Pepsi just got fried by KFC

Coke or Pepsi? Few questions spark bigger debates at barbecues—or in fast-food boardrooms. And Coke just scored a major win in the cola wars: After four decades on Team Pepsi, KFC is ditching the drink for Coke in its 3,700 US restaurants starting in January 2027.

The fried-chicken chain has served Pepsi since 1986, the year PepsiCo acquired KFC. Even after the soda-and-snack giant spun off KFC, Pizza Hut, and Taco Bell as Yum! Brands in 1997, KFC stayed loyal to its former parent company.

But KFC has been losing its own loyalty campaign as customers flock to Chick-fil-A and Popeyes. To turn things around, a menu makeover ensued this summer with a new suite of 20 sauces plus new drinks like Boba Refreshers and Krunch Shakes. A switch to Coke, which offers more flavors and flexibility, is the latest ingredient in what KFC US President Catherine Tan-Gillespie has called the “Kentucky Fried Comeback.”

The cola wars with a side of chicken

While big restaurants rarely switch soda providers, this game has seen its share of defections. In 2024, Pepsi poached the country’s largest restaurant chain, Subway, from Coke. Before scoring KFC, Coke lured away Arby’s, Culver’s, and Panda Express. These breakups don’t happen over lunch; restaurants typically sign exclusive supply contracts with beverage providers offering equipment, maintenance, and discounts as part of the deal.

Coke was already ahead in the restaurant soda game, appearing in 73% of the nation’s top fast-food establishments, according to one industry tally. Meanwhile, PepsiCo has been struggling to revive US demand, with organic revenue growth slowing to just 1% in the previous quarter. Losing KFC is another hit: Evercore ISI analyst Robert Ottenstein estimated that the switch could cost PepsiCo $50 million in revenue.

Still, Wall Street’s reaction felt surprisingly flat. PepsiCo shares fell just 0.7% on Thursday after the news broke, then were back up 2.42% on Friday. Coca-Cola shares bubbled up just slightly, closing 2.83% higher Friday, while KFC parent Yum! Brands rose about 2.8% on Thursday before falling a slight 0.21% on Friday.

Why didn’t the news deep-fry Pepsi’s stock? For one, restaurants are just a drop in the bucket compared to the grocery store market. And Pepsi hasn’t lost the Colonel completely: Its drinks will still be served at KFC locations internationally, spanning more than 29,000 restaurants in 150 countries.

Plus, PepsiCo has plenty of business beyond beverages. Unlike Coke, it has a sprawling snack empire that includes Doritos, Cheetos, and Lay’s. In other words, Pepsi may have lost some fizz, but it still has plenty of chips left to play.—JD