The law is Pepsi8217;s latest weapon

Globally, since Roger Enrico took over as Pepsi8217;s world-wide chief a few years ago, the company has increased the scope of the bitter cola-wars to include the courts as well as anti-trust authorities across the globe. In a no-holds barred game where no one8217;s taking any prisoners, Pepsi8217;s increasingly realised that Coke8217;s tremendous lead over it globally 8212; Coke8217;s global market share is around 55 per cent as against it8217;s 30 per cent 8212; and its huge cash chest, allows it to simply crush Pepsi in various markets. After apartheid was over in South Africa and Pepsi came back into the market 8212; Coke operated in South Africa during the apartheid years 8212; it was convinced it8217;s politically correct behaviour would reap it rich dividends. What it didn8217;t realise was that Coke would price its product so cheap that it was almost free, to drive it out. Coupled with a major strike within a year at its South African plant, Pepsi had no option but to pull out before it bled todeath.

Similarly, when Pepsi had a 84 per cent share in the Venezuelan market, Coke simply went in and bought over its principal bottler Cizneros for 1 bn. Pepsi, whose market share went to zero overnight, went to court over this. Eventually, the International Court of Arbitration awarded 94 mn for the damage this caused to it8217;s business. Pepsi, meanwhile, tied up with a beer bottler, but managed to get back to a market share of under 45 per cent only.Given this, Enrico, the embarassed author of the famous book which prematurely announced Pepsi8217;s victory over Coke by stating The Other Guy Blinked, decided it was time to change tack, to take the war to other courts. Naturally, Justice Bhandari8217;s observations that market place battles can8217;t be decided by courts didn8217;t go down well with Pepsi.

In the Indian case, Pepsi had argued that Coke8217;s attempts to woo its entire sales team at Kanpur, to cite one of many examples in its suit, was really a means of trying to disrupt its business. While the court hasrejected its plea for an interim injunction, the actual case will go on and hearings will begin in November.

As part of its strategy to take Coke to court if need be, Pepsi sued Coke in a US district court in May last year. Pepsi, which sought unspecified damages, accused Coke of monopolising the sales of soft drinks at fountain outlets at restaurant chains, sports arenas and movie theaters by threatening to take away Coke from distributors that carried Pepsi as well. The fountain business is one of the fastest growing segments in the US market the US market itself is over half the global market. The suit is still pending.

In July, Pepsi followed this with a complaint to Italy8217;s anti-trust regulators, arguing that Coke was blocking access to beverage wholesalers by rewarding them with bonuses and rebates for exclusively stocking Coke these wholesalers were often the main supply sources for outlets such as hotels.

And the month after this, Pepsi stepped up its efforts to get the French government tostop Coke from buying Pernod Ricard8217;s Orangina for 840 mn. Pepsi argued that it had an exclusive distribution agreement with Orangina for drinks consumed outside the home, and that allowing Coke to take over Orangina would cut off Pepsi8217;s sole distribution outlet. Coke then had to re-submit a bid for Orangina, but Pepsi8217;s opposed this again.

And just last month, Pepsi decided to add to Coke8217;s growing troubles with anti-trust authorities in Europe 8212; they have opposed Coke8217;s moves to buy out Cadbury Schweppes8217; brands, saying it will create a monopoly 8212; by complaining that Coke was giving illegal incentives to supermarkets and other retailers to prevent them from stocking rivals products. A few weeks ago, European investigators swooped upon Coke offices in various countries across the continent . Apart from dealing with the EU investigations, Coke has now had to scale back its Schweppes deal dramatically, 8212; the deal which is just 40 per cent the size of the earlier one, excludes 15 member countries of theEU. It is believed that Pepsi also played a role in Australia8217;s regulators refusing to allow Coke to take over Schweppes brands in the country.

It would, of course, be wrong to automatically conclude that Pepsi8217;s getting a pasting in the market and is therefore going to the courts. If Coke8217;s not going to the courts that8217;s because it8217;s streets ahead of Pepsi. But where it8217;s getting hit, it8217;s going to courts too. In the case of the Gujarat bottling plant, for example, Pepsi bought over the company which earlier used to do Coke8217;s bottling. Coke then went to court, and the court prevented the plant from bottling any beverage other than Coke for a year. Coke obviously did not get anything bottled from the Pepsi-owned plant, but Pepsi had to keep these facilities unutilised for a full year.

It8217;s a war out there, and anything goes. Clearly, this new phase has just begun, and several interesting possibilities will emerge. Internationally, for example, Pepsi filed a case against an employee William Redmond whojoined Quaker Oats8217; sports drinks division a few years ago. Pepsi argued that Redmond was privy to their trade secrets and must be stopped from joining Oats as he could pass on these to his new employers 8212; Redmond had also filled a confidentiality agreement with Pepsi. The US Appeals Court for the Seventh Circuit granted Pepsi the injunction they sought.

Pepsi8217;s lawyers are also busy digging up more such cases in other areas such as automobiles where companies have been restrained from hiring senior personnel from competitors, for their court case in November in Delhi. Meanwhile, the EU8217;s investigations into Coke could take upto a year to get completed, and Pepsi looks like it8217;s going to keep appealing to various courts/anti-trust units against Coke. Just a few days ago, it appealed against Coke buying Schweppes8217; brands in Chile. The cola wars fizz on, though in a different setting.