In 1986, KFC was Coca-Cola’s second-largest fountain account in the U.S., trailing only McDonald’s. Then PepsiCo bought the chain, and Coke disappeared from KFC’s U.S. fountains for the next four decades.
That changes in January. KFC U.S. announced this week that it will move its beverage partnership to The Coca-Cola Company, with Coke products expected in all U.S. restaurants by spring 2027. That’s roughly 3,700 locations changing what’s in the cup.
This is a significant development and a symbolic win for Coke. KFC is a founding brand of Yum! Brands, which PepsiCo spun off in 1997 and which has stayed loyal to its former parent ever since. It also caps a remarkable run for Coke. Marriott ended a 34-year relationship with PepsiCo this summer. Costco brought Coke back to its food courts in 2025 after more than a decade with Pepsi. Culver’s, Arby’s, and Panda Express have all moved to Coke in recent years.
But “Coke wins” is the least useful takeaway. If you manage a beverage partnership of your own, here’s what this deal tells you.
The Cola Wars Are Alive and Well
Just two years ago, the story ran the other direction. Subway, the largest U.S. restaurant chain by number of locations, left Coke for a 10-year Pepsi agreement that began in January 2025. Now Pepsi loses a partner it has served since 1986.
We get asked often whether companies really switch soft drink providers. They do, and the biggest names in foodservice keep proving it. No beverage partnership is permanent, no matter how long it has lasted or how tangled the corporate history.
This is important: when the incumbent knows you’re willing to switch, and the challenger believes it has a real shot, both bring their best offer. When either side assumes the outcome is already decided, you always leave value on the table.
And switching rarely hurts sales on its own. As we’ve written before, guests come for your food, not your cola. Beverage sales rise when a partner invests in driving them, which brings us to the more interesting part of this story.
A Beverage Deal Can Send a Message
Read KFC’s press release and you’ll notice how little of it is about the deal itself. KFC calls the partnership “a visible proof point” in its broader “Kentucky Fried Comeback.” In a memo to franchisees obtained by CNBC, KFC U.S. President Catherine Tan-Gillespie called it “a critical step” in that plan.
KFC has been losing U.S. diners to Chick-fil-A and Popeyes. Changing the cup is one of the most visible moves a restaurant brand can make. Guests see it. Franchisees see it. Employees, investors, and the press all see it. It tells the market that something new is happening.
Beverage partnerships are rarely just about dead net price (the true cost per gallon or case after all rebates and discounts). The right deal can fund capital projects, power marketing, support a rebrand, or signal a new direction to franchisees and investors. If your organization is in the middle of a turnaround, an expansion, or a leadership transition, your next beverage deal can carry some of that weight.
We’ve seen examples where beverage partnerships have been the fuel behind revitalized PR campaigns, best-selling LTO cocktail innovations, significant philanthropic efforts and physical space transformations. These partnerships can be used as a tool for larger, strategic aims.
Notice What KFC Didn’t Talk About: Soda
The press release barely mentions soft drinks. Instead it talks about “compelling food-and-drink pairings,” serving customers “across more occasions,” and Coke’s “innovation capabilities.” It points to the iced coffees, boba, shakes, and other drinks KFC has been testing at Open House, its innovation restaurant in McKinney, Texas.
That fits what’s happening across QSR. This spring, McDonald’s launched six crafted sodas and refreshers across nearly 14,000 U.S. restaurants and brought in Red Bull for an energy drink, despite its decades-long Coke partnership. We broke that down in What McDonald’s Beverage Pivot Means for Your Next Deal. Sonic has built much of its brand around drinks for years. Taco Bell has set a $5 billion beverage revenue target by 2030. And crafted drinks like dirty sodas are averaging around $5.50, roughly double a standard fountain pour.
The cola is becoming the least interesting thing in the cup. That shifts what you should want from a beverage partner. A lower syrup price still matters, but the bigger value is a partner that can bring excitement back to the beverage category: new flavors, limited-time offers (LTOs), menu development, consumer insights, and marketing that gives guests a reason to add a drink.
When you evaluate suppliers, ask each one to show you:
- What beverage innovation they’ve built with similar operators, and what it did to beverage incidence (the share of transactions that include a drink).
- How they’ll support LTOs and new platforms over the full term of the deal, not just at launch.
- How much marketing funding and creative support they’ll commit to in writing.
Get to Know a Partner Before You Go All In
One detail didn’t make most headlines: Coke and KFC aren’t strangers. KFC South Africa has long served Coke instead of PepsiCo brands. KFC operators in Indonesia (2019), Singapore (2022), and Malaysia (2022) all moved from Pepsi to Coke. Coca-Cola describes the new deal as bringing the two brands together “across the U.S. for the first time.” The key words are “across the U.S.”
For large organizations with an international or multi-region footprint, that’s a strategy worth copying. You don’t have to move your entire system to learn what a different beverage company is like to work with. A single market, region, or brand can serve as a proving ground. How responsive is their account team? How reliable is their service? Does their innovation pipeline deliver in practice, or only in the pitch? When your big renewal arrives, you’re evaluating a partner you already know.
The same logic works domestically. Yum! itself will now work with both giants: Coke at KFC U.S. and Pepsi at Taco Bell. Multi-brand restaurant groups, multi-themed entertainment operators, and health systems with distinct regions can often stagger agreements or carve out a brand or region, giving them firsthand experience with more than one supplier.
Negotiation Note: Split or staggered agreements come with tradeoffs. You give up some of the volume leverage of a single system-wide deal in exchange for flexibility and real-world comparison.
What Comes Next
In about 18 months, Pepsi has lost Costco’s food courts, Marriott, and now KFC U.S. But it isn’t standing still. One week after the KFC announcement, PepsiCo renewed its partnership with Taco Bell through 2036, keeping Mountain Dew Baja Blast in the cup at KFC’s sister chain. Expect Pepsi to compete just as hard for the next major account that comes up for renewal. Coke will want to keep its momentum, and Keurig Dr Pepper remains an interesting player in the mix.
If your agreement expires in the next two or three years, you’re heading into one of the most competitive markets we’ve seen. Ask every supplier what they’ll do to make beverages a reason guests choose you, and get the answer in writing. KFC just showed how much a beverage partnership can say about where a brand is headed. Make sure yours says something too.
Related Resources:
Podcast: Soft Drink Fountain Food Fight and What it Means for Coke, Pepsi, and Dr Pepper
MRM Magazine Feature — The New Economics of Fountain Soda
The Ultimate Guide to a Beverage Deal
