PepsiCo started losing the cola wars when its CEOs lost focus

PepsiCo is facing a fresh setback in the soft-drink business after KFC said it will replace the company’s beverages with Coca-Cola products at its 3,700 U.S. restaurants. The decision ends a 40-year partnership and adds significance because PepsiCo previously owned KFC.

The move comes as PepsiCo CEO Ramon Laguarta acknowledges that the company is struggling to compete in soft drinks. During PepsiCo’s third-quarter earnings call, Laguarta said, “we’re not competing well in soft drinks.”

A high-profile loss for PepsiCo

KFC’s decision is more than a change in restaurant beverage suppliers. The long-standing relationship made the announcement a particularly visible blow for PepsiCo as it works to address its position in the cola market.

The shift also underscores the importance of major restaurant partnerships in the competition between PepsiCo and Coca-Cola. KFC’s U.S. footprint gives Coca-Cola a new presence across thousands of locations, while PepsiCo loses a partner it had been associated with for four decades.

A contrasting Taco Bell renewal

PepsiCo has retained another important restaurant relationship. Taco Bell and PepsiCo renewed their U.S. agreement for 11 more years, including continued support for Mountain Dew Baja Blast and other beverage offerings.

Those two developments present contrasting outcomes for PepsiCo’s restaurant business. While the company has kept its Taco Bell deal, KFC’s departure highlights the competitive pressure facing its soft-drink operations. Laguarta’s comments indicate that improving performance in beverages remains an acknowledged challenge for the company.

What comes next

PepsiCo’s recent restaurant agreements provide a mixed picture: one major partnership is ending while another has been extended. The company’s own assessment of its soft-drink competitiveness, combined with KFC’s move to Coca-Cola, puts renewed attention on how PepsiCo responds to its cola problem.