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Pepsi settles legal dispute over Powerade ad

PepsiCo Inc. Wednesday said it reached an agreement with Coca-Cola Co.  to settle its lawsuit that accused Coke of making false claims in a new advertising campaign for its PowerAde Option sports drink.
Carolina Panthers v Tampa Bay Buccaneers
Gatorade’s lawsuit says that the National Advertising Division of the Better Business Bureau last year decided that Coca-Cola could compare Powerade Option to Gatorade only if it discloses that “consumers will not receive the energy replacement benefits provided by Gatorade.”Andy Lyons / Getty Images
/ Source: Reuters

PepsiCo Inc. reached an agreement on Wednesday with Coca-Cola Co. to settle a lawsuit that accused Coke of false advertising in a new campaign for its Powerade Option sports drink, the two companies said.

PepsiCo’s Stokely-Van Camp Inc. subsidiary, which owns the rival Gatorade sports drink brand, had filed the lawsuit on Monday in U.S. District Court in Chicago.

As part of the settlement, Coke agreed to stop airing one commercial and modify a second, PepsiCo said in a statement.

Pepsi had accused Coke of false advertising in its new campaign because it suggests that Powerade Option, a low-calorie sports drink, offers more energy-enhancement benefits than Gatorade.

Coke said in a statement that the modified ad campaign would make clear that Powerade Option has both fewer calories and less carbohydrate energy than Gatorade. Coke said the ad campaign, which has aired during the broadcast of the U.S. college basketball tournament this month, will continue to do so.

Gatorade is No. 1 in the sports drink category, with a nearly 80 percent market share. The brand has boosted profits and sales at PepsiCo at a time of sluggish soft drink demand.

“As the No. 2 player, we want to set ourselves apart from the category, but we want to compete in the marketplace, not the courtroom,” Coca-Cola North America’s vice president of hydration, Gloria Garrett, said.

For Coke, it is not the first time this year Powerade has been the center of a storm.

Bottlers representing about 10 percent of the company’s U.S. volume sued Coke recently in a bid to prevent the company and its largest bottler, Coca-Cola Enterprises, from shipping Powerade to the warehouses of No. 1 retailer Wal-Mart Stores Inc. instead of delivering product directly to individual stores.

Market leader Gatorade is a warehouse-distributed brand.