KFC will replace Pepsi with Coca-Cola across its approximately 3,700 U.S. restaurants, the fried chicken chain announced Thursday, ending a domestic beverage alliance that lasted nearly four decades.
The transition is scheduled to begin in January 2027, with Coca-Cola products expected to be served at every U.S. franchise by the end of the first quarter of that year, CNBC reported. The change marks a major shift in the long-running competition between the nation’s two largest soft drink makers for dominance on fast-food fountain dispensers.
A Historic Fast-Food Realignment
The relationship between KFC and PepsiCo dates back to 1986, when PepsiCo purchased the chicken chain. In 1997, PepsiCo spun off its restaurant division as Tricon Global Restaurants, which was later renamed Yum! Brands in 2002. Even after the separation, PepsiCo retained the beverage contracts for Yum’s brands, creating a long-standing corporate tie.
Catherine Tan-Gillespie, the president of KFC, framed the shift as a move to revitalize the restaurant’s identity and attract diners. Tan-Gillespie said in a statement reported by Fox Business that the partnership is “another step in our work to evolve KFC, strengthen our restaurants, menu offerings and create a more relevant experience for today’s customers.”
Dagmar Boggs, the president of foodservice and on-premise at Coca-Cola, said in a statement that combining KFC’s food with Coca-Cola’s product lineup offers a chance to “unlock new growth possibilities together.”
The Shifting Fountain Wars
Beverage pacts represent crucial battlegrounds for drink makers seeking constant volume and daily brand exposure. While such alliances rarely change hands among major fast-food brands, both conglomerates have traded significant accounts in recent years.
In 2024, PepsiCo scored a high-profile win by capturing Subway, the largest U.S. restaurant chain by store count, away from Coca-Cola, CNBC noted. However, Coca-Cola has steadily chipped away at other longstanding PepsiCo accounts, securing partnerships with Arby’s, Culver’s, and Panda Express, as well as signing hotel giant Marriott earlier this year, according to Yahoo Finance.
The departure of KFC’s U.S. stores delivers another commercial challenge to PepsiCo. In an analyst note cited by Yahoo Finance, Robert Ottenstein of Evercore ISI estimated that the lost KFC business could reduce PepsiCo’s revenue by roughly $50 million, implying a total retail value between $350 million and $400 million. Ottenstein noted that the decision highlighted Coca-Cola’s strong brand equity and pointed out that quick-service restaurants rely heavily on beverages to drive customer traffic.
Drink Innovation and What Comes Next
Fast-food chains have increasingly focused on non-alcoholic drinks as a critical revenue driver. Competitors across the industry have added flavored iced teas, specialty coffees, and mixed sodas to capture customer interest outside traditional lunch and dinner hours. KFC recently introduced shakes and iced coffees at Open House, its test kitchen in McKinney, Texas, according to CNBC.
Despite the domestic departure, PepsiCo’s broader relationship with Yum! Brands is not entirely over. Tan-Gillespie confirmed that PepsiCo will remain a key partner for KFC’s international locations. Reuters reported that PepsiCo also recently renewed beverage contracts for KFC restaurants overseas and for Yum’s Taco Bell chain.
Store operators across the U.S. will begin installing Coca-Cola equipment after the new year as the restaurant chain prepares to finalize the switch by spring 2027.
