Cadbury sues Pepsi in Seven Up dispute

Cadbury Schweppes yesterday fired the opening salvo in a soft drinks war against PepsiCo that could prompt US regulators to examine the stranglehold that Pepsi and Coca-Cola have over the US soft drinks market.

Cadbury's US soft drinks subsidiary, Dr Pepper/Seven Up, has accused PepsiCo of trying to stop some of America's biggest fast-food chains, including Pizza Hut, Kentucky Fried Chicken and Taco Bell, from selling Seven Up.

Cadbury is seeking damages and compensation against its larger US rival and filed a lawsuit in Texas on Friday. A Cadbury's spokeswoman said: "We believe PepsiCo has made the marketplace anti-competitive and restrictive." At issue, is an agreement between PepsiCo and restaurant group Tricon, the owner of 10,000 fast food outlets, that Cadbury alleges penalises Tricon restaurants for stocking Seven Up.

A PepsiCo spokesman said: "We compete fairly and vigorously so we have every confidence that the suit is without merit."

The court case, which is expected to last several years, is likely to resurrect question marks over the two US soft drinks giants' dominance of the US market.

Eva Quiraga, an analyst at Morgan Stanley, said: "This brings up once again the issue that some of Cadbury's brands are not as safe as they should be in the US."

Cadbury shares slipped 5 per cent to 421p. The company said that since PepsiCo struck an agreement with Tricon in early 2000 to stock its products, Cadbury had seen its position in 5,000 outlets reduced to 2,500.

Under the PepsiCo deal, Tricon receives discounts on the cost of syrup concentrates if it stocks only PepsiCo products, Cadbury said. Pepsi's main competitor to Seven Up is Sierra Mist, a lemon-lime soda introduced last year.