Soft Drinks & Coffee Carry "Experiential Marketing" into Airport Industry

Jodi Richards
Published in: 

Cleveland Hopkins

January brings not only a new year at Cleveland Hopkins International (CLE), but also a new source of revenue. The airport has signed a five-year agreement valued at $2 million, which grants exclusive pouring rights throughout the terminal to Pepsi Americas. According to CLE's director, Ricky Smith, this is just one of several innovative ideas being explored to diversify the airport's revenue stream - a common theme among airports as airlines continue to struggle financially.

The deal was brokered by Airport Marketing Income (AMI), an Oregon-based experiential marketing and sponsorship company. CLE hired AMI under a two-year consulting agreement to explore sponsorships, marketing opportunities and alternative media.

According to AMI president and co-founder Brad Jersey, traditional advertising or marketing is using media such as print, radio and television; alternative media is "everything else that can happen." Overall, this branch of marketing/advertising is expected to see a 15% annual compounded growth between now and 2012, equating to a roughly $150 billion business.

Under the five-year agreement with Cleveland Hopkins, Pepsi Americas will contribute money to various communities in the Ohio market as well as run over-the-air commercials that discuss what the company is doing in the community. Pepsi Americas will also host quarterly sampling programs inside the airport, where travelers can test and experience some of the beverage company's new offerings. The local Pepsi bottling company will make advertising available on all of its distribution trucks, allowing for the promotion of "hot or important" things at the airport, Smith explains. Promotions by Pepsi Americas are expected on the concourses, in the garage and skywalks.

"We're excited to bring the great taste of Pepsi to the thousands of travelers passing through CLE," comments Kathy Krieger, director of on-premise sales for Pepsi

Americas. "Cleveland is a vibrant, growing market that embodies the core Pepsi elements of taste, variety and excitement. This partnership is the

latest example of our commitment to serving the community."

According to Krieger, Pepsi is interested in pursuing this type of marketing partnership at other airports, too.

Jersey says the agreement gives CLE "a worldwide recognized brand" in Pepsi as well as additional revenue. For Pepsi, it's a new forum to gain market share and get feedback.

Meanwhile in Boston

While sponsorships such as this are not new, they are relatively new to the airport industry. Another example can be found at Boston's Logan International Airport (BOS) with Dunkin' Brands. AMI worked with the New England company to create awareness and trial of its special blend coffee though non-traditional marketing.

Under the BOS program, AMI developed a multi-dimensional, multi-year, experiential campaign that included quarterly sampling programs, a 7-foot-tall brand icon of the Dunkin' Brands Styrofoam coffee cup located in two high-traffic areas and a 117-foot long pedestrian bridge graphic. During the 10-month campaign, more than 25 million travelers through BOS were exposed to the advertising message.

According to Smith, CLE pursued the pouring rights deal for a number of reasons, including revenue and value to passengers. Pepsi products represent about 60% of the market in northeast Ohio, says Smith, "So we're offering the residents in this area their preferred beverage brand."

AMI worked with the airport to identify any and all possible opportunities, says Jersey. "We ask a lot of questions," he notes, all in an effort to pinpoint what advertising and marketing avenues the airport is able to take advantage of. Key to the exploration is identifying things that can be monetized at the airport. And, with today's economic conditions forcing some airlines to cut service and/or amenities, airports are left to fill that financial void.

Increasing non-airline revenues is a critical part of CLE's strategic plan, says Smith. Operating under a residual lease agreement, the airport strives to keep airlines' operating costs low.

In September 2007, Continental Airlines announced a 40% expansion of air service at CLE over 1 1/2 years. However, as fuel prices climbed, the airline deferred its expansion and Smith expects a 100,000 reduction in passenger numbers, year over year.

Facts and Figures

Project: Exclusive Pouring Rights for Pepsi

Location: Cleveland Hopkins

Estimated Value: $2 million

Contract Length: 5 years

Marketing Consultant: Airport Marketing Income

Details: Program includes product tastings and promotions at the airport, airport advertising on Pepsi delivery trucks and financial support for local community by Pepsi

Other AMI Programs: Promotions for Dunkin' Brands coffee at Logan International in Boston

A Few Twists & Turns

The sponsorship deal was not as easy as signing a contract. One of the challenges, says Smith, was "unwinding" commitments that food and beverage operators had with other beverage providers. Pepsi Americas and the airport negotiated with those operators to ensure the pouring rights agreement would not impact their operations. The airport was at a point of transitioning from one master concessionaire to another. BAA, the current operator, is writing this requirement into its new subleases.

With airports struggling to find ways to diversify revenue, Smith expects similar deals to emerge elsewhere. And he has advice for airports looking at similar opportunities: "You can't go in with a singular goal - to generate more revenue for the airport. When you look at deals like this, it is important that you have multiple goals and rationale for dealing the deal." Customer preference, for instance, played a tremendous role in the airport's decision to partner with Pepsi.

CLE prides itself on thinking "outside the box" to find initiatives like the Pepsi program - especially in today's economic climate. "It's important that we're finding revenue sources not driven by passenger activity," Smith notes.

Additional Revenue Streams

CLE is also working with AMI to explore other sponsorship agreements, including naming rights for a parking garage and the sponsorship of a cell phone lot expected to open in 2009.

Concessions revenue at the airport is some $112 million each year. About 39% of that is attributed to parking, the airport's largest source of non-airline revenue, according to Smith.

Currently the parking program is a management arrangement; CLE will soon convert to a developer model parking arrangement where the developer invests in new parking facilities and is responsible for day-to-day operations of the parking garage and shuttle service. "This is important to us because the airport doesn't have to put out those funds and the debt service is not borne by the airlines," Smith explains.

In early 2009, the airport is also issuing a request for proposals for a new gas station/convenience store adjacent to the rental car facility. The airport is situated on about 5,000 acres and, according to Smith, about 100 acres is deemed "developable" so the airport is looking at developing a "lifestyle center" (mall).

Other revenue opportunities include establishing a per-trip fee for off-airport operators. With about 7,000 on-airport parking spaces and 7,100 off-airport operated privately, Smith says the amount of wear and tear on the airport pavement from shuttle service is worth implementing an automatic vehicle identification (AVI) system so those operators will help bear some of the costs of maintaining the airport's roadways.


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