Highlights
- PepsiCo and Taco Bell have extended their partnership through 2036, keeping Pepsi products at the chain’s US and international restaurants.
- KFC will begin switching its roughly 4,000 US locations from PepsiCo to Coca-Cola in January, with the transition expected to finish by spring.
- PepsiCo will retain its relationship with Yum Brands and continue supplying beverages to KFC restaurants outside the US.
PepsiCo is keeping Taco Bell as a major restaurant partner through 2036, even as KFC prepares to switch its US beverage supplier to Coca-Cola, highlighting how the two soft drink giants are competing for restaurant contracts.
The food and beverage company announced Thursday that it had renewed its long-running partnership with Taco Bell. The deal means Pepsi products will remain available at the chain’s restaurants in the US and international markets, including Canada, the United Kingdom, Ireland and Thailand.
The agreement comes a week after KFC, Taco Bell’s sister chain, said it would move its US beverage business to Coca-Cola. The change will affect about 4,000 American KFC locations, which are expected to begin switching suppliers in January and complete the transition by spring.
Taco Bell remains a key Pepsi partner
PepsiCo’s relationship with Taco Bell and KFC parent Yum Brands goes back decades, when PepsiCo owned the restaurant chains. Yum Brands became an independent publicly traded company in 1997, but the beverage partnership continued.
Taco Bell has built parts of its menu around PepsiCo brands. Its offerings include Mountain Dew Baja Blast and Doritos Locos Tacos, which use products from PepsiCo’s beverage and snack businesses.
The renewed agreement also preserves PepsiCo’s international relationship with KFC. The company will continue supplying beverages to KFC restaurants outside the US, despite losing the American business to Coca-Cola.
Coca-Cola gains ground in restaurant contracts
KFC’s switch is a significant win for Coca-Cola’s fountain beverage business, which supplies drinks to restaurants. Beverage consultant John Sicher told Bloomberg the deal adds a major customer to Coca-Cola’s fountain operations, which are already larger than PepsiCo’s.
Coca-Cola has also recently secured other restaurant and hospitality partnerships. In July, it reached an agreement to replace PepsiCo as Marriott International’s beverage supplier. Costco has also switched from PepsiCo to Coca-Cola.
The developments come as PepsiCo faces pressure to improve its North American beverage and snack businesses. The company recently lowered its profit forecast for the year, with CEO Ramon Laguarta acknowledging challenges in beverages and saying PepsiCo would increase investment in its soft drink brands.
Despite the KFC US loss, PepsiCo’s renewed Taco Bell agreement and continued international supply deal with KFC give it a substantial foothold within Yum Brands’ restaurant network.
