Pepsi's Got a Lot to Give in Fast-Food Offerings

NEW YORK (TheStreet) -- PepsiCo (PEP) has been runner-up to Coca-Cola (KO) for quite some time. Pepsi trails Coke in retail-beverage sales and fountain-beverage sales in restaurants. However, Pepsi continues to see robust sales in its snack foods business and has found new ways to capture sales in restaurants.

Pepsi's North American foods unit continues to be a growth segment for a company that has suffered a dipping share of the beverage market and a decline in carbonated beverage sales. Taco Bell, which features Pepsi beverages in its restaurants, has had success with its Doritos taco brands. From March 2012 to August 2013, Taco Bell sold more than 600 million Doritos tacos. Since then, two additional flavors have been introduced, helping boost same-store sales for Taco Bell.

The latest Pepsi food launch was presented in a Super Bowl commercial for Subway. Pepsi's Frito-Lay brand got some extended exposure as a key ingredient in the Fritos Chicken Enchilada sandwich, available at Subway restaurants for a limited time. The sandwich features "big flavor with a lot of crunch" and is the latest example of Pepsi expanding its restaurant offerings with innovative menu items.

Coke is the fountain-beverage provider for Subway stores, but Pepsi has found a way inside the restaurants through food, which Coca-Cola simply can't offer.

The next chain to see a Pepsi food product may soon be Buffalo Wild Wings (BWLD). Beginning in January, Buffalo Wild Wings made the switch from Coca-Cola to Pepsi for beverages. The move was seen as a possible way to tap into Pepsi's strong partnership with the NFL. TheStreet's Brittany Umar has suggested that Buffalo Wild Wings might, like Taco Bell, use its deal to experiment with food offerings that feature Pepsi-branded items.

Coca-Cola has fountain-beverage accounts with McDonald's (MCD), Burger King (BKW) and Subway. Pepsi has Yum Brands (YUM) restaurants, which include Taco Bell, Pizza Hut and KFC. (Of course, Yum Brands resulted from a Pepsi spinoff.) In fact, Pepsi was the drink provider in Subway restaurants before it was replaced in 2005 by Coca-Cola. At that time, Coca-Cola had a 68% market share of the domestic fountain-beverage market.

Pepsi continues to be a great investment opportunity. There are calls for the company to split its beverage and snack food business, but Pepsi continues to fight against such a move. At the start of the year, I chose Pepsi as one of my top 10 stock picks for 2014. With additional entries into restaurants through its beverage and food offerings, Pepsi may be best served by keeping its units together.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Author holds no positions in any company mentioned. Chris Katje has been fascinated with the stock market since a young age. That passion turned into a freelance writing career that began in 2008. Mr. Katje has seen his work appear on Seeking Alpha, the Motley Fool, The Street, and Variety. Chris's annual top ten stock picks list continues to beat the market and grow in popularity. You can follow Chris on Twitter (@chriskatje).

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