IRVINE, Calif. — KFC dropped PepsiCo last week, but its sister chain Taco Bell announced Thursday it is keeping the Mountain Dew maker Baja Blast for another decade.
The deal with Taco Bell is a much-needed win for PepsiCo, whose business has had a rough few weeks. Not only has it lost its long-standing contract with KFC to compete with Coca-Cola, but its North American beverage business is also in crisis.
The company reported a 2% decline for its North American beverage unit in its most recent quarter, and its CEO, Ramon Laguarta, bluntly stated during the earnings conference call that it “did not compete well in the soft drinks space,” including the recently acquired Poppi brand.
Losing the KFC contract is a blow to PepsiCo, given that it once owned the fried chicken chain. But keeping Taco Bell is a bigger deal, since it generated $17 billion in U.S. system-wide sales last year, compared to about $5 billion for KFC. (Both channels are owned by Yum! Brands.)
Taco Bell and PepsiCo said in a statement that the two will continue to collaborate on new drinks and foods through 2036, including new flavors coming to their Doritos Locos Tacos. He also noted that the Baja Blast drink has become a $1 billion brand.
As food prices rise and consumers look to cut spending, the beverage category is a key growth area for Taco Bell and other fast food chains.
Taco Bell is aggressively growing its beverage sales with a goal of generating $5 billion in revenue by 2030. Last year, the chain launched a line of “Refrescas” drinks aimed at attracting consumers looking for a drink between meals. Further expansion will come from developing new Baja Blast options with Pepsi, including a limited-time Pink Lemonade featuring singer Olivia Rodrigo.
“Taco Bell’s Baja Blast line has often been a key differentiator for the brand, and leveraging product exclusives can help increase foot traffic for fast food chains,” Elizabeth Lafontaine, research director at location analytics firm Placer.ai, told CNN.
“Especially as the industry faces greater competition and consumers seeking more value in fast food offerings,” she added.
Taco Bell and PepsiCo said in a statement that they plan to stay ahead of “emerging beverage trends in craft, functional and energy drinks, including energy offerings designed to appeal to Gen Z consumers and unlock new morning and afternoon occasions.”
Taco Bell has been a bright spot in the fast food industry, but saw a decline in traffic over the summer due to a cyclosporosis outbreak linked to lettuce served at a number of restaurants. The company will give a more complete view of the sales impact when it reports results next month.
The key takeaways from this article were generated with the help of large language models and reviewed by our editorial team. The article itself is solely written by humans.
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