Pepsi Plans to Relaunch Its Cola in Iraq
Wed Jan 7, 1:00 AM ET

PepsiCo Inc. (NYSE:PEP - News), driven from Iraq (news - web sites) by United Nations (news - web sites) economic sanctions in 1990, reached a franchise agreement with one of its former Iraqi bottlers, Baghdad Soft Drinks Co., and will relaunch its cola there, Wednesday's Wall Street Journal reported.

Pepsi, of Purchase, N.Y., will start shipping beverage concentrate and new glass bottles to Iraq in the coming months. The food and beverage company also plans a major marketing campaign to reintroduce the company's flagship cola.

To many Iraqis, Pepsi-Cola never left. For more than a decade, Baghdad Soft Drinks and street vendors have kept the brand alive in Iraq by selling homemade cola in leftover Pepsi bottles. But PepsiCo had a hard time swallowing that. It was yet another impediment to negotiating a deal to return to doing business in a country that still lacks a legal system and government.

The Middle East is one of the few regions where Pepsi has a big lead over Coca-Cola Co. (NYSE:KO - News), which also is seeking new bottling partnerships in Iraq. Pepsi's edge is partly a result of the perception among many in the Middle East that Coke favors Israel, where Coca-Cola products have two-thirds of the soft-drink market. As this new cola confrontation continues, Coke and Pepsi are also fending off a growing number of small, upstart sodas around the world that call on Muslims to boycott the major American brands.

Wall Street Journal Staff Reporters Chad Terhune and Chip Cummins contributed to this article.