Pepsi locks in Taco Bell through 2036, even as sister chain KFC defects to Coke

Pepsi locks in Taco Bell through 2036, even as sister chain KFC defects to Coke

PepsiCo and Taco Bell announced on Thursday, October 22, 2026, that they are extending their long-running U.S. beverage partnership by another 11 years, keeping the deal in place through 2036. The renewal lands just one week after KFC, the sister chain also owned by Yum! Brands, said it would switch its U.S. beverage supplier from PepsiCo to Coca-Cola.

An 11-year renewal through 2036

The renewed agreement keeps PepsiCo's full beverage portfolio — Pepsi, Pepsi Zero Sugar, Mountain Dew, Starry, plus the Taco Bell-exclusive Mountain Dew Baja Blast and Mountain Dew Baja Midnight — flowing at participating Taco Bell, Taco Bell Cantina and Live Más Cafe locations nationwide. International Taco Bell markets in Canada, the United Kingdom, Ireland and Thailand will also continue to serve Pepsi products. PepsiCo shares rose 2.5 percent on the day.

Beverage Innovation and Gen Z Energy Drinks

In a joint statement, Taco Bell and PepsiCo said they plan to "stay ahead on emerging beverage trends across crafted, functional and energy beverages," including energy offerings aimed at Gen Z consumers and designed to unlock new morning and afternoon occasions. The companies framed the renewal as extending a partnership that has driven beverage and food innovation for decades.

KFC's defection one week earlier

The backdrop is KFC's switch. On October 15, KFC U.S. announced it would replace Pepsi with Coca-Cola at nearly 3,700 U.S. restaurants, ending a supply relationship that began when PepsiCo acquired the chain in 1986. The transition starts in January 2027 and should be complete by spring 2027. KFC U.S. president Catherine Tan-Gillespie called the move "a critical step in the Kentucky Fried Comeback," saying a new beverage partner gives the brand a platform to innovate and meet changing tastes.

Taco Bell's Reasons for Staying Put

Scale explains the split. Taco Bell generated roughly $17 billion in U.S. system-wide sales in 2025, against roughly $5 billion for KFC — about three times as much. Losing KFC stings, but keeping Taco Bell is the bigger prize, and it puts to rest market fears that more Yum! Brands chains would defect to Coca-Cola.

PepsiCo's beverage business is under pressure

PepsiCo's North America beverage unit reported a 2 percent decline in its most recent quarter, and CEO Ramon Laguarta told analysts on the earnings call that the company is "not competing well in soft drinks," including the newly acquired Poppi brand. Bank of America analysts estimate the KFC loss costs PepsiCo about $500 million in annual sales, roughly a 3 percent hit to Pepsi Beverages North America's concentrate sales, while boosting Coca-Cola's North America sales by about 2.5 percent.

The Two Brands Diverge

KFC U.S. begins pouring Coke in early 2027, while PepsiCo keeps Taco Bell through 2036. PepsiCo still holds KFC's international beverage business and other channels, and Taco Bell's exclusive Baja Blast remains a brand asset. The two sister chains are now on opposite sides of the cola wars, and the fast-food map has been redrawn.