In Pop Culture Wars, Pepsi Claims Victory at Rite Aid

In an unusual deal that further advances the cola wars, Rite Aid has agreed to exclusively sell Pepsi Cola at its 4,000 stores.

Observers view the Rite Aid deal as a sign of a new assertiveness on the part of Pepsi. It recently has wrested several accounts from Coca-Cola and has filed a federal lawsuit against its archrival alleging unfair business tactics.

“Pepsi recently has taken on what I call a new aggressiveness,” said John Sicher, editor and publisher of Bedford Hills, N.Y.-based Beverage Digest. “I think the Rite Aid deal is part of that.”

According to Rite Aid, the deal with Pepsi took effect nearly seven months ago--about the time Rite Aid began converting Thrifty-Payless stores to Rite Aid stores. A spokeswoman for the drugstore chain wouldn’t discuss Rite Aid’s reasons for going with Pepsi but insisted that its customers are well served. Pepsi brands include Slice, Mountain Dew, Lipton iced teas and Aquafina water.

Although nearly unheard of among other top drug chains, exclusive soft drink arrangements are nothing new to Rite Aid: The chain had an exclusive deal with Coke for about 11 years before going with Pepsi. (Thrifty-Payless sold both Coke and Pepsi before this year).

Now, Pepsi is fighting back. Pepsi spokesman Larry Jabbonski said his company--which has 31% of the soft drink market, compared with Coke’s 44%--triggered the switch by “encouraging competition.”

“We’d had some ongoing discussions with [Rite Aid executives], and we convinced them to let us do a test in two of their stores last November,” said Jabbonski. According to Jabbonski, Pepsi managed to convince Rite Aid that it could increase its beverage sales and profit margins by dealing with Pepsi.

According to a knowledgeable source, Rite Aid went with Pepsi after it unsuccessfully tried to convince Coke to sweeten its bid for Rite Aid’s business. Representatives of both soft drink firms said Rite Aid made the final decision.

While drugstores account for a small percentage of soft drink sales, the category is quickly growing. Only 3.6% of soft drink sales come from drugstores, but the segment grew 9% in the first quarter of 1998. Overall, retail growth in soft drink sales grew by about 2%, according to Beverage Digest. Pepsi’s drugstore volume in the first quarter of 1998 jumped by 31% on the strength of the Rite Aid account.