NYC Comptroller Sours on Snapple Pacts

NEW YORK The New York City comptroller yesterday urged the city to cancel two deals that would mark Snapple as its exclusive beverage vendor, citing concerns about fairness and possible conflicts of interest involving Interpublic Group’s sports-marketing unit Octagon.

In a seven-page letter to the city’s top lawyer, comptroller William C. Thompson Jr. accused the city of failing to recognize what he deemed to be a conflict of interest between Octagon, which acted as the city’s consultant, and Snapple owner Cadbury Schweppes, another Octagon client. The comptroller noted that the perceived conflict was compounded by the fact that Octagon and Deutsch, Snapple’s marketing agency since 1997, are both owned by IPG.

“This fact compounds exponentially the potential for favoritism in a process that should have been, but was not, open, fair and competitive,” Thompson’s letter stated.

David Bober, Octagon’s director of business development and special projects, said the furor surrounding the suggestion of impropriety reflected a general misunderstanding of the holding company model and the advertising industry.

“We’re the second-largest holding company in the world, so it is far from uncommon for a brand to work with multiple agencies,” Bober said. While Octagon’s U.K. office does represent Cadbury, the account is for the company’s confectionery products and is unrelated to the Snapple business. Bober added that Octagon has worked with beverage giant Pepsi, which bid on the contract and lost.

“We’ve worked with most of the large beverage companies in one form or another,” Bober said. “We didn’t choose Snapple, the schools did.”

The letter goes on to say that Thompson believes Octagon further confused the process by failing to provide consistent bidding guidelines, allowing one vendor to bid only on fruit juices, rather than juice and water as Snapple did. Another firm said it was encouraged to include snacks in the bid. Two firms provided information that their bids were equal to or better than Snapple’s agreement, but that no negotiations took place with them, the letter said.

Bober said that while Pepsi was encouraged to provide bids on snack products, the proposal was separate from the beverage bid and that “in every presentation we made our message was uniform and consistent.”

Thompson added that Octagon did not win the New York Board of Education contract through a standard bidding process, but by purchasing Bober Associates, which was partnering with the firm that won the business in 2001—Growth Through Sports Marketing.

Thompson also questioned the involvement of Joseph Perello, the city’s chief marketing officer, who was previously vice president of marketing for the New York Yankees. During his tenure with the team, Perello brought in Snapple as the “Official Iced Tea of the New York Yankees.” Thompson suggested that Perello should have recused himself from the process or asked the opinion of the city’s Conflicts of Interest Board.

“The mayor has asked the corporation counsel to look into the comptroller’s allegations of conflicts of interest,” said Jeffrey D. Friedlander, first assistant corporation counsel of the New York City Law Department.

“But there is absolutely no conflict of interest in the city’s marketing officer, Joe Perello, having represented the Yankees in a previous agreement with Snapple,” he said.

IPG officials referred calls to Octogon.