Coca-Cola's KFC Win Is About More Than Soda -- Barrons.com

By Evie Liu

KFC's switch from PepsiCo to Coca-Cola will have a limited financial impact on either beverage company, but it highlights a bigger win for Coke: convincing restaurants that it can help them attract customers and get them to spend more on more than just drinks.

KFC announced last week that it will replace PepsiCo beverages with Coca-Cola products at roughly 3,700 U.S. restaurants beginning in January 2027, with the transition expected to be completed by spring. The agreement follows Marriott's decision earlier this year to switch from Pepsi to Coke, ending another longstanding supplier relationship.

The KFC contract itself is small by Coke's standards -- TD Cowen analyst Robert Moskow estimates it will boost the company's total revenue by just 0.1% to 0.2% in 2027.

But the symbolic value could be considerably greater as the beverage giant makes inroads into restaurant and hotel accounts that had maintained longstanding relationships with Pepsi.

Coca-Cola has been strengthening its position at venues where consumers buy drinks away from home. The company says its drinks are available at more than 500,000 U.S. foodservice locations, including restaurants, hotels, movie theaters, and amusement parks.

The stakes extend beyond immediate sales. Restaurants and hotels put beverage brands in front of millions of consumers, reinforcing habits and brand recognition every time someone places an order. That exposure, if lost, can be difficult to replace, Jefferies analyst Kaumil Gajrawala wrote in a Friday note.

Coca-Cola is trying to make itself harder for restaurants to replace by providing more than soda.

In April, the beverage giant launched a national advertising campaign called "And a Coke," bringing together 13 restaurant partners including Domino's, Wendy's, Popeyes, and Wingstop.

The campaign promotes both Coke and the participating chains across television, social media, and delivery platforms, as part of Coca-Cola's efforts to help its restaurant partners grow sales.

Coca-Cola is using consumer data collected through its Freestyle fountain machines to identify popular flavor combinations and develop exclusive new drinks for restaurant partners, giving them unique menu offerings that could help them attract customers and stand out from competitors.

The consumer insights could help the company develop new drinks in as little as 90 days, it said, compared with the roughly 18 months typically required. Examples include Fanta Crimson Sour Cherry at White Castle and Sprite Loco Lime at Wingstop, both developed in less than three months, according to the company.

Coca-Cola is also making itself more valuable to restaurants through technology and business support. In 2024, it introduced Coca-Cola Lens, a platform that provides consumer insights and advice on menu planning and digital ordering. In May, it introduced new fountain-machine models and features, including smaller machines and tools that help operators track supplies.

KFC, for its part, is counting on Coca-Cola to help refresh its menu and attract more customers as part of a broader turnaround effort. The companies plan to develop new food-and-drink pairings and expand beverage choices at KFC, although they haven't disclosed the financial terms or specific new products.

To be sure, PepsiCo is hardly retreating from the fight. The company is making similar investments to attract restaurant accounts. Its AI-powered Menu platform helps operators improve online ordering and sales, while customized drinks and exclusive products such as Mountain Dew Baja Midnight at Taco Bell offer additional ways to appeal to customers.

Although Coke's recent wins suggest it's been successful at persuading some longtime Pepsi partners to switch, PepsiCo recently secured Subway's U.S. beverage business from Coke, demonstrating that supplier changes can cut both ways.

PepsiCo's foodservice business has continued to grow despite the recent contract losses. The company reported mid-single-digit revenue growth in the channel in 2025 and said sales increased again in the third quarter of 2026 -- even as organic beverage revenue across all U.S. channels remained unchanged from a year ago.

Gajrawala raised the possibility of a foodservice price war if more restaurant chains start shopping around for better deals. If competition heats up, both beverage giants could find themselves paying more to win or keep restaurant customers.

Write to Evie Liu at evie.liu@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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October 19, 2026 17:24 ET (21:24 GMT)