KFC is replacing Pepsi with Coca-Cola at nearly 3,700 U.S. restaurants, ending a beverage partnership that dates back almost four decades.
KFC and Coca-Cola later announced the new partnership in a joint statement, saying the transition will begin in January 2027, with Coca-Cola products expected to be available at all U.S. locations by spring.
The partnership began after PepsiCo acquired KFC in 1986. PepsiCo separated its restaurant businesses from the company in 1997 but continued supplying beverages to KFC under its parent company, Yum Brands, Reuters reported.
In the announcement, KFC U.S. President Catherine Tan-Gillespie said the partnership would help modernize the chain and improve its restaurants and menu offerings.
"I'm incredibly excited
to bring KFC and Coca-Cola together," Tan-Gillespie said in the statement.
What drinks will KFC offer?
Coca-Cola's beverage portfolio will replace Pepsi products at KFC's U.S. restaurants. KFC's current U.S. lineup includes Pepsi, Mountain Dew, Starry and Aquafina, as well as the chain's own lemonade and iced tea, according to The Wall Street Journal.
Coca-Cola's portfolio includes drinks such as Sprite, Fanta and Dasani. However, KFC has not specified which Coca-Cola products will be available at its U.S. restaurants when the transition begins
KFC said the new partnership could lead to additional beverage options and new food-and-drink combinations. The chain has already been experimenting with drinks such as iced coffees, boba beverages and shakes at its Open House innovation restaurant in McKinney, Texas, according to KFC's announcement.
Dagmar Boggs, Coca-Cola's president of foodservice and on-premise in North America, said in the announcement that the companies could combine KFC's food with Coca-Cola's beverage portfolio and innovation capabilities to create new customer experiences and growth opportunities.
The companies did not disclose financial details of the agreement, Reuters reported.
What the switch means for PepsiCo
Losing KFC's U.S. business comes as PepsiCo works to improve soda sales amid rising costs and changing consumer preferences, Reuters reported. The company is also facing pressure from activist investor Elliott Investment Management to improve its North American performance.
KFC is one of the biggest sellers of Pepsi among U.S. restaurant chains, according to The Wall Street Journal.
"It's just a bad look for PepsiCo ... when you lose a big-name brand partner like that," Jay Woods, chief market strategist at Freedom Capital Markets, told Reuters.
PepsiCo will continue supplying beverages to Taco Bell and KFC's international restaurants. According to Reuters, Yum Brands recently renewed agreements covering both businesses, including a 10-year agreement with Taco Bell.
Why KFC is changing its strategy
KFC has been working to revive its U.S. business after years of declining sales and restaurant closures, The Wall Street Journal reported. The chain has expanded its focus beyond traditional chicken buckets to sandwiches, wings and tenders while exploring new beverage offerings.
The Wall Street Journal also reported that restaurant chains are increasingly using specialty drinks and new menu combinations to attract customers.
Coca-Cola already has longstanding beverage partnerships with McDonald's and Wendy's, Reuters reported. The KFC deal expands its presence in the fast-food market while ending one of PepsiCo's longstanding restaurant relationships.
Contributing: Reuters
Reporter Anthony Thompson can be reached at ajthompson@usatodayco.com, or on X @athompsonUSAT
This article originally appeared on USA TODAY: KFC is replacing Pepsi with Coca-Cola at US restaurants
