OAKBROOK, Illinois: As a Michelin three-star restaurant offers only vins des grand cru, McDonald's customers expect no other cola than Coke - although the underlying rationales for those decisions are likely to be very different.

Or were.

In a ten-month pilot scheme, and for the first time in its 67-year history, McDonald's is presenting its customers with a cola choice: Coke . . . or Pepsi.

The latter, however, is available only in bottles and cans, whereas Coke flows fizzily from fountains. Moreover, the choice is restricted to a handful of participating outlets.

Nonetheless, the pilot is judged a success by two of the three participants and is likely to be extended from the Texas cities of Bryan and College Station, plus Kansas City, to a third market: Wichita, Kansas.

According to an anonymous executive: "Where consumers have freedom of choice, like they do in stores, that's where you see Pepsi have a lead. It's fountain that tips the scales for Coke, and it's McDonald's that tips the fountain scale."

When (if?) the choice is rolled-out nationally, it could finally push long-time runner-up Pepsi onto the winner's podium. "This to me is the beginning of the end," opines the anonymous insider, who estimates that McDonald's sales contribute up to 10% of Coke's North American profit.

"If 10% of your cash flow in North America [flips] from Coke to Pepsi," opined the executive, "Coke's share leadership will unravel. That's what convenience-stores have already found out."

  • In a separate (but perhaps not unrelated) move, Coca-Cola announced a major reorganisation of its North American operations, including the creation of a unit dedicated to developing new products outside its traditional soft drink category.

    The US soda market slipped by 0.6% overall last year - three times the decline registered in 2005 - and would have been greater but for strong growth in energy drinks [WARC News: 12-Mar-07].

    Coke's domestic portfolio will henceforth be separated into three new business units: sparkling beverages, still beverages and emerging brands.

    The latter initiative, which will focus on NPD, signals Coca-Cola's determination to respond to the shifting sands of the US beverage market.

    Coca-Cola North America president Sandy Douglas vows that the company will become "the US growth and profit leader in emerging ideas, brands and categories".

    Data sourced from AdAge.com and Financial Times; additional content by WARC staff