Pepsi Master Bottling Agreement

Under the terms of Pepsi Bottling Group`s framework bottling agreement with PepsiCo, which allowed PBG to manufacture, package, sell and distribute Pepsi-Cola and Pepsi Branded Cola beverages, PBG was required to pay the prices of the concentrates set by PepsiCo and to use PepsiCo`s approved container types. PepsiCo also had the right to approve PBG`s three-year annual financial plan, but did not have the right to unreasonably refuse approval. Failure to implement the approved plan in all material respects could result in termination of the agreement. PBG had the right to determine the prices at which it sold its products. Although PBG had an extensive distribution system in the United States and Canada, Russia, Spain and Greece, it used a combination of direct in-branch sales and distribution through wholesalers. The plaintiffs refer to numerous clauses in the franchise agreements that they claim demonstrate [the defendant`s] excessive control over the franchisees` operations and performance.   Individually or collectively, these cases of discretion or authority under the [defendant] contract are no more than an ordinary franchisor.   A franchisee`s reasonable expectations are adequately protected by the standard of good faith and fair trade, which governs the franchisor`s exercise of its contractual responsibilities and powers. This court has no reason to believe that Kansas law would impose fiduciary duties on a franchisor solely on the basis of that status. In March 1999, PepsiCo split its bottling and soft drink distribution business – which were known within the organization as Pepsi COBO (company-owned bottling plants). In the fifth largest IPO in the history of the U.S. stock exchange, PepsiCo sold 100 million shares at a price of $23 per share.

PepsiCo retained a 40% stake in the new public company and placed two senior officials on its board of directors. In addition, PBG had to submit its annual operating plan to PepsiCo for approval and only used Suppliers approved by PepsiCo. In return, PBG expected a high level of marketing support funded by PepsiCo. Although there are still hundreds of Pepsi Cola licensees in the U.S. alone — some of them have been grouped into major chains — the company reserved bottling and distribution facilities for itself in ten selected metropolitan areas in 1975. This network was managed by a Metro unit that was renamed pepsi-cola Bottling Group in 1977. By 1978, PepsiCo subsidiaries operated 19 plants in Dallas, Houston, Los Angeles, Milwaukee, the New York Metropolitan Statistical Area, Orlando, Philadelphia, Phoenix, and Pittsburgh, the entire state of Rhode Island, and all of Michigan except the Upper Peninsula. Pepsi-Cola Bottling Group has produced, sold and distributed soft drinks and syrups with PepsiCo brands, including Pepsi-Cola, Diet Pepsi-Cola, Pepsi-Cola Light, Mountain Dew, Teem, Patio and Aspen.

Pepsi-Cola International`s 34 foreign units operated under the name United Beverages International. In early 1999, PepsiCo launched its bottler consolidation plan by implementing certain national "anchor bottlers" that reported directly to PepsiCo.   Currently, PepsiCo has three anchor bottlers that account for 70-72% of the volume of Pepsi products in the United States.   The largest of these anchor bottlers is the defendant Bottling Group.   Bottling Group existed in the 1990s as part of PepsiCo and consisted of Bottling operations owned by PepsiCo that PepsiCo had acquired from independent bottlers who wanted to sell their franchises.   In March 1999, PepsiCo entered into a Framework Bottling Agreement (MBA) with Bottling Group that granted Bottling Group the exclusive right to manufacture, sell and distribute Pepsi products in all or part of 41 states, including the areas west, south and east of the Pittsburg Pepsi territory.  The implied duty of good faith and fair trade is not without limitations.   It "does not give judicial carte blanche to rewrite the agreement of the parties" and "the mere exercise of one`s own contractual rights without further ado cannot constitute a violation" of the implied agreement of good faith and fair trade.

 Hartford fire. Co.c. Federated Dep`t Stores, Inc., 723 F.Supp. 976, 991 (S.D.N.Y.1989) (internal citation omitted).   On the contrary, it "simply ensures that the parties to a contract fulfil the essential and negotiated conditions of their agreement and that the parties are not wrongly and expressly negotiated to obtain advantages".  Don King Prod., 742 F.Supp. to 767 (internal citation omitted). All three parties filed motions for summary judgment on all applications.

 According to the UCC, "the meaning of the parties` agreement must be determined, read and interpreted in the light of business practices and other related circumstances by the language they use and their actions."  N.Y. U.C.C. § 1-205, cmt. 1. The terms of a written agreement "may be explained or supplemented by the course of business or business practices or by the process of execution".  N.Y. U.C.C. § 2-202(a).   When analyzing the obligations and rights imposed by the exclusivity clause, we can take into account the conduct under the contract, since such behavior is the most convincing proof of the intentions of the parties.   See N.Y.

U.C.C. § 2-208, cmt. 1. Since this is a summary judgment case, we consider the evidence in light of the most favourable non-moving party, which is Pittsburg Pepsi in this case.   PepsiCo is a leading seller of soft drink concentrate and controls the brands associated with its products.   As part of an exclusive bottling date (EBA), PepsiCo enters into an individual agreement with a bottler for the bottling and distribution of its soft drinks in a specific geographical area.   As part of a syrup appointment, PepsiCo enters into an individual agreement with a bottler for the production, sale and distribution of well syrup in specific geographical areas. Caleb D. Bradham founded the pepsi-cola co. original in 1902, shortly after developing and patenting the syrup in his pharmacy in New Bern, North Carolina. In 1904, he founded a syrup and bottling factory in New Bern. Bradham began franchising the product to other bottling companies almost immediately; By the end of 1909, there were 250 in at least 24 states.

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