Fast-food chain KFC announced on Thursday that it has selected Coca-Cola as its new beverage partner for U.S. restaurants, ending a four-decade relationship with PepsiCo. The change applies to all 3,718 KFC locations in the United States.

PepsiCo’s snack business has faced pressure from higher costs and shifting consumer preferences toward healthier options, contributing to slower growth and margin recovery for the company. PepsiCo CEO Ramon Laguarta noted earlier this month that these challenges have made revenue and profit gains more difficult to achieve.

The partnership between PepsiCo and KFC originated when PepsiCo acquired the chicken chain to expand into food and snacks. Although PepsiCo later spun off KFC in 1997, it continued to serve as the brand’s beverage supplier. A PepsiCo spokesperson confirmed that existing agreements with Taco Bell and KFC International locations remain in place, including a 10-year deal for those international operations.

PepsiCo also maintains beverage partnerships with Subway and Jersey Mike’s Subs, and operates soda fountains at Pizza Hut locations, which transitioned from Coca-Cola to PepsiCo in 2011 after leaving the Yum Brands portfolio. In 2012, PepsiCo lost a similar partnership with Dunkin’ Donuts to Coca-Cola following a five-year collaboration.

Coca-Cola currently serves as a beverage partner for McDonald’s and Wendy’s. The company stated that Coca-Cola products will become available at KFC U.S. restaurants by spring 2027. Financial terms of the agreement were not disclosed.

Jay Woods, chief market strategist at Freedom Capital Markets, commented that the shift represents a notable change in the beverage landscape, particularly given the size of both brands. His firm holds shares in Coca-Cola. Analysts have suggested the move could impact PepsiCo’s market positioning, especially amid broader challenges in its North American operations. The company is also under review by activist investor Elliott Investment Management, which acquired a stake in PepsiCo last year and has urged strategic adjustments.

The transition reflects a broader realignment in the fast-food beverage sector, where brand affiliations continue to evolve in response to market dynamics and consumer demand.