Buffalo Wild Wings (NASDAQ:BWLD) recently announced that it would stop serving products from Coca-Cola (NYSE:KO) and make the switch to PepsiCo (NYSE:PEP). This is a key win for PepsiCo, as Buffalo Wild Wings is a fast-growing restaurant chain. For Buffalo Wild Wings, it's a win as well for a number of reasons, including PepsiCo's sponsorship of the NFL and Major League Baseball. The only loser in this deal appears to be Coca-Cola.

How will this change affect the three companies and what should investors expect? For us Fools, it pays to find out.

Plenty of possibilities
There are plenty of possibilities for Buffalo Wild Wings with PepsiCo as its beverage supplier instead of Coca-Cola. In addition to having Pepsi products, including Mountain Dew, 7UP, and Tropicana orange juice, PepsiCo also offers its line of Frito-Lay potato chips. This gives Buffalo Wild Wings endless possibilities to create plenty of new snack options.

It's the Frito-Lay division that attracted Buffalo Wild Wings to PepsiCo. Now, Buffalo Wild Wings can offer Doritos, Ruffles, Cheetos, Sun Chips, Lay's, Funyons, and Tostitos to go with its wings and beverages. It also opens up a bunch of possibilities in terms of menu innovations. Will we get Doritos-flavored chicken wings?

For Buffalo Wild Wings, this was a well thought out decision. Chief executive officer Sally Smith actually went to the PepsiCo food-innovation lab to see what the brand can offer her company. PepsiCo showed her some treats that it can make with its products, including a Doritos crunchy topping for wings and chicken tenders and a Mountain Dew-flavored salad dressing.

Now while I don't expect any new menu items immediately, I think we could start seeing some new offerings in the next 12-to-18 months. The good news is that if Buffalo Wild Wings can get a new product from PepsiCo that tastes as great as the Doritos Locos Tacos at Taco Bell, the chain will have a new hit menu item. A great new menu item can certainly continue driving customers into its doors, and that's what Buffalo Wild Wings wants.

Keeps the activists at bay
The deal with Buffalo Wild Wings shows that there are synergies between the snacks and beverage businesses. Activist investor Nelson Peltz has been trying to get PepsiCo to split into two companies. One company would be the beverage business and the other would be the snacks business.

What about Coca-Cola?
I won't be bringing out the tissues for Coca-Cola; after all, the company remains the No. 1 beverage company in the world. While PepsiCo has diversified itself with its snacks business, Coca-Cola is purely a beverage company. In addition to its namesake brand, Coca-Cola owns Sprite, Fanta, Dasani, Vitaminwater, Minute Maid, Powerade and many others.

For Coca-Cola, its strategy is to ensure it remains dominant in the beverage business. While some have said that the single-serve business from the likes of Green Mountain Coffee Roasters poses a threat to its business, Coca-Cola CEO Muhtar Kent sees things differently. At this month's Beverage-Digest conference,  he said that he sees single-serve dispensers as an opportunity and not a threat. Coca-Cola getting into the single-serve market could certainly be an exciting opportunity for the company.

How do shares look?
In the past year, the biggest disappointment has been Coca-Cola. Its shares have risen only 4%. The best performer has been Buffalo Wild Wings, whose shares have risen 92%. PepsiCo shares have risen slightly more than 17% in the past year.

Buffalo Wild Wings trades at 30 times next year's earnings. Coca-Cola and PepsiCo both trade at 17 times next year's earnings. Both also have the same dividend yield of 2.8%.

Foolish assessment
I think the clear winner here is Buffalo Wild Wings. Shares have been on a tear over the past year, and I see plenty of growth ahead for the chain. The tie-up with PepsiCo is yet another smart move on the part of management at Buffalo Wild Wings.

It's tougher to decide who the winner is between Coca-Cola and PepsiCo overall. The beverage business is extremely competitive. While PepsiCo won the battle for Buffalo Wild Wings, there are plenty of other battles where Coca-Cola is winning. This is just one of many battles that the two giants are fighting in the "cola wars."

Both companies look attractive from a value investor's point of view with their solid dividend and low P/E ratio. I'd say an investor can't go wrong in owning either PepsiCo or Coca-Cola for the long run.


Mark Yagalla has no position in any stocks mentioned. The Motley Fool recommends Buffalo Wild Wings, Coca-Cola, and PepsiCo. The Motley Fool owns shares of Buffalo Wild Wings, Coca-Cola, and PepsiCo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.