Yum! Brands (YUM), the parent company of KFC, announced on Oct. 15 that it will end its beverage deal with PepsiCo (PEP) across its U.S. restaurants and replace it with Coca-Cola (KO).
The change will take effect in January 2027, and KFC expects all its American locations to be serving Coca-Cola products by spring 2027, CNBC reported.
Pepsi and KFC have a relationship that goes back about 40 years, and it’s a pretty interesting story. PepsiCo bought KFC in 1986 and continued as its beverage supplier, even after spinning it off into what became Yum! Brands in 1997, according to Reuters.
Now, that long relationship is coming to an end. But that’s only in the U.S., as PepsiCo recently renewed beverage agreements covering Taco Bell and KFC’s international restaurants, according to Reuters.
PEP shares slipped about 0.7% to $128.38 on the day of the announcement.
Why KFC in U.S. is dropping Pepsi after nearly 4 decades
U.S. KFC restaurants have been losing customers to Chick-fil-A and Popeyes over the past few quarters.
As part of its ongoing “Kentucky Fried Comeback” revival plan, launched shortly after Catherine Tan-Gillespie took over as KFC U.S. president in 2025, the Coca-Cola deal is now one of the biggest moves on the board.
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“I’m incredibly excited to bring KFC and Coca-Cola together,” Tan-Gillespie said. “These are two originals, with deep consumer love.”
The deal also gives KFC access to Coca-Cola’s drink development team. KFC is already testing new beverage options such as boba refreshers and Krunch shakes at its prototype restaurant in McKinney, Texas, NRN reported.
Adding Coca-Cola’s innovation team to that effort should help KFC accelerate those tests.
Everyday KFC fans will see Coca-Cola products at the counter
The biggest change will be at the fountain machine.
KFC has not yet disclosed its full Coca-Cola lineup, but staples including Pepsi, Diet Pepsi, Starry, and Aquafina are expected to make way for Coca-Cola’s standard fountain pour, which typically includes Coca-Cola, Diet Coke, Coke Zero Sugar, Sprite, and Dasani water.
Mountain Dew Sweet Lightning, which is exclusive to KFC, will also disappear once the swap is complete, Parade reported. So if that’s your favorite drink, you should enjoy it while it’s still there.
What Yum! Brands investors should watch next
Yum! Brands owns KFC, Taco Bell, and Pizza Hut. Most of its earnings come from royalty fees paid by franchise owners, so if KFC and its other brands see an improvement in sales or profit margins, it all flows back to Yum.
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On the day of the KFC announcement, YUM shares closed up about 2.8% at $150.83.
However, the real test of whether customer traffic actually picks up will come in 2027 and 2028. Investors will also be able to determine whether the new drink menu actually increases the average spend per visit by that time.
Why Coca-Cola keeps winning fountain contracts
Big restaurant chains don’t often switch their beverage suppliers because of the cost and operational work involved. So for Coca-Cola, this is a rare win. The deal adds about 3,700 restaurants to Coca-Cola’s U.S. network.
“This exciting new partnership brings Coca-Cola and KFC together across the U.S. for the first time,” said Dagmar Boggs, Coca-Cola’s president of Foodservice and On-Premise, North America, in a company press release.
KO closed at $93.90 on Oct. 16 and is up more than 35% year to date.