Coke, Pepsi to Vie for Burger King’s Soda Business

Coca-Cola and Pepsi are squaring off for the right to dispense their soda at Burger King, the second-largest U.S. burger chain, in a deal seen as crucial for Pepsi, but not necessarily for Coke.

Burger King, a recently acquired subsidiary of British conglomerate Grand Metropolitan, said Thursday it is holding talks with Coca-Cola Co., which lost the Burger King account in 1983, and PepsiCo Inc., the current contract holder, as part of a “normal, periodic review” of accounts.

The Burger King business is crucial to PepsiCo, analysts said, because Pepsi lags far behind Coke in its share of the U.S. fountain soda business.

“Unquestionably, Burger King is an important customer of ours,” PepsiCo spokesman Tod MacKenzie said, adding that PepsiCo retained the contract once before, when the Miami-based chain reviewed its accounts in 1987.

“We think we have a good track record,” MacKenzie said.

Spokesmen for Coca-Cola, the world’s largest soft drink company, were unavailable for comment. However, analysts said Coke’s contract to supply Burger King’s arch-rival McDonald’s Corp. could make it hard for Coca-Cola to regain the Burger King account.

Although the contract brings in some revenue, this latest skirmish in the beverage industry’s ongoing “cola wars” represents “a lot of noise that signifies nothing for profits,” said Prudential-Bache analyst George Thompson.

While soda sales to consumers by fast-food chains offer twice the profit margins of their food sales, the sales to the big restaurant chains are a relatively small business for Coca-Cola and PepsiCo. In fact, the contract’s real importance to both companies lies in its marketing value.

“This (competition) is more significant from a visibility standpoint than from any other,” said analyst Emanuel Goldman of Paine Webber.

“We estimate it’s only worth a penny a share (in earnings) to Pepsi, but they get tremendous benefit on a spillover basis from being in Burger King because it helps affect people’s decisions on which soft drink to buy in supermarkets,” he said.