Key Points

• KFC has ended its nearly 40-year partnership with PepsiCo
• Analysts estimate that this transaction could result in PepsiCo losing approximately $500 million in annual sales.
• The decision of KFC has raised concerns among outsiders about whether PepsiCo will be able to maintain its partnerships with other large catering companies.

KFC announces that it will end its nearly 40-year partnership with PepsiCo and switch to Coca-Cola in over 3,700 restaurants across the United States. This is a major blow for the beverage giant, and analysts estimate that it could result in a reduction of $500 million in annual sales.

The fast-food chain confirmed this decision on October 15th. Coca-Cola products will begin to replace Pepsi beverages starting in January 2027, with the switch expected to be completed across the United States by the spring of 2027.

Overall, this move represents a major victory for Coca-Cola in its decades-long competition with PepsiCo.

KFC's split with Pepsi results in a $500 million loss for the beverage giant

According to Reuters, analysts at Bank of America estimate that the loss of KFC could result in a reduction of about $500 million in PepsiCo's annual sales, which is equivalent to approximately 3% of PepsiCo's North American beverage concentrate sales.

Analysts say that this transaction could also drive an increase of about 2.5% in Coca-Cola's North American sales. However, Wall Street believes that the potential damage to reputation could far outweigh the immediate financial impact.

Jefferies analysts warned that losing such a long-term customer could lead the market to question PepsiCo's ability to retain other major foodservice partners. PepsiCo is currently dealing with issues such as weak consumer demand, rising operating costs, and slower-than-expected profit margins in North America.

The partnership between KFC and PepsiCo can be traced back to 1986, when PepsiCo acquired this restaurant chain. Even after PepsiCo divested its restaurant business in 1997, this beverage collaboration continued.

Why did KFC choose Coca-Cola over Pepsi?

According to a report by The Wall Street Journal on October 19th, earlier this year, Coca-Cola won this collaboration after making competitive presentations at its headquarters in Yum Brands in Texas.

Executives from two beverage companies presented their respective plans, and it is reported that Coca-Cola won the favor of KFC with its innovative beverage strategy and plans to boost restaurant sales.

Despite facing setbacks, PepsiCo still maintains important cooperative relationships with Yum Brands, including Taco Bell as well as KFC stores in the international market.

Author

Danielle Walgenbach

Danielle is a journalist who covers cryptocurrency and financial markets, with over four years of reporting experience. She is adept at breaking down complex financial and economic topics into clear and solid news stories.