Sunday, August 20, 2017

Arby's Thinking Coke in 2018

The Coca-Cola Company has won the contract to sell soft drinks at quick-serve chain Arby’s.  The contract is a coup for the Atlanta-based beverage giant as they unseated their rival PepsiCo Inc. in the process.   The deal will add more than 3,200 Arby’s locations to Coca-Cola’s portfolio of restaurant clients.
Arby's latest logo and restaurant design
Arby’s Restaurant Group Inc., which is based in Sandy Springs, is controlled by Atlanta-based Roark Capital Group. Roark owns over a dozen multi-unit restaurant brands such as Moe's Southwest Grill, Hardee's/Carl's Jr., Jimmy John's, and Corner Bakery Cafe, most of which already offer Coke products

Roark purchased Arby's in 2011 when it was spun off by Wendy's/Arby's Group.  At the time of the acquisition, Arby's was already a PepsiCo client.  Arby's, which first opened in Boardman, Ohio in 1964, operated for over 40 years without a national beverage partnership.  That changed in late 2005 when the company announced their partnership with PepsiCo.  

"PepsiCo's extensive portfolio of popular beverage brands, coupled with the opportunities available serving salty snacks, creates a mutually beneficial relationship," said Doug Benham, then President & CEO of Arby's Restaurant Group, Inc.

This week, however, things changed. 

 “After conducting a thorough and highly competitive review of our current beverage contract, which concludes in early 2018, we have ultimately decided to transition to the Coca-Cola Co.,” Arby’s spokesman Chris Fuller said on Thursday. “We expect the transition to begin during the first quarter of 2018.” 

Partnership flips in the restaurant/soda industries are rare, given the length of the contracts, but do happen from time to time.  

In 2002, Coke became the exclusive soft drink and bottled water supplier to Regal Cinemas, who had previously had an agreement with Pepsi.  In 2003, Coke won the contract with Subway Restaurants, displacing Pepsi, which had been the sub shop's soda provider since 1988.  Last year, PepsiCo won over Subway Canada, unseating Coke.  

Most recently, and most notably, in 2013, Coke lost their exclusive agreement with Costco Wholesale, who instead signed a contract with Pepsi.  Costco dishes out more than 100 million hot dogs at its food courts, which is more than four times what Major League Baseball sold at its ballparks in 2011, according to the National Hot Dog & Sausage Council.  Every hotdog sold at Costco, of course, comes with a 20 ounce beverage, now a Pepsi beverage. 

Coca-Cola’s commanding share of the U.S. fountain business makes them a formidable opponent in the fight for restaurant taps, even as PepsiCo has stepped up its game in recent years by leveraging its massive food business,” said Duane Stanford, editor-in-chief of trade publication Beverage-Digest, which first reported the news.

Coke has longstanding partnerships with industry titans McDonald's, Wendy's and Chick-fil-A, among others, while Pepsi has partnerships with KFC, Taco Bell and Pizza Hut, all of which they used to own, as well as Culver's and Bojangles', among others.  

While I have been personally unimpressed with Coca-Cola's Freestyle beverage unit, and Pepsi's "me too" Spire contraption, both of which offer consumers a greater array of beverage choices than a traditional fountain,  there is definitely the need for continued innovation like this in the soft drink industry.   Consumers continue to shift away from soda in favor of other types of beverages, and the fact that Coke and Pepsi both realize this and are each investing in ways to both improve and diversify their respective businesses is a good sign. 

How frequently do you purchase a fountain soda when eating at a quick serve restaurant?  Does the beverage partnership at a given restaurant impact your dining decision?  If you're a native Atlantan, do you consider it a sin to drink Pepsi?

Please share your thoughts below. 

9 comments:

Brian said...

I prefer Coke and definitely shy away from restaurants that have Pepsi, when possible. I actually have eaten Arby's just once since they switched to Pepsi, and that trip wasn't my choice.

That said, I also avoid places that only have the Freestyle machines. They are a great concept, but the fact is that the "plain" versions of Coke, Diet Coke and Sprite from them do not taste anything like the versions of those drinks that come from every other delivery method. They rushed the cartridge delivery formulas to market and never fixed them, just deciding they were "close enough." They aren't. When your flagship products are unrecognizable to customers, it doesn't do you a lot of good to be able to have them with peach flavoring. Get your core product right first.

Ironically, Pepsi's Freestyle clone delivers a much better product that more closely resembles the traditional formula. They didn't rush to introduce it and ended up with a better product.

Jamie Teagle said...

The saddest thing to me is that my Costco hot dog comes with a Pepsi instead of a Coke. Other than that, not really affected by most if these other deals.

Anonymous said...

Arby's was once owned by Royal Crown (RC) cola, and I remember some of their restaurants serving it as their choice of cola. It was a drawback at the time for my family, but the lure of the jamocha shake overrode that.

vespajet said...

Where it gets interesting is the fact that depending upon the market, Dr. Pepper is distributed by either Coke or Pepsi due to longstanding agreements that predate Dr Pepper's merger with the then Cadbury Schwepps Americas. In many cases, if the local Coke distributor is their distributor, you will see Dr. Pepper on the fountains at McDonald's and not Mr. Pibb. Here in Metro Atlanta, Pepsi is the distributor for Dr. Pepper but the rest of the Dr. Pepper Snapple Group portfolio is distributed by the company's own distribution network (Even when you get further out from Atlanta to places like Griffin and LaGrange, the local Pepsi distributor distributes Dr. Pepper. If you head up I-75 towards Chattanooga, the distributor for Dr. Pepper switches from Pepsi to the Chattanooga-based Coke distributor.).

As for the Coca-Cola Freestyle machines, I like them, but the problem is that at some places with them, the quality of the beverages is not that great and they don't do a good job of keeping the machines filled (I've used to go to one Burger King near my old job in which they rarely would be out of any of the flavors, yet the one down the street from where I is bad about it. Even the Zaxby's by my house seems to always have at least half of the flavors out.).

Anonymous said...

Circa 2017, do people really pick fast food (or any other resturant for that matter) for Coke products over Pepsi? Very sad to read that this many people demand one toxic chemical concoction over another and admit to driving out of their way to do so. SMH

Anonymous said...

Well it didn't take long for someone to show up with their condescending self-righteous opinion regarding other peoples' preferences (@Circa 2017)

Anonymous said...

Anonymous 6:53 don't be mad at Anonymous crooked hillary 12:51, she has her crocs on wrong. AGAIN! I'm sure she is afraid of me when I drink my Diet Coke / Diet Pepsi and start foaming at the mouth ... It is just carbonation! SMH!

Anonymous said...

As a frequent diner at Arby's I will be sorry to see Pepsi products depart. I prefer Pepsi products over Coke any day of the week.

I will echo the comments about the Freestyle machines being out of flavors and I do no think they deliver a true Coke product.

Glad to read about Costco serving Pepsi!

Anonymous said...

PLEASE put an Arby's (with Coke) somewhere in the Northlake Mall area! We have to drive all the way to Peachtree Industrial Blvd to get our Arby's fix. Whatever fast food restaurants there are at Northlake either close early or are not very good. We don't need a McDonald's at Northlake AND Tucker and yet no Arby's anywhere to be seen! It's insanity, I tell you!