How Pepsi fell behind in the cola wars-and then lost KFC

Key Points:

• KFC announced it will replace PepsiCo soft drinks with Coca-Cola products at its 3,700 U.S. locations starting January, marking a significant shift after a 40-year partnership with PepsiCo.
• Coca-Cola has overtaken Pepsi in the U.S. carbonated soft drinks market, holding 18.5% market share in 2023 compared to Pepsi’s 8.1%, with Pepsi falling to third place behind Dr. Pepper in 2024.
• PepsiCo’s focus on its expansive food and snacks portfolio, especially Frito-Lay, has led to less attention on its soda business, contributing to declining soft drink sales despite stabilization in the overall U.S. beverage market.
• Activist investors have long urged PepsiCo to split its food and beverage businesses or re-franchise bottling operations, similar to Coca-Cola’s strategy, to improve margins and brand innovation; CEO Ramon Laguarta recently indicated openness to these options.
• PepsiCo aims to revitalize its soft drink segment by investing in brands like Pepsi, Mountain Dew, and Poppi, but analysts warn that significant changes, including potential re-franchising, could take years to yield results.