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Soft Drink Rivals Cooperate in Theft Case

LYNN NEARY, host:

In business news today, taking the lid off a legendary rivalry.

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NEARY: Coke versus Pepsi. Like the Hatfields and McCoys, it's a rivalry that's part of the American myth. But when some employees at Coca-Cola tried to steal trade secrets and pass them off to Pepsi for a price, they found out that the legendary rivalry has its limits.

PepsiCo got wind of the plot and told Coke about it. Coke and Pepsi then joined forces to foil the plan by helping the FBI with an undercover sting operation. Federal prosecutors in Atlanta yesterday charged three people with stealing confidential information from Coke and trying to sell it to rival PepsiCo. One person arrested was an administrative assistant at Coca-Cola.

Joining us now is John Sicher. He is the editor and publisher of Beverage Digest. Good to have you with us.

Mr. JOHN SICHER (Editor and Publisher, Beverage Digest): Good morning.

NEARY: So, first of all, what are these three people accused of trying to steal?

Mr. SICHER: We don't know. All the prosecutors have said is that they were attempting to steal certain information, and apparently a sample of some new product.

NEARY: Well, what do you make of this alleged case of stealing trade secrets, given this rivalry between Coca-Cola and PepsiCo that's about a hundred years old, I think?

Mr. SICHER: What it shows is something fascinating. It shows that these two companies - which are sometimes bitter rivals that compete ferociously in the marketplace - that that competition basically is defined within ethical limits. And that's consistent with what these companies are all about. Ethics really run very deeply in the culture of both Coke and Pepsi.

NEARY: Well, a Pepsi spokesperson said that we just did what any responsible company would do. Is that the case? Is this what most companies would do? Or, as you said, is there some stronger ethic within Pepsi and Coke?

Mr. SICHER: It's a great question. I think Pepsi was being modest. I think these companies are basically way at the far end of the scale in terms of how they do business - their decency and their ethics. No, I don't think all companies would have done this, but Pepsi would and did, and Coke would've done it had the situation been reversed.

NEARY: In terms of their real rivalry in the marketplace between Coke and Pepsi, who's winning that one these days?

Mr. SICHER: Coke is a little bit bigger, but last year, Pepsi grew a little bit more strongly. Pepsi has - owns Gatorade and Aquafina, the big sports drink and water, and those two products are doing terrifically.

NEARY: And what about all the mystique around Coke's secret formula, which we mentioned earlier? How difficult would it be to get hold of that?

Mr. SICHER: It would be very easy, paradoxically. The formula is kept in a vault in Atlanta. However, today anybody with access to a high-tech chemistry lab could get analysis of the Coke formula and actually probably quite easily replicate the taste of Coca-Cola. But what people miss when they talk about the secret formula is that what they couldn't replicate is the power of the brand and the trademark.

So if I decide I want to start a new cola, I could easily come up with a cola that tastes exactly like Coke Classic. What I couldn't do is use the word Coke or the word Coca-Cola, and that's the real power of the product.

NEARY: So the drink would always taste different.

Mr. SICHER: The drink would taste different because I wouldn't be calling it Coke. That's where the power is.

NEARY: Okay. Well, thanks so much for joining us this morning.

Mr. SICHER: Any time.

NEARY: John Sicher is the editor and publisher of Beverage Digest. Transcript provided by NPR, Copyright NPR.