KFC signed Coca-Cola as its US beverage partner, ending a roughly 40-year exclusive relationship with PepsiCo.
The switch starts in January 2027, with Coca-Cola products expected across KFC's US restaurants by spring 2027
PepsiCo's relationship with KFC dates back to its 1986 acquisition of the chain, when Pepsi became the only soft drink served at its US restaurants.
It spun the chain off into Yum Brands in 1997 and kept the drinks deal anyway. PepsiCo stays on as KFC's beverage partner in international markets.
The lost sales are a rounding error
Jefferies estimates the KFC switch at $375M to $560M in sales, against roughly $94B in annual revenue.
Jefferies says the loss doesn't materially change its financial projections, and flags lost brand visibility as the bigger worry.
PepsiCo also just renewed Taco Bell for 10 years and holds Subway, Jersey Mike's, and Pizza Hut.
The pressure sits in North America, where third-quarter beverage volumes fell 2% and food volumes were flat.
PepsiCo's North America pressure points — as of Q3 fiscal 2026
| Metric | Figure |
|---|---|
| Estimated KFC contract sales at risk (Jefferies) | $375M–$560M |
| PepsiCo annual revenue (approx.) | $94B |
| North America beverage volumes, Q3 | -2% |
| North America food volumes, Q3 | Flat |
| Operating margin change | -35 basis points |
| Q3 net revenue | $25.7B, up 5.6% |
| FY2026 core EPS growth guidance (currency-adjusted) | 1% to 2%, cut from low end of 4%-6% |
| Elliott Investment Management stake | $4B |
North America recovery keeps slipping
PepsiCo cut its fiscal 2026 core earnings per share growth forecast on Oct. 8 to 1% to 2% after currency adjustments, down from the low end of a 4% to 6% range.
Third-quarter net revenue still grew 5.6% to $25.7B, beating expectations, with international markets contributing 45% of core segment operating profit year-to-date.
PepsiCo's chief financial officer Steve Schmitt said North America's core operating margin would stay under pressure in the fourth quarter.
Frito-Lay's turnaround is the other open file, with the snacks unit's core operating profit down 8% through the first 36 weeks of fiscal 2026 on flat revenue.
Activist investor Elliott Investment Management holds a $4B stake and wants asset sales plus a North America fix.
Chief Executive Ramon Laguarta has said the company is open to revisiting every option, including accelerating refranchising.
For Coca-Cola, the win adds a national chain it has never poured in.
"These are two originals, with deep consumer love."
Catherine Tan-Gillespie, KFC
The deal lands as KFC runs a comeback plan launched last year and expands its drink lineup into new dayparts.
Coca-Cola's foodservice leadership frames the tie-up as pairing KFC's menu with its full beverage portfolio and innovation pipeline.
PepsiCo, meanwhile, is leaning on record productivity savings and fresh cost cuts to defend margins while volumes stay soft.
The next two quarters will show whether the North America fix is working or whether contract losses keep stacking up.
