Fast food chain KFC signed Coca-Cola as its beverage partner for U.S. stores on Thursday, ending a relationship with PepsiCo that dates back about four decades.
Losing the beverage partnership with KFC, which has 3,718 U.S. locations, could be a setback for PepsiCo, which is working to improve soda sales in the country while its snacks business struggles with high prices and a shift toward healthier options.
Rising costs have also increased concerns from PepsiCo CEO Ramon Laguarta, who said earlier this month that growth and margin recovery were taking longer than expected.
The partnership began when PepsiCo acquired KFC with the aim of expanding into the food and snacks sector. Although PepsiCo later created KFC in 1997, it remained a beverage partner for its parent company Yum Brands.
“It’s just a bad image for PepsiCo… when you lose a marquee brand partner like that. This could be the straw that breaks the camel’s back,” said Jay Woods, chief market strategist at Freedom Capital Markets.
“It’s very rare that two giants in the same industry go in such different directions,” he said. Freedom Capital Markets owns shares in Coca-Cola.
PepsiCo is also under scrutiny from activist investor Elliott Investment Management, which revealed a stake in the company last year and called on it to sell underperforming assets and improve its performance in North America.
Yum Brands and PepsiCo have just renewed their agreements at Taco Bell and KFC International stores, a PepsiCo spokesperson told Reuters. Taco Bell is a 10-year deal, they said.
PepsiCo has beverage partnership deals with sandwich chains Subway and Jersey Mike’s Subs. She also runs the soda fountain at Pizza Hut, which only left the Yum Brands brand this year and moved from Coca-Cola to PepsiCo in 2011.
Coca-Cola products will be available in U.S. KFC restaurants by spring 2027, the company said. Financial details of the partnership were not disclosed.
Coca-Cola is a long-time beverage partner of hamburger chains McDonald’s and Wendy’s.
The Wall Street Journal first reported the news on Thursday, citing people familiar with the matter.
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