KFC's Coca-Cola Switch Highlights PepsiCo's Soda Challenge

KFC will switch its U.S. beverage partnership to Coca-Cola starting in January 2027, with Coca-Cola products expected in all 3,600 U.S. restaurants by spring 2027, while PepsiCo keeps its Taco Bell and KFC International deals.

KFC and The Coca-Cola Company announced a new U.S. beverage partnership that will bring Coca-Cola products to all 3,600 KFC restaurants in the country for the first time, according to The Coca-Cola Company.

The deal covers only U.S. KFC restaurants, while KFC International stores follow a separate track. Yum Brands and PepsiCo Inc (NASDAQ: PEP) renewed their beverage agreements across KFC International stores and renewed their Taco Bell deal for another 10 years, a PepsiCo spokesperson told Reuters.

PepsiCo also holds beverage partner agreements with Subway and Jersey Mike's Subs, and it supplies the soda fountain at Pizza Hut. Pizza Hut left the Yum Brands umbrella this year, after switching to PepsiCo from Coca-Cola in 2011. We think that makes the U.S. KFC switch a loss of one major account rather than the end of PepsiCo's restaurant beverage business.

The KFC loss lands on a soft-drink business that was already losing ground.

Pepsi-Cola held 8.1% of the U.S. carbonated soft drinks market by volume last year, compared with 18.5% for Coca-Cola, according to trade publication Beverage Digest. In 2024, Pepsi fell to third place behind Dr Pepper for the first time, and it remains there.

PepsiCo CEO Ramon Laguarta told Wall Street analysts earlier this month, "We do not feel good about the beverage business." "So we are putting all the urgency of the business and focus on improving our performance in soft drinks," he said. The soda lineup he may want to build includes Pepsi, Mountain Dew and Poppi, a prebiotic soda PepsiCo bought last year for $2 billion.

Bank of America analysts estimate the KFC account is worth about $500 million in annual sales. They equate that to roughly a 3% hit to Pepsi Beverages North America's concentrate sales. Evercore ISI analyst Robert Ottenstein estimated the lost revenue to PepsiCo at about $50 million. By his analysis, that suggests retail revenue is closer to $350 million to $400 million.

Elliott Investment Management, an activist investor, called PepsiCo a "dramatic underperformer." Elliott urged the company to consider, among other things, re-franchising its company-owned bottlers. We think KFC adds to the soda problem, while the share losses and Elliott's proposal show the problem is bigger than one account.

PepsiCo's companywide revenue kept growing last quarter.

• PepsiCo's North American beverage business is a $28 billion business.
• That business shrank 2% by volume in the third quarter of 2026.
• PepsiCo brought in nearly $94 billion in revenue last year.
• About 58% of that revenue came from its Frito-Lay snacks division and Quaker brand.
• North American beverages made up 30% of total company revenue.
• PepsiCo reported net revenue of $25.274 billion for the third quarter of 2026, according to its October 2026 earnings release.
• That revenue was up 5.6% from the same quarter a year earlier.
• Organic revenue rose 3.1% in the third quarter of 2026, according to the same release.
• Operating profit reached $4.260 billion in the third quarter of fiscal 2026.
• Earnings per share, the profit attributed to each share, came to $2.23 in the third quarter of fiscal 2026.
• Year-to-date net revenue through the third quarter of fiscal 2026 reached $68.898 billion.
• Frito-Lay holds a 38% share of the $80 billion U.S. savory snacks market.

Volume measures how much product PepsiCo sells, while revenue measures the dollars those sales bring in. Organic revenue strips out effects like acquisitions and currency swings to show underlying growth. The volume decline applies only to North American beverages, while the revenue gains cover the whole company.

PepsiCo Inc stock traded at $135.77 as of October 23, 2026. Analysts' average price target was $141.59, with a consensus rating of hold, as of October 23, 2026. Fair value stood at $200.01 as of October 23, 2026.

KFC said on October 15, 2026, that it will switch its U.S. beverage partnership to The Coca-Cola Company starting in January 2027. It expects Coca-Cola products in all U.S. restaurants by spring 2027. Those two dates are the waypoints for readers who follow PepsiCo.