Pepsi accused Coke on Thursday of monopolising the sales of fountain soft drinks at restaurant chains and movie theatres by threatening to take away Coke from distributors who carried Pepsi as well.
The lawsuit filed in US District court here comes as Pepsi-Cola Cos efforts to challenge Cokes dominance in the fountain segment of the $55 billion soft drink market have begun to bear fruit.
The suit did not pertain to sales of bottles or cans of the soft drinks, only to fountain-dispensed drinks handled by large foodservice distributors who control deliveries to chains of restaurants and theatres.
Also Read
The lawsuit, filed by Pepsi-Colas parent Pepsico Inc asked the court to restrain Coca-Cola from entering into agreements with its distributors to exclude Pepsi and to award the company undetermined damages.
Coca-Colas message to foodservice distributors is clear: if a distributor carries Pepsi at a customers request, the distributor will be terminated by coke, the lawsuit said.
A spokesman for Atlanta-based Coca-Cola, Rob Baskin, said, We have not been served with papers yet and we havent seen the suit so we dont have a comment on it.
The Pepsi lawsuit said Coke had become arrogant at its success in the fountain-dispensed market, which Pepsi credited to two of its own blunders.
Pepsi said it had damaged its ability to compete in the market by distributing its fountain products through local bottlers at a time when specialised national, regional and local fountain distributors were taking over the market.
It said its ability to compete was also damaged when Pepsico acquired several restaurant chains including Pizza hut, Taco Bell and KFC in the 1970s and 1980s that used Pepsi products. Coca-Cola pointed to the restaurants in convincing other restaurant chains that Pepsi had become their competitor.
Pepsi said it eliminated both obstacles in 1997, when it negotiated a new arrangement with its bottlers allowing it to distribute fountain soft drinks through foodservice distributors and when it spun off its restaurant chains as a separate company, Tricon global restaurants. Fountain sales account for about 27 percent of soft drink sales in the US, and industry analysts estimate Coca-Cola had 65 percent of that business compared with 20 per cent to 25 per cent for Pepsi.
The lawsuit said virtually all agreements between Coca-Cola and its fountain distributors has included a condition preventing the distributor from handling Pepsi products but that the company rarely tried to enforce the rule until 1997.
The lawsuit said the bottler values the business of chain restaurants and movie theatres because customers who sample the product there will later buy it at supermarkets, vending machines and other retail outlets.
Coca-Cola leads Pepsi in the overall US soft drinks market, with a 43.9 per cent market share to Pepsis 30.9 percent, according to the Beverage Digest/Maxwell report for 1997.