Coca-Cola Deals Pepsi a Stinging Blow, Snatches KFC After Nearly 40 Years

Yum! Brands, Inc. (NYSE:YUM)-owned KFC announced Thursday that Coca-Cola Company (NYSE:KO) will become its new U.S. beverage partner, ending a nearly 40-year relationship with PepsiCo, Inc. (NASDAQ:PEP). The agreement covers all 3,600 KFC restaurants across the U.S. However, international KFC locations will continue to serve PepsiCo beverages. The transition will begin in January 2027, with Coca-Cola products expected at all U.S. KFC restaurants by spring. The deal marks a competitive win for Coca-Cola and a setback for PepsiCo, which is struggling to revive growth in its North American beverage business. KFC Bets on Coca-Cola to Revive Growth The beverage switch supports KFC’s broader “Kentucky Fried Comeback” strategy, aimed at attracting customers and winning back market share from rivals such as Chick-fil-A and Popeyes, CNBC reported. KFC U.S. President Catherine Tan-Gillespie said the partnership represents an important step in the chain’s turnaround. She highlighted opportunities to introduce new beverages, strengthen restaurant operations and improve customer experiences. The move comes as KFC faces intense competition in the U.S. chicken market, where rivals have gained ground through menu innovation and aggressive expansion. See More: Top Value Stocks PepsiCo Loses Major Restaurant Partner PepsiCo’s relationship with KFC dates back to its ownership of the restaurant chain. Although PepsiCo spun off KFC in 1997, it remained a key beverage supplier to Yum Brands. The loss comes as PepsiCo’s North American carbonated soft drink business continues to underperform the broader category. During its recent earnings call, PepsiCo also lowered its fiscal 2026 earnings outlook amid ongoing margin pressure in North America. The company outlined additional cost-cutting measures to control expenses and support growth. Jay Woods, chief market strategist at Freedom Capital Markets, told Reuters that losing a high-profile customer like KFC could further damage PepsiCo’s image. The setback also comes as activist investor Elliott Investment Management pressures PepsiCo to shed underperforming assets and improve its North American operations. However, PepsiCo has renewed its beverage agreements with Taco Bell and KFC International, Reuters reported. The Taco Bell agreement runs for 10 years. PepsiCo also secured a 10-year beverage agreement with Subway in 2024, replacing Coca-Cola at the sandwich chain’s U.S. restaurants. Coca-Cola Expands Its Fast-Food Dominance For Coca-Cola, the agreement strengthens its position in the U.S. quick-service restaurant market. The beverage giant already supplies major chains, including McDonald’s Corporation (NYSE:MCD) and Wendy’s Company (NASDAQ:WEN). Coca-Cola has also secured partnerships with Culver’s, Arby’s and Panda Express in recent years, according to CNBC. Dagmar Boggs, Coca-Cola’s president of foodservice and on-premise operations in North America, said the partnership would combine KFC’s food offerings with Coca-Cola’s beverage portfolio and innovation capabilities. The companies didn’t disclose the financial terms of the agreement. Price Action Price Action: Yum Brands shares were unchanged at $150.83, Coca-Cola shares were up 0.80% at $92.74 and PepsiCo shares were up 0.51% at $129.03 during premarket trading on Friday, according to Benzinga Pro data. Image via Shutterstock Read Also: Jamie Dimon Warns AI Agents That Make Payments on Your Behalf ‘May Not’ Act Properly: AI Revolution Like a ‘Tsunami’ That Must Be Managed