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Wendy's Picks Coke Over Pepsi

Good news on Pepsi's plans to buy juice giant Tropicana helped offset its loss to archrival Coca-Cola of Wendy's restaurant fountain sales, an analyst said Monday.

Neither development, however, prompted much movement in Coke or Pepsi share prices.

Coke rose 1/8 to 79 7/16; Pepsi dipped 1/16 to 32 7/16.

Merrill Lynch analyst Doug Lane said that Coke's Wendy's win wouldn't have a substantial impact on revenue.

Any negative effect on Pepsi stock was softened after a judge denied a bid by the cooperatively owned Ocean Spray to block Pepsi's purchase from Seagram of No. 1 juice brand Tropicana, Lane said. A Pepsi spokesman said the sale may close within days.

The Wendy's contract and the Tropicana decision "are relatively minor events," Lane said. "It's a mild positive for Coke. But in the big scheme of things, it's not a big deal."

Wendy's International Inc., based in Dublin, Ohio, will no longer let franchisees choose between Coke and Pepsi. The decision affects the approximately 20 percent of Wendy's restaurants not already serving Coke. Atlanta-based Coke has supplied Wendy's 900 company-owned restaurants in the United States as well as most of its 3,700 franchises.

Officials at Pepsi, based in Purchase, N.Y., weren't invited to bid on the Wendy's contract. Still they were preparing a "magnificent offer - one that will greatly exceed anything on the table," said the president of Pepsi's fountain-beverage division, Vince Gennaro.

The company had been working to improve its fountain business and had mentioned Wendy's as a chain where inroads had been made.

Terms of the Coca-Cola agreement weren't announced, but Wendy's chairman and chief executive, Gordon Teter, said in a letter to franchisees that Coke will pour $42 million into Wendy's national advertising campaign in the first year.

Meanwhile, once Pepsi completes the Tropicana purchase, it plans to open a new front in the cola wars, pitting Tropicana against struggling Coke unit Minute Maid.

By Steve Gelsi, CBS MarketWatch. The Associated Press contributed to this report

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