An eye opener:
> An ice-laden soft drink at a fast-food outlet can easily sell for
> $1.25, with very little overhead for the restaurant operator. Buying
> bottles and cans costs the restaurants more and they are harder to
> mark up when consumers can buy a 12-pack of Coke and Pepsi cans for $2
> in some grocery stores.
Yeah, why DO I spend a buck or more on fountain drinks? I gotta be an
idiot. (The fact that I'm posting this at 4:19am notwithstanding...)
Full article follows. Rock and roll-a cola wars, I can't take it anymore.
> FOR PEPSI, A BATTLE TO CAPTURE FOUNTAIN SALES FROM RIVAL COKE
> By NIKHIL DEOGUN, Staff Reporter of THE WALL STREET JOURNAL
> May 11, 1998
> The soda fountain is now ground zero in the cola wars.
> With its pugnacious lawsuit Thursday against Coca-Cola Co., PepsiCo
> Inc. is aiming to gain ground in the market for soft drinks dispensed at
> fountains, the very heart of Coke's U.S. strength and the major reason
> for Pepsi's weakness.
> Pepsi is accusing its bigger rival of trying to freeze it out of the
> business of selling soda pop in restaurants and movie theaters served by
> independent food distributors. Pepsi's claim: As it has sought inroads
> into the fountain business, Coke has used its huge market power to
> threaten distributors with losing their Coke business if they supply
> Pepsi. Pepsi says that 90 of the top 100 national restaurant chains and
> other large fountain accounts receive their products from these
> distributors, so Coke is violating antitrust law by blocking access to
> the "distribution superhighway." Coke says the charge has no merit.
> 'JAWS OF DEATH'
> The suit goes to the core of Pepsi's strategy against Coca-Cola, which
> has steadily gained U.S. market share and has vowed to capture 50% of
> the domestic soft-drink market by 2001. In 1997, Coke's U.S. share was
> 44% vs. Pepsi's 31% -- and one of Pepsi's top executives has referred to
> the gap as the "jaws of death."
> The fountain business "is crucial for Pepsi because it accounts for
> nearly all the difference in the 12 to 13 share-point lead Coke has over
> Pepsi nationally," explains Andrew Conway, an analyst at Morgan Stanley,
> Dean Witter & Co.
> Thanks to "combo" meals and "super-size" drinks at fast-food
> restaurants, the fountain business has been growing faster than sales of
> soft drinks in bottles and cans, though the pace has slowed. About 24%
> of soft drinks sold in the U.S. are dispensed by fountains. And while
> Pepsi and Coke are usually neck and neck in other sales outlets, Coke
> has a 65% share of the fountain business, towering over Pepsi's 25%.
> Coke doesn't break out profits for this business, but analysts say the
> fountain segment accounts for 25% to 40% of Coke's U.S. profit.
> Roger Enrico, PepsiCo's chairman and chief executive, has been even
> blunter. "Fountain could be our Achilles' heel," he told Pepsi bottlers
> at their annual meeting in January 1997. "We can't build a fountain
> business with a few gimmicks, and without the fountain business our
> future is a lot less bright."
> The lawsuit is just part of Pepsi's strategy to arm itself for the
> fountain wars. It set up a new fountain-beverage division in 1996 and
> since then has more than tripled the division's staff of 50. After
> months of sticky negotiations, Pepsi has amended contracts with most of
> its bottlers who have had the exclusive rights to sell syrup to most
> restaurants in their territories. That arrangement had turned off many
> big accounts, who preferred to buy their soft-drink syrup from the food
> distributors that already supplied them with ketchup and napkins --
> rather than from a hodgepodge of Pepsi bottlers. Coke, meanwhile, built
> a much bigger organization and did business with those very
> KEY MOVE
> Most important, PepsiCo last year spun off its fast-food unit-made up
> of the Pizza Hut, Taco Bell and KFC chains -- as a separate, publicly
> traded company, Tricon Global Restaurants Inc. For years, Pepsi's
> ownership of the restaurants meant Coke could tell owners of other
> restaurants that pouring Pepsi was putting money into their rivals'
> One new Pepsi tactic aims at a big weakness in the fountain business:
> the cups. Most of the time, people order drinks when they eat out at a
> restaurant. But they often skip the drinks when they buy takeout. Pepsi
> says its research shows that consumers dislike paper cups because they
> get soggy and can easily spill if jostled, so customers just decide to
> pick up a bottle or can from somewhere else.
> But restaurants don't like selling bottles and cans, which have lower
> margins than soda from the fountain. An ice-laden soft drink at a
> fast-food outlet can easily sell for $1.25, with very little overhead
> for the restaurant operator. Buying bottles and cans costs the
> restaurants more and they are harder to mark up when consumers can buy a
> 12-pack of Coke and Pepsi cans for $2 in some grocery stores.
> Pepsi, searching for the perfect takeout cup, has come up with a
> couple of candidates. One is a 64-ounce cup with a clamp lid and a
> handle. Another, slated for testing next month, is a plastic
> "twist-and-go" cup with a dome-shaped lid that is screwed on. The cup,
> designed to carry 32 ounces, also has a narrow bottom that fits car
> cup-holders. It costs more, but Pepsi is betting it will pay for itself
> with extra volume.
> Counting on Slush
> For its part, Coca-Cola says it has introduced plenty of innovations
> in the fountain business. It introduced slush-style frozen drinks in
>several outlets and ties many of its national promotions to restaurant
> purchases. "The concept of proprietary cups is nothing new -- if a
> customer said they wanted a screw-on cup, I'm sure we'd develop one,"
> says a Coca-Cola spokeswoman.
> As for Pepsi's antitrust allegations, the spokeswoman says Pepsi has
> plenty of distribution avenues, including its own bottlers, to supply
> restaurants with soft-drink syrup. Besides, she says, Coke has contracts
> with only 540 of 3,300 food-service distribution companies in the U.S.
> The battle isn't likely to cool off soon, even though fountain drinks
> are less profitable than bottles and cans for Coke and Pepsi. Both
> consider restaurants, movie theaters and ballparks to be big billboards
> that help advertise, build brand loyalty and induce people to sample
> drinks. That is because consumers in these areas are "captive" -- they
> have no choice but to drink what is sold. Coke has used fountain outlets
> to develop smaller brands like Barq's root beer and to introduce new
> drinks, such as Surge, a citrus beverage. And many analysts say that if
> Pepsi expects Storm, a new lemon-lime drink it is currently testing, to
> ever be a big player, it will need a strong fountain business.
> Some people in the beverage business see the lawsuit as a sign that
> Pepsi still hasn't gained much ground against Coke. But Pepsi can claim
> some early wins. Vince Gennaro, president of Pepsi's fountain-beverage
> division, says the company has locked in contracts with 97% of all Pizza
> Hut, Taco Bell and KFC stores, fending off an attempted grab by Coke.
> Several Wendy's franchisees have switched to Pepsi from Coke, as have
> chains such as Planet Hollywood, Hard Rock Cafe and Bojangles.
> Last month, Pepsi signed on to be the exclusive beverage supplier for
> Walt Disney Co.'s new Club Disney, DisneyQuest and ESPN Zone venues.
> While small, the deal was surprising because Disney has a longstanding
> partnership with Coke, which sells and promotes its drinks at Disney's
> theme parks.
His whole life is a fantasy camp. People should plunk down $2000 to
live like him for a week: Do nothing. Fall ass-backward into money.
Mooch food off your neighbors. And have sex without dating.
-- George Costanza about Cosmo Kramer