Coke Ousts Pepsi at Dunkin’ Donuts

by Christopher Freeburn | April 3, 2012 4:25 pm

Coke Ousts Pepsi at Dunkin’ Donuts

In the latest battle in the cola wars, Coke has scored a warm, fresh, sugar-glazed victory against rival Pepsi.

Reuters reports that Dunkin’ Donuts (NASDAQ:DNKN[1]) has dropped[2] PepsiCo (NYSE:PEP[3]) drinks in favor of Coca-Cola (NYSE:KO[4]) products at its 9,400 Dunkin’ and Baskin Robbins shops across the U.S.

Terms of the deal haven’t been disclosed, Reuters notes, but the move likely left a bad taste in the mouths of Pepsi executives. In January, Dunkin’ revealed plans to double the number of existing Dunkin’ Donuts stores[5] over the next two decades, according to The Consumerist. Still, Pepsi released a polite statement, noting that, “Dunkin’ Donuts has been a valued partner of PepsiCo over the last five years and we’ve enjoyed being part of its success.”

Enterprise News reports that the Dunkin’ Donuts deal covers Coke’ juice, energy drink and water brands[6], including Powerade, Minute Maid, Simply, Dasani and Vitaminwater. Coke beverages will appear at Dunkin’ Donuts and Baskin-Robbins shops by late spring, and all Pepsi drinks will disappear by August.

The struggle for fast food venues remains ongoing, Reuters noted. Just last year, Pepsi persuaded Papa John’s (NASDAQ:PZZA[7]) to join its team by ditching Coke at its outlets.

The latest skirmish comes in a year that brings increasingly dismal tiding for the two leading rival sodas. Hit with rising material costs, sliding demand and a weakening dollar, the soda kings find themselves wary of alienating consumers with price increases in a competitive drink market and still lackluster economy.

As InvestorPlace writer Dan Burrows noted in February, both company stocks have relatively high valuations[8] at current share prices, making the less-than-compelling options for investors. That month, Pepsi announced layoffs of 3% of its total work force as part of an effort to reduce costs by $1.5 billion over two years.

Shares of both firms have stalled despite the markets’ gain this year — PEP is flat and KO is up 5% compared to a 12% gain for the S&P 500.

Endnotes:
  1. DNKN: http://studio-5.financialcontent.com/investplace/quote?Symbol=DNKN
  2. has dropped: http://www.reuters.com/article/2012/04/02/dunkinbrands-idUSL3E8F27M720120402
  3. PEP: http://studio-5.financialcontent.com/investplace/quote?Symbol=PEP
  4. KO: http://studio-5.financialcontent.com/investplace/quote?Symbol=KO
  5. double the number of existing Dunkin’ Donuts stores: http://consumerist.com/2012/04/dunkin-donuts-breaks-up-with-pepsi-to-go-steady-with-coke.html
  6. covers Coke’ juice, energy drink and water brands: http://www.enterprisenews.com/topstories/x221030547/Dunkin-is-dropping-Pepsi-drinks-in-favor-of-Coca-Cola
  7. PZZA: http://studio-5.financialcontent.com/investplace/quote?Symbol=PZZA
  8. have relatively high valuations: http://investorplace.com/2012/02/pepsico-pepsi-pep-coca-cola-coke-ko-stocks-to-watch/

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