KFC switches to Coke. But Pepsi’s still king at Taco Bell

PepsiCo extended its US soda supply deal with Taco Bell to 2036, securing a major sales channel. Meanwhile, KFC will switch to Coca-Cola for its US fountain business. The moves suggest a rebalancing of partnerships within Yum Brands. PepsiCo faces margin pressure in North America, and the Taco Bell deal provides predictable US demand.

PepsiCo (PEP) extended its U.S. beverage partnership with Taco Bell for 11 years, through 2036, securing a key customer after losing KFC to Coca-Cola (KO). The deal covers PepsiCo's drinks in Taco Bell locations and focuses on developing new beverages for younger consumers. PepsiCo's North American beverage volume fell 2% last quarter, highlighting the importance of defending its restaurant business. Shares of PEP, KO, and YUM (Taco Bell's parent) rose on the news.

PepsiCo (PEP) shares rose 2.5% after extending its U.S. fountain partnership with Taco Bell to 2036, securing a key revenue stream. The deal covers 8,200+ locations and focuses on product innovation. This follows KFC's switch to Coca-Cola (KO) for its U.S. locations. PepsiCo aims to protect its foodservice channel and defend against KO's market share gains.

KFC will replace Pepsi with Coca-Cola products at its 3,700 U.S. restaurants starting in January 2027, ending a nearly 40-year partnership. The switch is part of KFC's broader modernization effort, according to KFC U.S. President Catherine Tan-Gillespie. Coca-Cola aims to enhance customer experience and drive growth, while PepsiCo will retain its international beverage partnership with KFC.

PepsiCo warned of potential nationwide stock shortages for its energy drink brands in India within two months due to regulatory restrictions on the 'energy drink' label, according to the company. The Food Safety and Standards Authority of India (FSSAI) ordered manufacturers to stop using the term in June, impacting PepsiCo's Sting and Adrenaline Rush brands. Competitor Red Bull secured temporary relief, while PepsiCo faces operational challenges and potential distribution disruptions.

Yum! Brands (YUM) announced KFC U.S. will switch from PepsiCo (PEP) to Coca-Cola (KO) beverages by spring 2027. The move is part of KFC's 'Kentucky Fried Comeback' plan. YUM shares rose 2.8%, while PEP shares dipped 0.7% on the news. KO is up over 35% year-to-date.