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08.19.2015

Hospital Systems Save 24% With Coke or Pepsi Deal

By Tim Richardson

We recently completed a study of beverage spending by more than a dozen hospital systems nationwide. Our key finding was that hospital systems who engage in exclusive pouring rights agreements with either Coke or Pepsi were able to save an average of 24% over the prior year’s beverage spend.

Savings ranged from $1 million to more than more than $12 million during standard five-year contract term

Our review showed that hospital systems with between 3 and 10 acute care facilities regularly saved more than $1 million during 5-year exclusive pouring rights agreements. A much larger hospital system with just over 25 acute care facilities and many more non-acute facilities will save more than $12 million over the same time period.

Annual savings ranged from $250,000 per year to more than $2 million.

First of its kind: Review of almost $100 million in beverage spending over a 10-year period

For our review, we included data gathered from more than 10 years of work in the field, and we examined almost $100 million of beverage purchases by hospital systems.

That work showed that if your hospital system has 1,000 or more licensed beds, an exclusive pouring rights agreement with Coke or Pepsi can save you $1 million or more on your beverage spend over five years. We saw this kind of savings time and time again.

The money that much larger hospital systems net is staggering, with some on pace to save up to $12 total million over the course of a 5-year contract.

Please note that our study only included exclusive pouring rights agreements negotiated by Enliven. However, over the last ten years, we have reviewed several exclusive pouring rights agreements negotiated by hospital systems on their own or by other consultants. These agreements consistently produce lower savings than the contracts we negotiate.

The reason that the agreements we negotiate are better is that hospital systems and other consultants don’t have access to our large, proprietary database of all the most relevant data points required to negotiate the most favorable contracts: current beverage prices for all Coke and Pepsi packages, rebate rates by package, vending commissions, fixed marketing payment metrics, exclusivity payment metrics, top service level commitments and free product allotments.

We’ve worked for 10 years to develop and refine this database – and it makes a big difference when you sit down to negotiate an exclusive pouring rights agreement with either Coke or Pepsi).

Size Matters:

Typically, hospital systems with between 3 and 10 acute care facilities saw percentage savings of up to 34% year over year. On the other hand, hospital systems with more than 10 acute care facilities saw smaller percentage savings of 19%. While systems with more than 10 acute care facilities saw smaller percentage gains, i.e., 19% versus 34%, these larger organizations repeatedly saw bigger savings. This includes one system that saved more than $2 million over the previous year’s beverage spend simply by engaging in an exclusive pouring rights agreement negotiated by Enliven.

Bottom Line:

A CFO can expect at least 20%-30% savings on beverage spend, depending on the size of their hospital system, in the first year of an exclusive pouring rights contract negotiated by Enliven. For many organizations, this results in multimillion-dollar savings under a standard 5-year agreement. Those types of results are always fun to present to the rest of the executive team and board.

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08.19.2015

Hospital Systems Save 24% With Coke or Pepsi Deal

By Tim Richardson

We recently completed a study of beverage spending by more than a dozen hospital systems nationwide. Our key finding was that hospital systems who engage in exclusive pouring rights agreements with either Coke or Pepsi were able to save an average of 24% over the prior year’s beverage spend.

Savings ranged from $1 million to more than more than $12 million during standard five-year contract term

Our review showed that hospital systems with between 3 and 10 acute care facilities regularly saved more than $1 million during 5-year exclusive pouring rights agreements. A much larger hospital system with just over 25 acute care facilities and many more non-acute facilities will save more than $12 million over the same time period.

Annual savings ranged from $250,000 per year to more than $2 million.

First of its kind: Review of almost $100 million in beverage spending over a 10-year period

For our review, we included data gathered from more than 10 years of work in the field, and we examined almost $100 million of beverage purchases by hospital systems.

That work showed that if your hospital system has 1,000 or more licensed beds, an exclusive pouring rights agreement with Coke or Pepsi can save you $1 million or more on your beverage spend over five years. We saw this kind of savings time and time again.

The money that much larger hospital systems net is staggering, with some on pace to save up to $12 total million over the course of a 5-year contract.

Please note that our study only included exclusive pouring rights agreements negotiated by Enliven. However, over the last ten years, we have reviewed several exclusive pouring rights agreements negotiated by hospital systems on their own or by other consultants. These agreements consistently produce lower savings than the contracts we negotiate.

The reason that the agreements we negotiate are better is that hospital systems and other consultants don’t have access to our large, proprietary database of all the most relevant data points required to negotiate the most favorable contracts: current beverage prices for all Coke and Pepsi packages, rebate rates by package, vending commissions, fixed marketing payment metrics, exclusivity payment metrics, top service level commitments and free product allotments.

We’ve worked for 10 years to develop and refine this database – and it makes a big difference when you sit down to negotiate an exclusive pouring rights agreement with either Coke or Pepsi).

Size Matters:

Typically, hospital systems with between 3 and 10 acute care facilities saw percentage savings of up to 34% year over year. On the other hand, hospital systems with more than 10 acute care facilities saw smaller percentage savings of 19%. While systems with more than 10 acute care facilities saw smaller percentage gains, i.e., 19% versus 34%, these larger organizations repeatedly saw bigger savings. This includes one system that saved more than $2 million over the previous year’s beverage spend simply by engaging in an exclusive pouring rights agreement negotiated by Enliven.

Bottom Line:

A CFO can expect at least 20%-30% savings on beverage spend, depending on the size of their hospital system, in the first year of an exclusive pouring rights contract negotiated by Enliven. For many organizations, this results in multimillion-dollar savings under a standard 5-year agreement. Those types of results are always fun to present to the rest of the executive team and board.

Subscribe to Enliven

Join over 10k other industry experts who receive Enliven's advice direct to their inboxes.

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