The American chain KFC is ending its nearly 40-year partnership with PepsiCo in the US market and has chosen Coca-Cola as its new soft drinks supplier. As reported by Reuters on 15 October, the change will affect more than 3,600 outlets: the transition will begin in January 2027 and is scheduled to be completed by spring. The new agreement does not automatically extend to international restaurants, including those in Ukraine.
Briefly about the main points
- Coca-Cola will supply drinks to KFC restaurants in the US.
- The phased transition will begin in January and be completed in spring 2027.
- Reuters reports that there are 3,718 KFC outlets in the US.
- Bank of America estimates the risk to PepsiCo at $500 million in sales.
- KFC outlets worldwide, including those in Ukraine, are not obliged to change their drinks.
The roll-out will cover more than 3,600 restaurants in the US
The companies officially confirmed the agreement on 15 October. From January, the restaurants will gradually change their product range, and by spring the products Coca-Cola is to be displayed in all establishments covered by the contract.
Coca-Cola’s statement refers to more than 3,600 restaurants. Reuters, meanwhile, puts the total number of KFC outlets in the US at 3,718. The parties have not disclosed the financial terms of the new agreement.
The new partnership forms part of KFC’s rebranding in the US
History of the network’s connections with PepsiCo It began in 1986, when the drinks manufacturer acquired KFC. In 1997, PepsiCo spun off its restaurant division, which went on to form Yum! Brands; however, KFC continued to sell PepsiCo drinks.
President of KFC in the US Catherine Tan-Hillside described the agreement as part of its strategy to revamp the chain. The company sees it as a way to improve its menu and service and attract new customers. The agreement also provides for a wider range of products and new offers for customers.
President of Coca-Cola’s Foodservice Division in North America Dougmar Boggs said there were opportunities for the development of both brands.
Analysts estimate PepsiCo’s losses at hundreds of millions of dollars
According to Bank of America’s estimates, the suspension of supplies to US KFC outlets could cost PepsiCo around $500 million in annual sales. This represents approximately 3% of the Pepsi Beverages North America division’s sales of beverage concentrates.
Analysts at Jefferies believe that the risk for PepsiCo lies not only in direct losses, but also in a weaker brand presence in popular restaurants. Reuters describes KFC’s decision against the backdrop of rising costs at PepsiCo, weaker demand for snacks and a slower-than-expected recovery in profitability. The company’s chief executive Ramón Laguarta He had previously acknowledged that improving the financial performance would take longer than planned.
The agreement does not mean that drinks sold outside the US will automatically change
PepsiCo and Yum! Brands have extended their partnership agreements for KFC’s international restaurants and the Taco Bell chain. The contract with Taco Bell has been signed for ten years. PepsiCo also remains the drinks supplier for Subway, Jersey Mike’s Subs and Pizza Hut.
KFC’s new contract with Coca-Cola applies only to the US market. For the chain’s international restaurants, including those in Ukraine, it does not provide for the automatic replacement of Pepsi with Coca-Cola.
