For the first time in 40 years, KFC has changed its beverage supplier. Starting next year, its U.S. locations will discontinue PepsiCo (US.PEP) beverages and switch to products from The Coca-Cola Company (US.KO). The century-long rivalry between Pepsi and Coca-Cola, two giants in the carbonated beverage market, has never ceased. Their competition has long transcended mere taste preferences, extending into a battle for dominance in the global foodservice market and a strategic game of securing alliances with major restaurant chains.

1. Latest market share and market landscape

　　According to data from market research firm Circana, over the past 52 weeks, Coca-Cola held approximately 44% of the carbonated soft drink market share, while Pepsi held nearly 26%. Although the figures reflect Coca-Cola's overall lead in the carbonated beverage market, the tug-of-war between the two in foodservice and retail remains fiercely competitive.

2. Shifts among foodservice giants: The changing landscape of supply contracts

　　Pepsi is currently facing pressure in the foodservice supply sector, as long-time dining partners begin to shift allegiance:

　　KFC's move: Since PepsiCo acquired KFC in 1986, its U.S. outlets have used Pepsi beverages. Pepsi later spun off KFC, Pizza Hut, and Taco Bell into Yum! Brands while maintaining the partnership. Analysts suggest that KFC's switch to Coca-Cola beverages may be Yum!'s latest strategy to revitalize KFC in the U.S.

　　Chain contract changes: In July this year, Coca-Cola announced an agreement with Marriott International to replace Pepsi as its beverage supplier. Costco also announced last year that its food courts would switch from Pepsi to Coca-Cola.

　　However, Pepsi is not entirely on the defensive; in 2024, Pepsi successfully regained Subway as a partner from Coca-Cola.

3. Business diversification and youth-oriented offensive and defensive strategies

　　Facing the shifting dynamics in the carbonated beverage market, the two companies have adopted different strategies. Coca-Cola has primarily expanded into tea, coffee, and sparkling water markets. PepsiCo, through its earlier connections with restaurant assets and acquisitions of Quaker Oats and Frito-Lay, has transformed into a "dual-engine" business model combining snacks and beverages. Combined with their respective youth-focused marketing and flexible channel contract competitions, this decades-long business war continues to evolve. (rc)