Cadbury sues Pepsi in drinks war

Both Pepsi and Cadbury have interests in 7 Up

Cadbury Schweppes has officially launched the battle for the lemon and lime soft drink market in the US, alleging in a suit that PepsiCo has acted illegally.

Cadbury has accused Pepsi of attempting to persuade Tricon, the owner of Pizza Hut, Kentucky Fried Chicken and Taco Bell, to replace Cadbury's 7 Up with rival lemon-lime soft drink Sierra Mist.

7 Up, the number two US soft drink in the lemon lime sector behind Coca Cola's Sprite, accounts for 2% of Cadbury's total US sales volume and £7m of profit, with trade through Tricon contributing under half of that.

Dr Pepper/7 Up, a subsidiary of the British soft drinks and confectionery maker, filed the suit on Friday in Texas.

Shares in London-based Cadbury, which ranks as the world's third biggest soft drink company, closed more than 4.5% lower at 421p on Monday.

Bitter taste

A Cadbury spokeswoman said it was being alleged that Pepsi had offered Tricon a discount on concentrates for all its soft drinks, including a relatively new drink called Sierra Mist.

The suit alleges the agreements are anticompetitive because they limit competition in these outlets and take away consumer's freedom of choice.

"The reason for filing this is because it interferes with existing contractual relations... and because the principle of free choice is fundamental to our business," a Cadbury spokeswoman told Reuters.

"This is not significantly material to our business in the US," she added.

Pepsi-Cola International has rights to distribute 7 Up overseas while Cadbury Schweppes owns rights to the brand in the US.