Full Breakdown
PepsiCo’s Soft-Drink Setback Deepens as KFC Switches to Coca-Cola
By Drooid · · How we work
KFC Switches to Coca-Cola
In January, KFC announced it will replace PepsiCo’s flagship sodas with Coca-Cola products across its roughly 3,700 U.S. restaurants. The change ends a partnership that began 40 years ago, when PepsiCo owned the fried-chicken chain before spinning it off in 1997. KFC U.S.
PepsiCo’s Soft-Drink Decline
PepsiCo’s carbonated-soft-drink share slipped to 8.1 % of U.S. volume last year, well behind Coca-Cola’s 18.5 % (Beverage Digest). In 2024 the brand fell to third place behind Dr Pepper for the first time. The company’s North American beverage segment, worth $28 billion, contracted 2 % by volume in the most recent quarter, even as its non-soda lines such as Gatorade and Aquafina grew.
Strategic Options and Executive Views
CEO Ramon Laguarta told analysts, “We do not feel good about the beverage business” “We do not feel good about the beverage business,” — Ramon Laguarta, pepsico CEO. He signaled a renewed focus on soft-drink brands—including Pepsi, Mountain Dew and the prebiotic soda Poppi acquired for $2 billion—by boosting marketing, shelf-space payments and price adjustments.
Analysts note that PepsiCo’s snack arm, Frito-Lay, has historically subsidized the beverage division, delivering operating margins roughly twice as high. Duane Stanford observed, “It worked so long as the Frito-Lay continued to be a powerful engine” “It worked so long as the Frito-Lay continued to be a powerful engine,” — Stanford. The.
In response to pressure, Laguarta floated the idea of “re-franchising” company-owned bottlers, a move that could improve execution but may cause “significant disruption” “If ‘accelerated’ re-franchising is indeed the right path, [but] this would not be without significant disruption,” — Barclays’s Lauren Lieberman. A PepsiCo spokesperson declined further comment on that possibility.
Market Data and Financial Context
PepsiCo generated nearly $94 billion in revenue last year; 58 % came from its Frito-Lay snacks business, while the remaining 30 % derived from North American beverages. The U.S. savory-snack market, valued at $80 billion, sees PepsiCo holding a 38 % share, though recent price hikes—up to 50 % on some chip lines since 2021—have flattened sales.
Outlook
Re-franchising could take a decade or more to complete, mirroring Coca-Cola’s experience. Meanwhile, PepsiCo’s only clear growth driver in beverages is Gatorade, which has seen sales rise after a lower-sugar launch in March. Analysts argue that reversing the “counted carbonated soft drinks out” mindset will be essential if PepsiCo hopes to rebuild its soda empire.
*Ramon Laguarta attended the China Development Forum in Beijing on March 22, 2026.*