One of the longest-running supply relationships in American fast food is coming to an end. KFC said on Thursday that its roughly 3,700 US restaurants will drop PepsiCo drinks in favour of Coca-Cola. The first change in drink supplier in decades is expected to start in January 2027.
A break with history
The link between KFC and Pepsi dates back to 1986, when PepsiCo bought the fried-chicken chain. At the time, KFC was reportedly one of Coca-Cola’s largest fountain customers. PepsiCo spun off KFC, Pizza Hut and Taco Bell in 1997 to form what is now Yum Brands. Even so, KFC’s US counters kept pouring Pepsi for nearly three decades afterwards.
Under the new agreement, Coca-Cola products will start rolling out in January 2027 and are expected to be available at all US locations by spring. KFC said the partnership could also lead to new food-and-drink pairings and additional beverage options.
Part of a wider turnaround
For KFC, the switch is tied to a turnaround effort it calls the “Kentucky Fried Comeback”. The chain has lost ground in the US to rivals such as Chick-fil-A and Popeyes, and it is trying to win diners back.
KFC US president Catherine Tan-Gillespie told franchisees and employees the new partner gives the brand a platform to innovate and respond to changing tastes. Dagmar Boggs, Coca-Cola’s president of foodservice and on-premise in North America, said the deal combines KFC’s food with Coca-Cola’s range and innovation.
How investors reacted
Yum Brands shares rose about 2.7% after the announcement, while Coca-Cola’s edged up. Analysts suggested the economics of the arrangement likely favoured KFC. Beverage industry consultant John Sicher called the deal a big win for Coca-Cola.
Switching suppliers on this scale is unusual in the restaurant industry, though not unheard of. Fountain contracts are valuable because they put a drink brand in front of customers every day. They tend to run for many years, and the companies involved fight hard for them.
A setback, not a collapse, for PepsiCo
The loss stings for PepsiCo, which has been working to revive growth in its North American beverage business. Losing the fountain business at thousands of restaurants removes a highly visible outlet for its drinks.
The damage is limited, however. PepsiCo has renewed its agreements with Taco Bell, in a contract reported to run for ten years, and with KFC’s international operations. It also keeps relationships with several other major restaurant chains.
One caveat is that KFC restaurants in mainland China are run by a separate company, Yum China. It has its own board and its own contracts, so the Coca-Cola switch does not automatically extend there.
Why it matters beyond soft drinks
Soft-drink contracts rarely make headlines, but this one shows how much competitive pressure restaurant brands are under. Chains are looking for any lever to lift traffic: menu changes, marketing partners, or a new drinks deal that comes with promotional support.
For Coca-Cola, the deal adds scale in foodservice, a channel where volume is hard to win. For consumers, the immediate change will be simple: a different cup in their hand from early next year. KFC’s wider ambitions depend on whether it can bring back the customers it has lost, and new drink options alone are unlikely to do that.
What happens next
The rollout begins in January. Analysts will watch whether KFC’s US sales show any benefit from the refreshed beverage lineup and the planned food-and-drink pairings. They will also watch whether other chains reconsider long-standing drink deals.
