KFC drops PepsiCo for Coca-Cola in US beverage switch
KFC has chosen Coca-Cola as its US beverage supplier, ending a roughly four-decade partnership with PepsiCo. The move, effective by spring 2027, could pressure PepsiCo's soda sales and comes amid activist investor scrutiny and slower-than-expected growth.
Fast-food chain KFC has signed Coca-Cola as its beverage partner for its 3,718 US restaurants, ending a relationship with PepsiCo that spanned about four decades, the company said on Thursday.
The loss could be a setback for PepsiCo, which is trying to improve soda sales in the country while its snacks business faces high prices and a consumer shift to healthier options. Higher costs have also weighed on the company, with chief executive Ramon Laguarta saying earlier this month that growth and margin recovery were taking longer than planned.
The partnership began when PepsiCo acquired KFC in an effort to expand into food and snacks. PepsiCo spun off KFC in 1997, but continued to supply beverages to its parent company, Yum Brands.
“It is just a bad look for PepsiCo... when you lose a big-name brand partner like that. This could be the optical straw that breaks the camel's back,” said Jay Woods, chief market strategist at Freedom Capital Markets, which holds shares in Coca-Cola. “It is very rare that you have two giants in the same industry take such a different turn,” he added.
PepsiCo is also under pressure from activist investor Elliott Investment Management, which disclosed a stake last year and has urged the company to sell underperforming assets and improve its North American performance.
A PepsiCo spokesperson told Reuters that Yum Brands and PepsiCo had just renewed agreements covering Taco Bell and KFC International stores, including a 10-year deal for Taco Bell. PepsiCo also has beverage agreements with sandwich chains Subway and Jersey Mike's Subs, and supplies soda to Pizza Hut, which left Yum Brands this year and switched from Coca-Cola to PepsiCo in 2011.
PepsiCo previously lost Dunkin to Coca-Cola in 2012 after a five-year stint at the donut chain. Coca-Cola is already the beverage partner at McDonald's and Wendy's.
Coca-Cola products will be available at KFC US restaurants by spring 2027, the company said. Financial details were not disclosed. The Wall Street Journal first reported the news on Thursday, citing people familiar with the matter.