KFC, which has roughly 4,000 US locations, will transition to Coca-Cola beverages starting in January, according to a statement. The restaurants are expected to serve Coca-Cola by spring. International KFC locations will continue to serve PepsiCo drinks.

“This is a big win for Coke. It adds a major customer to Coke’s fountain business,” beverage consultant John Sicher said Thursday, adding that Coke’s fountain business was already much bigger than PepsiCo’s. Coke’s beverage partners include large chains such as Burger King and McDonald’s.

PepsiCo has struggled to turn around its salty snacks division and weakness has also emerged in the company’s North America soda business. KFC is also the latest partner the company has lost: In July, Coca-Cola announced a deal with Marriott International Inc. to displace PepsiCo as its beverage provider. Costco Wholesale Corp. last year announced a switch to Coca-Cola from PepsiCo in its food courts.

PepsiCo shares fell 0.7% in New York trading on Thursday. Coca-Cola shares rose 0.2% while Yum! Brands Inc., which is the parent of KFC, climbed 2.8%.

“The beverage wars are alive and well today,” said Tim Harms, the chief executive officer of Enliven, which negotiates beverage deals. PepsiCo, for example, wrested back the Subway account from Coke in 2024. “There is still a lot of competition for these beverage contracts.”

The change seems to be a strategic move in Yum’s efforts to revitalize KFC in the US, Harms said. “The beverage category can be a tool to do that.”

Coca-Cola held about 44% of the carbonated soft-drink beverage market, compared to almost 26% for PepsiCo, over the last 52 weeks, according to Circana data.

The Wall Street Journal reported the news earlier.

“We don’t feel good about the beverage business,” Chief Executive Officer Ramon Laguarta said on a call with analysts last week after PepsiCo lowered its profit outlook for the year. He said PepsiCo would be investing more in its soda brands to drive growth.

KFC, Pizza Hut and Taco Bell were spun off of PepsiCo in 1997 to create the company that later became Yum. The other two chains still serve Pepsi drinks. Yum agreed earlier this year to sell Pizza Hut to LongRange Capital.

Given the history, luring KFC away from PepsiCo likely meant Coca-Cola had to offer franchisees significant discounts and incentives, said Eric Gonzalez, a restaurant analyst at Seaport Research Partners. “There’s probably a good amount of savings for the franchisees,” he said.

PepsiCo still has a big presence at Yum, as it supplies items such as the Doritos Locos Tacos shells for Taco Bell, the company’s best-performing brand. It also sells Mountain Dew for the Mexican-style chain’s signature Baja Blast. KFC US is a relatively small part of Yum’s business.

“You can’t rip Taco Bell away easily” from PepsiCo, Gonzalez said. He questioned whether KFC’s move could sour Yum’s relationship with PepsiCo, even if it resulted in savings. “Is it worth it to do this? Is the juice worth the squeeze here?”

By Kristina Peterson and Daniela Sirtori