KFC to replace Pepsi with Coca-Cola at 3,700 US restaurants — Fortune
Starting in January, KFC in the United States will begin replacing PepsiCo soft drinks with Coca-Cola products at 3,700 restaurants. The partnership between KFC and PepsiCo lasted about 40 years and began when PepsiCo owned the fried chicken restaurant chain. In 1997, PepsiCo spun KFC off into a separate company, Fortune reports.
Pepsi’s market position
According to industry publication Beverage Digest, Pepsi-Cola’s share of the US soft drink market by volume stood at 8.1% last year, while Coca-Cola had 18.5%. In 2024, Pepsi fell to third place for the first time, also trailing Dr Pepper, and has remained third ever since. Sales of Diet Coke and Coke Zero also exceed those of Pepsi’s corresponding products several times over.
PepsiCo CEO Ramon Laguarta told analysts that the company is dissatisfied with the performance of its beverage business and is increasing its focus on carbonated drinks. Last quarter, sales volumes in PepsiCo’s $28 billion North American beverage business declined by 2%. At the same time, sales of non-carbonated beverages, including Gatorade, Aquafina and Ocean Spray, improved.
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Possible steps by PepsiCo
Last year, PepsiCo generated nearly $94 billion in revenue. About 58% of that amount came from its food and snack business, which includes Fritos and Doritos chips and the Quaker brand. Another 30% of total revenue came from beverages in North America. The operating margin of the Frito-Lay division in the region was regularly about twice as high as that of the US beverage business.
The company may step up the development of the Pepsi, Mountain Dew and Poppi brands — a prebiotic soda acquired by PepsiCo last year for $2 billion. This could mean additional spending on marketing and advertising, paying for better product placement in stores and lowering prices.
Laguarta also allowed for the possibility of returning to a model under which the company transfers its owned bottling facilities to franchise partners. According to him, this could potentially improve operational execution and margins. At the same time, analysts warn that such a transition would be difficult and could take years. KFC U.S. President Catherine Tan-Gillespie told employees that cooperation with Coca-Cola should give the chain an opportunity to introduce innovations and respond to changing consumer tastes. Taco Bell, meanwhile, extended its contract with Pepsi for another 10 years.
