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

Fast-food giant KFC has announced it is switching its beverage partner for US stores from PepsiCo to Coca-Cola, marking the end of a decades-long partnership. The move, which comes after Coca-Cola finalized its deal with KFC, could pose challenges for PepsiCo as it strives to boost soda sales in the United States while grappling with high prices and a shift towards healthier options.

PepsiCo CEO Ramon Laguarta has expressed concerns over rising costs and the slower-than-anticipated recovery of growth and margins. The partnership began when PepsiCo acquired KFC in the early 1990s, before spinning off KFC as part of Yum Brands in 1997. "It is just a bad look for PepsiCo... when you lose a big-name brand partner like that," commented Jay Woods, chief market strategist at Freedom Capital Markets.

"It is very rare that you have two giants in the same industry take such a different turn." The news of the partnership change has drawn attention from investors, with Freedom Capital Markets holding shares in Coca-Cola and noting the significance of the shift. PepsiCo is also under scrutiny from activist investor Elliott Investment Management, which recently disclosed holding a stake in the company and called for improvements in performance in North America.

Yum Brands, KFC's parent company, recently renewed agreements for Taco Bell and KFC International stores, according to a PepsiCo spokesperson. PepsiCo has also extended its beverage partnerships with Subway and Jersey Mike’s Subs, and operates the soda fountain at Pizza Hut. PepsiCo maintains beverage agreements at other chains, including Dunkin, which it lost to Coca-Cola in 2012.

Coca-Cola products will be available at KFC US restaurants starting spring 2027, though financial details of the partnership remain undisclosed. The Wall Street Journal first reported the news on Thursday.