KFC picks Coca-Cola as US soda supplier, ditches longtime partner PepsiCo

Fast-food giant KFC has partnered with Coca-Cola for US soda sales, ending a long-standing relationship with PepsiCo, the food and beverage company. The loss of the long-standing beverage partnership with KFC, which operates 3,718 locations in the US, could be a setback for PepsiCo as it strives to boost soda sales in the country while dealing with high prices and a shift towards healthier options.

PepsiCo CEO Ramon Laguarta has expressed concerns about the higher costs and slower growth and margin recovery than anticipated. The partnership between PepsiCo and KFC began when PepsiCo acquired the fast-food chain in an effort to expand into food and snacks. However, PepsiCo spun off KFC as a separate entity in 1997, but remained its beverage partner.

This recent development is seen as a negative publicity for PepsiCo, especially when a major brand partner like KFC leaves. Jay Woods, a chief market strategist at Freedom Capital Markets, commented on the rarity of two industry giants taking such a different direction. PepsiCo is currently under scrutiny from activist investor Elliott Investment Management, which recently disclosed a stake in the company and has requested it to sell underperforming assets and improve its performance in North America.

Yum Brands, the parent company of KFC and Taco Bell, has renewed agreements with both establishments, according to a PepsiCo spokesperson. PepsiCo also maintains beverage partnerships with sandwich chains Subway and Jersey Mike's Subs and operates soda fountains at Pizza Hut. PepsiCo lost Dunkin Donuts to Coca-Cola after a five-year partnership in 2012.

Coca-Cola is already a long-standing beverage partner for fast-food chains McDonald's and Wendy's. The news was first reported by The Wall Street Journal on Thursday, based on information from people familiar with the matter.