KFC picks Coca-Cola as US soda supplier, ditches longtime partner PepsiCo

REUTERS -- Fast-food chain KFC ‌on Thursday signed Coca-Cola as its beverage partner for US stores, bringing to a close a relationship with PepsiCo that dates back about four decades.

The loss of the beverage partnership with KFC, which has 3,718 US locations, could ​be a setback for PepsiCo as it works to improve soda sales in the country, ​while its snacks business grapples with high prices and a shift to healthier ⁠options.

Higher costs have also added to concerns for PepsiCo CEO Ramon Laguarta, who said earlier this ​month that growth and margin recovery was taking longer than planned.

The partnership began when PepsiCo acquired KFC in ​a bid to expand into food and snacks. While PepsiCo later spun off KFC in 1997, it continued to be a beverage partner for its parent Yum Brands.

“It is just a bad look for PepsiCo… when you lose ​a big-name brand partner like that. This could be the optical straw that breaks the camel’s ​back,” said Jay Woods, chief market strategist at Freedom Capital Markets.

“It is very rare that you have two giants ‌in the ⁠same industry take such a different turn,” he said. Freedom Capital Markets holds shares in Coca-Cola.

PepsiCo is also under scrutiny from activist investor Elliott Investment Management, which disclosed a stake in the company last year, and has asked it to sell underperforming assets and improve its performance in North America.

Yum Brands and ​PepsiCo just renewed agreements ​across Taco Bell and ⁠KFC International stores, a spokesperson for PepsiCo told Reuters.

Taco Bell is a 10-year agreement, they said.

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PepsiCo has beverage partner agreements at sandwich chains Subway ​and Jersey Mike’s Subs. It also runs the soda fountain at Pizza ​Hut, which left the ⁠Yum Brands umbrella only this year and switched to PepsiCo from Coca-Cola in 2011.

In 2012, PepsiCo lost Dunkin to Coca-Cola after a five-year run at the donut chain.

Coca-Cola products will be available at KFC US ⁠restaurants by ​spring 2027, the company said. Financial details of the partnership ​were not disclosed.

Coca-Cola is a long-standing beverage partner at burger chains McDonald’s and Wendy’s.

The Wall Street Journal first reported the news ​on Thursday, citing people familiar with the matter.