Coke Tries To Oust Cadbury Schweppes At Mcdonalds

Atlanta-based Coca-Cola, the worlds biggest soft drinks company, is trying to push Cadbury Schweppes, the UK group, out of thousands of McDonalds fast-food outlets in the US, it emerged on Tuesday.

Coca-Cola confirmed it had offered McDonalds franchisees one-time gifts of between 200 and 600 gallons of free soft drink syrup if they would agree to serve only Coca-Cola products in their restaurants.

The move threatens to erode an important market for products made by Dr Pepper/Cadbury Schweppes North America, Cadbury Schweppes US subsidiary. These include Dr Pepper, 7UP, Canada Dry, Schweppes, A&W and Sunkist.

Cadbury Schweppes, number three in the US soft drinks business, said it had already matched Coca-Colas offer and would take all possible steps to protect its market - including, if necessary, legal action.

 

Coca-Cola said conversion allowances were part of normal competitive practice in the US soft drinks industry.

Fast food restaurants are one of the most important outlets for soft drinks in the US. Soft drink companies supply the restaurants with syrup, which is then mixed with water and gas.

According to Beverage Digest, an industry newsletter which reported Coca-Colas move, fountain sales account for 22 per cent of the US carbonated soft drinks market. The segment is dominated by Coca-Cola, which accounts for 60 per cent of fountain sales. Coca-Colas position stems partly from a handshake agreement with McDonalds under which it is exclusive supplier to the companys 1,800 restaurants in the US.

But another 9,500 McDonalds restaurants are owned and operated by franchisees, who may choose their own suppliers.Many franchisees already buy only Coca-Cola products, but others supplement them with those supplied by Dr Pepper, ranked third in the US market with 14.8 per cent of soft drink sales, behind Coca-Cola, 43.1 per cent, and PepsiCo, 31 per cent.

Coca-Cola is telling McDonalds restaurant owners they do not need to offer Dr Pepper products because it can match them with its own range, such as its Mr Pibb brand, which competes in the Dr Pepper flavour category. The free syrup it is offering is enough to make 30,000 to 90,000 drinks per restaurant, representing a big profit opportunity. Cadbury Schweppes said it was incurring costs in the low millions of dollars to match Coca-Colas offer. Soft drinks accounted for 2.9 billion of Cadbury Schweppes sales of 5.1 billion in 1996, with US sales about 1 billion. Its shares closed 15p down in London at 526 1 /2p on Tuesday.