KFC Replaces PepsiCo with Coca-Cola as US Soda Supplier, Ending 40-Year Partnership

KFC has selected Coca-Cola as its beverage supplier for US restaurants, ending a partnership with PepsiCo that lasted nearly four decades and adding pressure to PepsiCo’s growth strategy.

KFC Selects Coca-Cola for Its US Restaurants

KFC has signed an agreement with Coca-Cola to supply beverages to its restaurants across the United States, ending its long-standing relationship with PepsiCo. The decision marks a significant change for the fast-food chain, which has worked with PepsiCo for approximately 40 years.

Coca-Cola products are expected to become available at KFC’s US outlets by spring 2027. The companies have not disclosed the financial terms of the new partnership.

KFC operates 3,718 restaurants in the United States, making the agreement an important opportunity for Coca-Cola to expand its presence in the fast-food beverage market.

PepsiCo Faces a Setback Amid Growth Challenges

The loss of KFC as a US beverage partner could create additional challenges for PepsiCo as it attempts to strengthen its soft-drink business. The company has been working to improve soda sales in the US while also addressing pressure on its snacks division.

Rising prices and changing consumer preferences, including growing interest in healthier food options, have affected the broader packaged-food and beverage industry. Higher operating costs have added to these concerns.

PepsiCo CEO Ramon Laguarta recently indicated that the company's efforts to restore growth and improve profit margins were taking longer than anticipated. Losing a prominent restaurant partner such as KFC could intensify investor concerns about its performance in the US market.

How the KFC-PepsiCo Partnership Began

The relationship between KFC and PepsiCo dates back to PepsiCo’s acquisition of the fast-food chain as part of its strategy to expand beyond beverages and into the food business.

Although PepsiCo separated KFC in 1997, it continued supplying beverages to the restaurant chain through its relationship with Yum Brands, KFC’s parent company.

The latest decision ends PepsiCo’s beverage arrangement with KFC’s US restaurants. However, the companies will maintain other business relationships. PepsiCo has confirmed that agreements covering Taco Bell and KFC’s international restaurants have been renewed.

According to a PepsiCo spokesperson, the Taco Bell agreement spans 10 years, providing the beverage company with continued access to another major fast-food brand.

Market Analysts Assess the Impact on PepsiCo

The change has attracted attention from market observers because of the prominence of both companies. Jay Woods, chief market strategist at Freedom Capital Markets, described the loss of a major brand partnership as an unfavorable development for PepsiCo.

The decision comes at a time when the company is already under pressure to demonstrate stronger business performance. While the KFC agreement alone does not determine PepsiCo’s overall outlook, the departure could add to concerns about its competitive position.

Freedom Capital Markets holds shares in Coca-Cola, a detail relevant when considering the analyst’s comments.

Activist Investor Elliott Adds Pressure

PepsiCo is also facing scrutiny from activist investor Elliott Investment Management, which disclosed a stake in the company last year.

Elliott has called for changes aimed at improving PepsiCo’s performance in North America, including the potential sale of underperforming assets. Its involvement has increased attention on the company’s strategy, operating efficiency and ability to deliver stronger results.

Against this backdrop, losing the KFC US beverage contract represents another development for investors to assess as PepsiCo works to address its business challenges.

Coca-Cola Strengthens Its Position in the Restaurant Industry

The KFC agreement expands Coca-Cola’s presence in the US quick-service restaurant sector. The beverage company already has long-standing partnerships with major burger chains, including McDonald’s and Wendy’s.

Securing KFC’s US business gives Coca-Cola another prominent restaurant platform for distributing its products. The switch also highlights the competition between Coca-Cola and PepsiCo for beverage contracts with large restaurant operators.

KFC’s move follows other changes in the industry. In 2012, PepsiCo lost its beverage partnership with Dunkin to Coca-Cola after a five-year arrangement.

PepsiCo Retains Other Major Restaurant Partnerships

Despite losing KFC’s US business, PepsiCo continues to supply beverages to several restaurant chains. Its partners include sandwich businesses Subway and Jersey Mike’s Subs.

PepsiCo also operates the soda fountain business at Pizza Hut. Pizza Hut left the Yum Brands umbrella in 2026 and switched from Coca-Cola to PepsiCo in 2011.

These arrangements demonstrate that PepsiCo retains significant restaurant relationships even as competition for major beverage contracts continues.

Coca-Cola Products to Arrive at KFC by Spring 2027

KFC expects Coca-Cola beverages to reach its US restaurants by spring 2027. The transition will end a partnership that began when PepsiCo owned the fast-food chain and continued for decades after its separation.

Although the financial details remain undisclosed, the agreement represents a notable shift in the US restaurant beverage market. For Coca-Cola, it creates an opportunity to strengthen its restaurant network. For PepsiCo, it adds another challenge as the company works to improve sales, margins and investor confidence.

The long-term impact will depend on how effectively Coca-Cola serves KFC’s restaurants and how PepsiCo responds to the loss while maintaining its other major partnerships.

Conclusion

KFC’s decision to appoint Coca-Cola as its US beverage supplier marks the end of a nearly 40-year partnership with PepsiCo. The change strengthens Coca-Cola’s position in the fast-food market while adding pressure on PepsiCo amid concerns about sales growth, costs and profitability. However, PepsiCo continues to serve other major restaurant chains, and the broader impact will become clearer as the transition approaches in spring 2027.