Wendy's Renews Soft-Drink Agreement with Coca-Cola, Threatening Pepsi's Business

Strategic Insights -

Wendy's, the No. 3 U.S. fast-food hamburger chain, has renewed its 10-year soft-drink agreement with Coca-Cola, forcing franchisees who currently serve Pepsi drinks to switch once their contracts expire. The deal includes a $100 million contribution from Coca-Cola to Wendy's national advertising campaign over the next decade. This move is a significant blow to PepsiCo, which has been attempting to build its business in the restaurant industry, particularly in the fountain machine market.

Key Takeaways:

  • Wendy's has renewed its soft-drink agreement with Coca-Cola for 10 years, requiring franchisees who serve Pepsi drinks to switch once their contracts end.
  • The contract includes a $100 million contribution from Coca-Cola to Wendy's national advertising campaign over the next decade.
  • Coca-Cola had already provided soft drinks to about 4,400 of Wendy's 5,207 locations.
  • Pepsi has been making inroads in the restaurant business, signing agreements with Pizza Inn and Bojangles Restaurants, and convincing hundreds of Wendy's franchisees to switch from Coca-Cola in the past year.
  • More than 700 Wendy's locations currently serve Pepsi products.
  • Pepsi has a strong presence in the fountain machine market through its agreements with former restaurants, including Pizza Hut, Taco Bell, and KFC, which have more than 20,000 locations combined.
  • This deal highlights Coca-Cola's dominant position in the beverage market and its ability to adapt to changing market conditions.

Statistics:

  • 4,400 of Wendy's 5,207 locations currently serve Coca-Cola products.
  • 700 Wendy's locations currently serve Pepsi products.
  • $100 million: the amount Coca-Cola will contribute to Wendy's national advertising campaign over the next decade.
  • 50: the number of people on Coca-Cola's team working on the Wendy's account.
  • 5,207: the total number of Wendy's locations.
  • 20,000: the combined number of locations of Pizza Hut, Taco Bell, and KFC, which serve Pepsi products.

Sources:

  • Bloomberg, May 30, 1997
  • Bloomberg, May 1, 1997
  • Bloomberg, April 2, 1997