KFC’s move to Coke after nearly 40 years with Pepsi: Overview
- KFC US will replace PepsiCo with Coca-Cola from 2027.
- The switch is part of KFC’s push to revive US sales.
- Pouring rights deals bring marketing, equipment and revenue benefits.
- The loss could cost PepsiCo around $500m in annual concentrate sales.
- Future beverage deals will be driven by innovation beyond cola brands.
After almost four decades with PepsiCo, KFC’s US restaurants are preparing to switch to Coca-Cola, ending a longstanding partnership that dates back to PepsiCo’s acquisition of the fried chicken chain in 1986.
The transition is due to begin in January 2027, with Coca-Cola expected to reach more than 3,600 US KFC restaurants by the spring. The change applies to KFC’s US operations, with PepsiCo continuing to supply the chain in international markets.
The move forms part of KFC’s wider efforts to win back US diners, with the chain positioning its new beverage partnership as an opportunity to refresh its offering, respond to changing consumer preferences and attract customers.
For Coca-Cola, the deal represents a symbolic victory in its longstanding rivalry with PepsiCo. But it also carries a significant commercial impact. Bank of America estimates the account represents around $500m in annual concentrate sales for PepsiCo, equivalent to approximately 3% of Pepsi Beverages North America’s concentrate sales.
According to Tim Harms, CEO of beverage consultancy Enliven, however, the significance of these agreements extends well beyond the immediate financial impact or which cola appears on the menu.
Why pouring rights agreements are so valuable
For restaurant operators, choosing a beverage supplier involves much more than selecting the brands they offer customers. These partnerships can play an important role in driving revenue and supporting day-to-day operations.
“Beverages, and particularly sodas, can be one of the most profitable items on a restaurant’s menu,” says Harms.
“Some restaurant operators wouldn’t be able to open up their doors without the beverage sales, and so that can be very important.”
Suppliers are therefore competing on more than product price. Financial incentives, rebates and price protection all come into consideration, alongside investment in dispensing equipment, maintenance, marketing support and service guarantees to ensure products remain available.
“Often the beverage company supplies the equipment, and that can be tens of millions of dollars depending on the chain,” he adds.
For suppliers, the value extends beyond securing a restaurant account. Partnerships offer opportunities to increase brand visibility, encourage product trial and build consumer loyalty outside the foodservice channel.
Harms points to Dr Pepper as an example. Around 20 years ago, he says, the brand was considerably smaller, with a stronger regional presence in Texas and Oklahoma. Expanding its distribution into restaurant and foodservice accounts helped raise its profile beyond those markets.
“By gaining visibility in these channels, it would grow the brand outside of the channel overall, and we’ve seen that play out,” he says.
Restaurants also give beverage companies an opportunity to associate their products with everyday experiences, from eating out to visiting a theme park or cinema. They can introduce consumers to products they might not otherwise try, too.
Coca-Cola vs PepsiCo: the battle continues
KFC is among several accounts to have changed hands in recent years. Harms points to Costco, Culver’s, Arby’s and Panda Express as examples of restaurants and retailers that have switched from PepsiCo to Coca-Cola. But the competition runs both ways. In 2024, PepsiCo won Subway back from Coca-Cola after nearly 21 years, demonstrating that even the longest-standing partnerships are not guaranteed.
“There’s no beverage deal that’s safe. There’s no beverage deal that’s off limits for the competitor to come in and try to win it over,” Harms says.
The two companies also have different strategies for winning partnerships.
One advantage for PepsiCo is its wider portfolio of snack brands, which allows it to offer restaurant partners opportunities beyond beverages. Harms points to the company’s relationship with Taco Bell, recently renewed for another 10 years, as an example. The partnership includes Doritos-branded tacos, bringing PepsiCo’s Frito-Lay portfolio into the deal.
“Pepsi does like to bring a lot of their snack brands to play. So it’s not just a beverage partnership, but also how can they bring pieces to it,” he says.
The companies also differ in their bottling structures. While Coca-Cola has sold much of its bottling operations to independent companies, PepsiCo retains the majority of its bottling network. Harms says this can give PepsiCo an advantage in coordinating its packaged drinks across different territories.
Innovation will shape future pouring rights agreements
As restaurant beverage menus become more diverse, future pouring rights deals may be shaped less by flagship cola brands and more by suppliers’ ability to offer the right products across different categories.
Harms observes that consumers are generally less likely to order a soda alongside a burger, taco or pizza than they were 20 years ago. As a result, suppliers are looking at ways to help restaurant partners drive more beverage purchases through investment in functional drinks, energy and other emerging categories.
“There’s no one-size-fits-all anymore, so the beverage companies are having to be very nimble, very innovative,” Harms says.
He points to McDonald’s partnership with Red Bull for energy drinks, despite its longstanding relationship with Coca-Cola, as an example of restaurants looking beyond their traditional supplier to meet demand in specific categories.
However, he believes major suppliers retain an advantage through their scale, distribution networks, pricing and marketing capabilities. Coca-Cola, PepsiCo and Keurig Dr Pepper are all investing in functional and innovative beverages, with energy and functional drinks likely to play an increasingly important role in quick-service and fast-casual restaurants.
Ultimately, Harms believes innovation will be central to winning future partnerships.
“The next beverage agreements, pouring rights partnerships, will not be about red versus blue. It’ll be about which company is able to innovate.”
Why the classics still matter
Despite changing consumer preferences, Harms does not believe traditional soft drinks are going anywhere. He expects cola to remain a staple for decades to come, even as consumers increasingly look for different things from their beverages.
“I think you’re seeing a bifurcation of what people want from their beverages. They want function, or they want indulgence,” he explains.
Products such as zero-sugar and diet colas allow established brands to respond to changing preferences while retaining the familiar taste of cola.
Harms points to Diet Coke’s continued growth since 2017 as an example of the category’s resilience.
“Even Diet Coke has really been growing year after year,” he says, adding that zero-sugar products combine the functional benefits consumers are looking for with the indulgence of enjoying a Coca-Cola.
For Harms, the future is not about choosing between established soft drinks and new innovations, but having a portfolio that caters to both.
“I think the winning beverage company of the future is going to be focused on all of these things,” he says.
