PepsiCo Loses KFC to Coca-Cola, Secures Taco Bell Deal
KFC will switch to Coca-Cola products in 2027, ending a nearly 40-year partnership, while Taco Bell extends its agreement with PepsiCo for another decade.
KFC is set to end its nearly 40-year partnership with PepsiCo, replacing its drinks with Coca-Cola products starting in January 2027. The move affects approximately 3,718 KFC restaurants in the United States.
However, PepsiCo has secured a significant deal with Taco Bell, another Yum! Brands-owned fast-food chain, extending their beverage partnership for an additional decade. This agreement provides a crucial lifeline for PepsiCo, as Taco Bell reported approximately $17 billion in U.S. systemwide sales last year, considerably more than KFC's roughly $5 billion.
Under the new agreement, Coca-Cola beverages such as Coke, Sprite, and Fanta will replace PepsiCo's offerings, including Pepsi, Mountain Dew, and Starry, at KFC locations nationwide. The switch is expected to be completed by spring 2027. The financial terms of the KFC deal have not been disclosed, and the change is specific to U.S. restaurants.
The shift comes as PepsiCo's North American beverage business faces challenges. The company reported a 2% decline in beverage volumes in its most recent quarter, with CEO Ramon Laguarta acknowledging the company's struggle to compete effectively in the soft drink market. Pepsi's share of the U.S. carbonated soft drink market by volume was 8.1% last year, trailing Coca-Cola's 18.5% and even Dr Pepper.
Despite these challenges, the extended partnership with Taco Bell offers PepsiCo significant opportunities. Taco Bell aims to achieve $5 billion in beverage revenue by 2030, with plans to develop new drinks alongside PepsiCo. This includes expanding its popular Refrescas range and introducing new flavors linked to its Doritos Locos Tacos. The chain is also focusing on energy and functional drinks to attract younger consumers and encourage visits outside traditional meal times. The exclusive Mountain Dew Baja Blast, which has become a $1 billion brand for Taco Bell, remains a key differentiator for the chain.
KFC's decision to switch from PepsiCo to Coca-Cola has generated discussion online. Some consumers have expressed mixed reactions to the potential changes in drink selections, while others outside the U.S. have noted that the change does not affect their regions.