DineEquity Inc. (DIN) has inked a 10-year contract with PepsiCo
Inc. (PEP) to be the exclusive provider of most soft drinks for the
company's Applebee's and IHOP restaurants, amid growing heat in the
soda wars.
The deal ends a decades-long supplier agreement between pancake
chain IHOP and Coca-Cola Co. (KO). Applebee's has been in
partnership with PepsiCo since 2003.
DineEquity Chief Executive Julia Stewart said by consolidating
its business with PepsiCo, the restaurant company achieved better
terms for its franchisees and the widest variety of beverage
options.
After seeing beverage sales slump for years, PepsiCo has said it
would pour up to $600 million into marketing and advertising this
year, and analysts have expected the company to ratchet up
competition, and possibly discounting, in an effort to gain ground
from Coca-Cola.
DineEquity is in the middle of an effort to remodel its
restaurants and menus to drive traffic, while selling
underperforming company-owned locations to franchise operators to
boost profit margins. Both of its restaurant chains have been
pressured by higher food costs, rising gasoline prices and
persistent unemployment.
Applebee's has more than 1,800 restaurants in the U.S., while
there are around 1,500 IHOP restaurants.
DineEquity's share closed at $48.44 on Friday, and are up around
1% in the past six months. PepsiCo's shares closed at $66.10, and
are up 4.6% in the past six months. Both were inactive in premarket
trading.
-By Kristin Jones; Dow Jones Newswires; 212-416-2208;
kristin.jones@dowjones.com