KFC said on Thursday that its US restaurants will switch from PepsiCo to Coca-Cola beverages next year, marking the first time in decades that the Yum Brands chain has changed its drink supplier. The fast-food chain signed Coca-Cola as its beverage partner for US stores, bringing to a close a long-standing relationship with PepsiCo.
According to CNBC, KFC’s US restaurants have served PepsiCo drinks ever since PepsiCo bought KFC in 1986. However, some of the chain’s international markets serve Coke products.
At the time of the acquisition, KFC was Coke’s second-largest fountain account, trailing only McDonald’s, the report added.
Pepsi later spun off KFC in 1997, along with sister chains Pizza Hut and Taco Bell — but even as the combined Yum Brands, the company stayed loyal to its previous owner.
Why is KFC making the fizzy switch?
According to CNBC, KFC aims to win back US diners, who have ditched the fried chicken chain for rivals such as Chick-fil-A or Popeyes.
“This decision is a critical step in the Kentucky Fried Comeback,” KFC US President Catherine Tan-Gillespie wrote in a memo to franchisees and employees obtained by CNBC.
She said, “A new beverage offering, with a new partner in Coca-Cola, gives us a platform to innovate, meet changing tastes and give customers more reasons to choose us.”
KFC expects to be serving Coke beverages in all of its US restaurants by the end of the first quarter of 2027, Tan-Gillespie said. She, however, maintained that Pepsi remains an important partner for KFC’s parent company and the chain’s international markets.
The change comes as beverages have become a critical way for many fast-food chains to attract consumers. For example, a number of restaurants, including McDonald’s and Taco Bell, have broadened their drink offerings with options such as refreshers or “dirty soda.”
For its part, KFC recently unveiled new drinks, including iced coffees and shakes, at Open House, its innovation restaurant in McKinney, Texas.
Coke told CNBC earlier this year that the company has helped many of its restaurant partners create new drinks.
Not so unusual
It is unusual for large restaurant chains to switch beverage providers, but not unprecedented.
In 2012, PepsiCo lost Dunkin to Coca-Cola after a five-year run at the donut chain.
In 2024, Pepsi poached Subway, the largest US restaurant chain by number of locations, from Coke.
Besides KFC, Coke has wooed away a number of notable Pepsi customers in recent years, including Culver’s, Arby’s and Panda Express.
Impact on Pepsi
The loss of the beverage partnership with KFC, which has 3,718 US locations, could be a setback for PepsiCo as it works to improve soda sales in the country, while its snacks business grapples with high prices and a shift to healthier options, Reuters reported.
Higher costs have also added to concerns for PepsiCo CEO Ramon Laguarta, who said earlier this month that growth and margin recovery was taking longer than planned.
“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,” Jay Woods, chief market strategist at Freedom Capital Markets, told Reuters.
“It is very rare that you have two giants in the same industry take such a different turn,” he said. Freedom Capital Markets holds shares in Coca-Cola.
PepsiCo is also under scrutiny from activist investor Elliott Investment Management, which disclosed a stake in the company last year, and has asked it to sell underperforming assets and improve its performance in North America.
According to the report, PepsiCo has beverage partner agreements at sandwich chains Subway and Jersey Mike’s Subs. It also runs the soda fountain at Pizza Hut, which left the Yum Brands umbrella only this year and switched to PepsiCo from Coca-Cola in 2011.