U.S. Water News Online
CHICAGO -- Escalating their highly unusual marketing war,
ad agency Foote, Cone & Belding (FCB) and PepsiCo fired off
heated exchanges recently in their ongoing court battle.
FCB, which has been caught in the middle of the fight between soda
giants PepsiCo and Coca-Cola, took a shot late at PepsiCo, which
recently won a temporary restraining order barring FCB employees who
worked on Pepsi's Aquafina water brand from having contact with Coke
executives on their Dasani brand, which is being reassigned to FCB.
Meanwhile, a Pepsi spokesman confirmed that PepsiCo has filed suit
in federal court here seeking to bar FCB from disclosing trade
secrets on Pepsi's newly acquired Gatorade brand to people who may
eventually work on competitor PowerAde.
In its response to the restraining order in Cook County Circuit
Court, FCB claims that PepsiCo is using the court to prevent FCB, "an
advertising agency that PepsiCo has fired," from working for
PepsiCo fired FCB in September and consolidated $300 million in
business, including the newly acquired Quaker Oats accounts that had
mostly been handled by FCB Chicago, with Omnicom Group, which already
had most of PepsiCo's business. Sources say the move was done to
pre-empt Coca-Cola's move to consolidate more business with
In an affidavit in the case, FCB Chief Executive Brendan Ryan said
that after the agency won the Aquafina account, it took the
extraordinary step of offering to pay PepsiCo if the deep ties
between new corporate parent Interpublic Group of Cos. and Coke
forced it to resign the PepsiCo account.
Ryan said the agency wrote to PepsiCo in March, committing not to
resign the business "due to competitive pressures" for at least three
years. Further, the agency said that if it was forced to resign, it
would pay a penalty of $20 million, or roughly 40 percent of FCB
Worldwide's annual after-tax profit.
The court drama is a rare public airing of dirty laundry in an
agency-client relationship, and also illustrates how fierce the war
has become between the two soda giants.
Ryan could not be reached. A PepsiCo spokesman said he wasn't
aware of the FCB filing and wouldn't comment.
In regard to the Gatorade lawsuit, the PepsiCo spokesman said that
the intent of the recent filing was fundamentally the same as that
behind the previous restraining order preventing certain FCB
employees from having contact with Coke executives. In the Aquafina
suit, PepsiCo had claimed some employees who have worked on Pepsi's
top water brand could have trade secrets that would damage Pepsi if
they fell into Coke's hands.
But FCB said that because its assignment lasted only a few months,
FCB personnel who remain with the agency didn't have access to
PepsiCo trade secrets that could benefit Coca-Cola.
Instead, FCB says PepsiCo had different motives in its suit. After
Pepsi fired the agency, court documents contend, "it encouraged a
raid on the agency, after which a significant number of FCB personnel
joined another agency, where they work for PepsiCo." Several were
encouraged by PepsiCo executive Robin Kaminsky to leave for that
agency, FCB contends, and many refused. FCB said PepsiCo's suit is
seeking to "unfairly pressure" them to accept PepsiCo's offer by
"placing unfounded restrictions on the practice of their profession
while they work at FCB."
In his affidavit, Ryan disputes what he says is a key contention
by PepsiCo--that the March letter from FCB represents an agreement
that FCB would not assign personnel to any Coke account for two years
after a termination of the PepsiCo-FCB relationship by the client.
"With respect, that is not what the letter says and nothing of the
kind was ever discussed by me with [PepsiCo President Steven
Reinemund] or any other PepsiCo representative."
Ryan also contends the agency was committed to maintaining "walls"
between the two clients. He also insists in the affidavit that, had
PepsiCo asked the agency to restrict personnel assignments for more
than a few months, "I would have rejected the proposal."
Ryan's affidavit also reveals the high-level sensitivities that
major packaged goods companies have regarding their competitors and
outside appearances. In one instance, Ryan contends Reinemund told
him he was concerned that Coke would use its position with
Interpublic to force FCB to resign PepsiCo. In outlining the
concerns, Ryan contends, Reinemund told him that a previous merger of
accounting firms had resulted in a combined firm that had both Coke
and PepsiCo as clients. He said Coke was able to insist that the
combined firm end its relationship with PepsiCo, thereby embarrassing
the company. Reinemund, Ryan contends, told him "that he had resolved
that PepsiCo would never again find itself in that situation."
Return to the
U.S. Water News Archives page
Return to the U.S. Water
Use a comma to separate e-mail addresses:
Hi, I thought you might like to read this article.