract Year.  This benefit has no negative financial impact, as these waived fees would be unrecognized revenues.  These waivers cannot be used for any hard costs or where the City has an expense to be paid.

Sampling Permits - up to $2,500 per permit x 12 permits = $30,000 in waived fees per Contract Year.  This benefit has no negative financial impact. 

Miami Beach Convention Center - up to $25,000 per room rental agreement x 1 per Contract Year = $25,000 in room rental waivers per Contract Year.  This would have no negative financial impact, as Spectra will only allow these room rental waivers to be utilized when there is no interruption to regular revenue producing meeting and convention business.  If utilized the City would see increased revenues from the percentage share of revenues realized of ancillary fees like internet, parking, food and beverage, etc.

Advertising Benefits - $0.00 cost to the City, as the City has no costs associated with these benefits. City owns all assets and can provide this space for free.  This would aim to increase brand awareness, which in turn can help drive sales of PepsiCo product, resulting in higher revenues due to the City under the agreement.

Rounds of Golf - $0.00 cost to the City, as the City would not incur any hard costs associated with this benefit, as it would be considered unrecognized revenues.  The costs per round of golf range from $131.00 - $235.00 depending on the season, with a maximum of six (6) allowable rounds to be played at the Miami Beach Golf Club during high season ($235.00).  Therefore, approximate value of this benefit would be $2,196.00 (6 rounds x $235.00 high season rates + 6 rounds x $131.00 low season rates).