On Thursday, KFC announced a new partnership with Coca-Cola for its US locations, marking the end of a nearly 40-year association with PepsiCo.
This shift could pose challenges for PepsiCo, which has 3,718 KFC outlets in the US, especially as it seeks to enhance soda sales and manage rising costs amid a trend toward healthier choices in snacking.
Concerns are mounting for PepsiCo CEO Ramon Laguarta, who noted that the recovery in growth and margins is taking longer than anticipated.
The collaboration between PepsiCo and KFC began when PepsiCo acquired KFC as part of its strategy to expand into the food and snacks market. Even after KFC was spun off in 1997, PepsiCo maintained its role as the beverage partner for Yum Brands, KFC’s parent company.
“Losing a notable brand like KFC is not a great look for PepsiCo. It might be the proverbial straw that breaks the camel’s back,” remarked Jay Woods, chief market strategist at Freedom Capital Markets.
He added that it’s uncommon for two leading companies in the same industry to take such divergent paths. Freedom Capital Markets holds shares in Coca-Cola.
PepsiCo’s situation is further complicated by scrutiny from activist investor Elliott Investment Management, which has urged the company to sell off underperforming assets and enhance its North American operations.
A spokesperson confirmed that PepsiCo recently renewed agreements with Taco Bell and KFC International stores, with Taco Bell’s deal lasting 10 years.
Additionally, PepsiCo maintains beverage partnerships with Subway and Jersey Mike’s Subs. It also oversees the soda fountain at Pizza Hut, which moved away from Yum Brands this year, having previously switched from Coca-Cola to PepsiCo in 2011.
Coca-Cola products are set to be available at KFC restaurants across the US by spring 2027, although the financial specifics of this new partnership have not been revealed.
Notably, Coca-Cola has a longstanding relationship as a beverage provider for burger chains like McDonald’s and Wendy’s.
