KFC will begin replacing Pepsi products with Coca-Cola beverages at thousands of American restaurants in January, ending a partnership rooted in PepsiCo’s former ownership of the fried-chicken chain.
By yourNEWS Media Newsroom
KFC is ending one of the fast-food industry’s longest-running beverage partnerships, choosing Coca-Cola over PepsiCo as the restaurant chain attempts to revive its struggling U.S. business and attract customers with a broader menu of drinks.
The agreement, first reported Thursday by The Wall Street Journal, will bring Coca-Cola products to thousands of KFC locations beginning in January 2027, delivering a significant competitive victory for Coca-Cola in its longstanding rivalry with Pepsi.
The change is especially notable because PepsiCo once owned KFC, along with Taco Bell and Pizza Hut. The beverage company separated those restaurant businesses in 1997, creating the operation that later became Yum Brands, KFC’s current parent company.
Despite the corporate separation, Pepsi remained a fixture at American KFC restaurants for decades. The chain’s current beverage offerings include Pepsi, Mountain Dew, Starry and Aquafina, products that will be displaced as the new agreement takes effect.
The switch will primarily affect the United States. PepsiCo is expected to continue supplying beverages to many international KFC restaurants, where the chain operates a substantially larger business.
Taco Bell, another Yum Brands subsidiary, is also expected to retain PepsiCo as its beverage supplier, preserving a particularly valuable partnership between the two companies.
PepsiCo developed Mountain Dew Baja Blast specifically for Taco Bell, creating a signature drink that subsequently expanded into retail stores and generated billions of dollars in sales.
KFC’s departure nevertheless represents a substantial loss for PepsiCo, which has faced growing competition in the North American beverage market.
PepsiCo Chief Executive Ramon Laguarta has acknowledged that the company has lost ground in carbonated soft drinks, including its flagship Pepsi brand, while Coca-Cola and Dr Pepper have strengthened their positions.
The company’s shares declined Thursday after reports emerged that KFC was preparing to change suppliers.
PepsiCo has also lost other prominent beverage accounts, including Marriott hotels and Costco food courts, although it recently reached a supply agreement with Subway.
For Coca-Cola, the KFC agreement provides an opportunity to expand its presence in a major restaurant chain at a time when beverage sales have become increasingly important to fast-food profitability.
Restaurants are introducing specialty lemonades, flavored refreshments and customizable drinks to attract younger consumers and encourage additional purchases.
These products can generate attractive margins while helping restaurants differentiate themselves in a highly competitive market.
The beverage agreement also comes during a difficult period for KFC’s domestic operations.
Once America’s leading chicken restaurant chain, KFC has fallen to fifth place in U.S. chicken-chain sales, according to industry research firm Technomic.
The company has struggled with declining sales, restaurant closures and competition from chains emphasizing chicken sandwiches, tenders and other portable menu items.
In response, KFC has been expanding beyond its traditional fried-chicken buckets, promoting sandwiches, wings and tenders while experimenting with new flavors and beverages.
Its Saucy by KFC concept has provided a testing ground for menu innovation, including specialty drinks intended to appeal to younger customers.
The decision to change beverage suppliers reflects those broader efforts to modernize the business rather than simply replace one brand of soda with another.
For PepsiCo, the loss raises further questions about its ability to defend restaurant and food-service accounts amid shifting consumer preferences and increasingly aggressive competition.
For Coca-Cola, the agreement brings its products into thousands of additional American restaurants while weakening a commercial relationship that survived nearly three decades after PepsiCo exited the restaurant business.
The transition is scheduled to begin in January, marking the end of an era for KFC customers accustomed to ordering Pepsi alongside the chain’s signature fried chicken.
Original article
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