Snapple's New York Deal Under Fire

03 November 2003

Snapple's recently acquired status as the official soft drink of New York has been challenged by the city's comptroller William C Thompson Junior.

Thompson has written to New York City's top lawyer claiming "clear conflict-of-interest concerns" over how Snapple – owned by UK-headquartered Cadbury Schweppes – forged a five year, $166 million (€143m; £98m) deal with municipal authorities.

Agreed in September, this contract gives the beverage group exclusive rights to sell drinks in schools, police stations and other city-run premises [WAMN: 15-Sep-03].

But Thompson argues the bidding process by which Snapple won the alliance was unfair. One of his gripes is that the deal was expanded from just schools to all municipal buildings.

"Somehow," Thompson told a news conference, "an agreement between the Department of Education and Snapple got transformed into a city-wide deal that was three times as large. What's worse, it seems that this was done without the knowledge of other potential bidders."

His other complaints concern alleged conflicts of interest. The comptroller noted that Joseph M Perello – the city's chief marketing officer – was involved in the deal. Perello, he argued, had dealt with Snapple when overseeing marketing for the New York Yankees.

Thompson also criticised the role of Octagon Group as a consultant. Octagon, he said, has worked with Cadbury-Schweppes before and is a unit of Interpublic Group, parent of Snapple's ad agency Deutsch.

Despite his accusations, Thompson admits there is nothing he can do about some aspects of the deal. Although the comptroller can reject city contracts, this power does not yet extend to the dealings of schools, which were brought under mayoral control only last year. Nevertheless, Thompson believes the expansion of the deal to cover all municipal buildings falls within his remit.

The claims also have a political dimension. Thompson is a Democrat and regarded as a possible challenger to New York's mayor Michael Bloomberg in 2005.

When asked about Thompson's allegations, Bloomberg replied that his colleague was "wrong". Declared the mayor: "The fact of the matter is the Snapple deal is a wonderful deal for the city … This is the one company that submitted a bid that was in the city's interest."

However, New York's Law Department admitted that Bloomberg had asked it to look into Octagon's involvement.

The Interpublic unit has denied any conflict of interest. Director of business development and special projects David Bober claimed Octagon and Cadbury-Schweppes worked together in Britain, with no bearing on the New York dealings. And he pointed out that the group has also worked with PepsiCo and Coca-Cola, both of which pitched unsuccessfully for the New York contract.

Data sourced from: New York Times; additional content by WARC staff