After decades with PepsiCo, the fast-food giant is making a massive beverage switch. Here is why the multi-market deal is worth far more than just drink sales.
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One of fast food’s longest-running soda partnerships is coming to an end. KFC announced this week that it will begin serving Coca-Cola products with all U.S. restaurants expected to make the switch by spring.
“The partnership marks another significant milestone in KFC’s broader Kentucky Fried Comeback, as the brand continues to modernize its menu, expand its beverage offerings and create more reasons for customers to visit,” a spokesperson for KFC told Inc. “The agreement also creates new opportunities for beverage innovation and food-and-drink pairings as KFC works to strengthen its customer experience.”
KFC said the change is part of a broader effort to expand its drink offerings, including new beverages and options for more times of day.
This is a win for Coke, especially coming off of recently winning Costco, Marriott, and Culver’s.
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The change is notable because Pepsi’s ties to KFC go back decades. PepsiCo bought the chain in 1986 and spun off its restaurant businesses in 1997 as Tricon Global Restaurants, now Yum Brands, and Pepsi has remained KFC’s beverage partner since.
Still, the shift isn’t entirely new for the chain. Coca-Cola already supplies KFC in other markets, including Indonesia, where KFC signed a five-year deal with Coke in 2019 after PepsiCo ended its bottling agreement with KFC’s longtime partner there. Three years later, Coke began supplying KFC restaurants in Malaysia.
Ralph Homer, founder of Praxis Model, which builds restaurant feasibility studies for investors, said the soda a chain serves matters more than it might seem. Homer, who said he has worked on more than 300 restaurant projects, explained to Inc. that fountain drinks are the highest-margin item on most fast-food menus because the syrup costs pennies per cup which makes a beverage contract like this one across thousands of U.S. restaurants worth far more than the drink sales alone suggest.