Key takeaways
- KFC ended its nearly 40-year partnership with PepsiCo
- PepsiCo could lose approximately $500 million in annual sales as a result of the deal
- KFC's decision raised concerns about PepsiCo's ability to retain other major restaurant partnerships
KFC announced that it will end its nearly 40-year partnership with PepsiCo and switch to Coca-Cola in more than 3,700 restaurants in the United States. This delivered a major setback to the beverage giant that analysts estimate could cost it $500 million in annual sales.
The fast-food chain confirmed the decision on Oct. 15. Coca-Cola products are set to replace Pepsi beverages beginning in January of 2027. The transition is expected to be completed nationwide by spring 2027.
Overall, the move is a big victory for Coca-Cola in its decades-long rivalry with PepsiCo.
KFC's Pepsi Breakup Could Cost Beverage Giant $500 Million
According to Reuters, Bank of America analysts estimated that losing KFC could reduce PepsiCo's annual sales by approximately $500 million, which is equivalent to around 3% of Pepsi Beverages North America's concentrate sales.
The deal could also boost Coca-Cola's North American sales by approximately 2.5%, according to the analysts. However, Wall Street believes the potential reputational damage could be much bigger than the immediate financial impact.
Jefferies analysts warned that losing such a longstanding customer could raise questions about PepsiCo's ability to retain other major restaurant partnerships. PepsiCo is already battling sluggish consumer demand, higher operating costs and slower-than-expected profit margin recovery in North America.
KFC's relationship with Pepsi dates back to 1986, when PepsiCo acquired the restaurant chain. The beverage partnership continued even after PepsiCo spun off its restaurant operations in 1997.
Why KFC Chose Coca-Cola Over Pepsi
According to an Oct. 19 Wall Street Journal report, Coca-Cola secured the partnership after a competitive presentation at Yum Brands' headquarters in Texas earlier this year.
Executives from both beverage companies presented their proposals, with Coca-Cola reportedly winning over KFC through its beverage innovation strategy and plans to increase restaurant sales.
The switch also forms part of KFC's turnaround strategy to modernize its menu, attract customers and strengthen its position against competing chicken restaurants.
Meanwhile, the decision will also bring an end to Mountain Dew Sweet Lightning at U.S. KFC restaurants. The popular honey-and-peach-flavored beverage that was introduced in 2019 will disappear from the chain's menu after Dec. 31, 2026.
Despite the setback, PepsiCo still has important partnerships with Yum Brands, including Taco Bell and international KFC locations.
