Dueling Fools Coke vs. Pepsi
Pepsi Rebuttal

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Dueling Fools
By Rick Aristotle Munarriz (TMF Edible)
April 4, 2001

My buddy Paul starts by pointing out how "Coke" is a well-recognized expression, second only to "OK." Pal, you nailed it. I couldn't agree with you more. Coke is not OK.

I won't argue with many of the valid points that my worthy Foolish opponent raised regarding the soft drink industry, mostly because they also apply to Pepsi. The one thing I would like to point out, given Coke's pathetic sales growth, is that the fizz biz looks pretty mature. To the investors who rode the stock through decades of beating down new markets: wakey, wakey -- ride's over. The Distribution Channel Express has hit the depot. We walk from here.

Coke knows it. That's why it's looking to break out of its carbonated mold. But if anyone thinks that Coke is so huge that it can eat up any beverage niche it desires, try not to snooze through history class next time. Powerade will never be Gatorade -- which has an even bigger market share of the energy drink segment than all of Coke's products combined in the soft drink field.

Coke's Fruitopia never posed a serious threat to Cadbury Schweppes' (NYSE: CSG) Snapple. And to put the value of new-age beverages into perspective, Snapple was lumped together with a ton of other Triarc (NYSE: TRY) products when it was sold to Cadbury late last year for a little more than 1% of Coke's market cap. For those keeping track of Snapple's suitors through the years, this is Larry King or Elizabeth Taylor with a twist cap.

So what's left? Oh, right, Coke is looking to dip into the iced coffee arena. Did I mention that it's Pepsi that makes the niche gorilla: Starbucks' (Nasdaq: SBUX) Frappuccino? In short (and that's a tempting option right there now that I think of it), Coke is looking to enter growth markets where it has failed before under far better management and where all its clawing and scratching today will win it no better than silver.

In closing, can I ask Coke shareholders to think about the reasons they bought the stock in the first place? It's because Coke was a winner, wasn't it? It's because Coke was a leader, right? Take a good look in the mirror now, and don't let those bottled curves fool you. Who is following whom now? Who is winning the beverage war? The answer is on the label of your Pepsi One, isn't it? Say it out loud, and welcome aboard. We ride from here.

Rick Aristotle Munarriz was fueled by Pepsi One during the Duel. He also claims to have been served a Diet Pepsi at the Coke Museum coffee shop in Atlanta, but no one believes him. Rick's stock holdings can be viewed online. The Motley Fool is investors writing for investors.

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