c.2013 New York Times News Service
c.2013 New York Times News Service
In an unusual deal that goes far beyond the soda wars, PepsiCo is to announce Thursday that it is unseating Coca-Cola as the beverage supplier to one of the nation’s hottest restaurant chains, Buffalo Wild Wings.
The deal, which will start with the introduction of Pepsi, Mountain Dew and other drink brands in the new year, is the biggest sign so far of how PepsiCo is deploying its thriving snacks business and Quaker, which it also owns, to offset declines in its traditional soda business.
“You’ve got to get in the door with great beverages,” said Kirk Tanner, president of PepsiCo’s food service business, which supplies restaurants and other institutions with the company’s products. “But what this partnership does is give Buffalo Wild Wings a full access pass to all that PepsiCo has to offer.”
That means items on the restaurant menus might someday include a Dorito-crusted wing or a Mountain Dew cocktail. While details are still in the discussion stages, the two companies envision blends that include things as diverse as chip-flavored dishes and sports celebrity appearances fostered by PepsiCo’s sports affiliations.
The clientele of Buffalo Wild Wings, a sports bar and grill, fits rather neatly with some of PepsiCo’s products, the companies point out. The chain is especially popular among men, particularly young men who also tend to be the biggest drinkers of Mountain Dew, perhaps the only major carbonated soda that still generates rising sales.
And the deal also allows Buffalo Wild Wings to capitalize on PepsiCo’s relationships with major sports organizations like the National Football League and Major League Baseball.
“We might be able, say, to utilize some proprietary films these groups have and show them in the restaurants,” said Sally J. Smith, the chain’s chief executive. “Pepsi also has relationships with players and entertainers, and they might make appearances in the restaurants.”
Smith and Tanner said they were especially excited by the opportunities to increase engagement with consumers through fantasy football, which already has had tremendous marketing benefits for both companies.
“We can bring new ties between their customers playing fantasy football and the NFL,” Tanner said. “And we can get players to pick favorites from the menu. There’s a lot we can do together.”
PepsiCo declined to release the value of the partnership.
PepsiCo’s chief executive, Indra K. Nooyi, has stressed the importance of PepsiCo’s businesses besides its soda division, given that sales of carbonated soft drinks have declined steadily over the past decade as health-conscious Americans choose other drinks. And bottled water sales, although strong, are not high enough for PepsiCo, or other prominent soda businesses, to fully recoup those losses.
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“We see tremendous opportunities to leverage PepsiCo’s diverse food and beverage portfolio in ways that benefit both companies,” Nooyi said in a statement about the deal with Buffalo Wild Wings, “through exciting innovations, unique customer engagement programs and powerful brand activations tied to sports and entertainment.”
Stephen Kalil, PepsiCo’s executive chef, accompanied Tanner and other executives on a visit with Buffalo Wild Wings to help explain how the company’s food businesses might mesh.
And Buffalo Wild Wings executives visited PepsiCo’s innovation center in Westchester County, N.Y., where they were treated to what the restaurant chain’s chief executive called “some incredible food combinations.”
“They have some incredibly creative culinary innovation, and we’re taking a look at Doritos, Tostitos, Ruffles and Fritos, which fit up very well with our demographic,” Smith said. “We would love to do something there, maybe incorporating a flavor profile or sauce profile in our menu.”
They are taking a cue from the extraordinarily popular Doritos Locos Tacos spawned from PepsiCo’s pairing with Taco Bell. It became the biggest product introduction in the restaurant chain’s history, racking up more than $1 billion in sales as of this fall.
“We sure have looked at that,” Smith said. “Not that lightening will strike twice, but we have that young demographic that craves that kind of crunch and spiciness as well.”
Smith said that the restaurant chain had been satisfied with its relationship with Coca-Cola but that its contract with PepsiCo’s arch rival was nearing its end.
“We had poured Coca-Cola for a number of years, and together with our franchisees,” she said, “we thought it was important to go out and have a look at what the options are.”