KFC switches to Coke. But Pepsi’s still king at Taco Bell
Taco Bell Extends PepsiCo Partnership Through 2036
Qwenews.com – Taco Bell has given PepsiCo an important vote of confidence by extending its long-running beverage partnership for another 10 years, preserving a relationship that remains central to the Mexican-inspired chain’s menu and marketing strategy. The agreement arrives shortly after sister brand KFC moved away from PepsiCo beverages in favor of Coca-Cola.
For PepsiCo, keeping Taco Bell is particularly meaningful at a difficult moment for its North American drinks business. The company recently disclosed that its North America beverage division declined 2% in its latest quarter, while chief executive Ramon Laguarta acknowledged that the company is facing challenges in the soft-drink market, including with its recently acquired Poppi brand.
“Not competing well in soft drinks.”
The new Taco Bell agreement runs through 2036 and covers continued work on beverage and food innovation. Among the products expected to remain a focus are future varieties connected to Doritos Locos Tacos, a menu platform that has helped link Taco Bell’s food offerings with PepsiCo’s snack portfolio.
Baja Blast Remains a Major Taco Bell Asset
The partnership’s most recognizable product may be Mountain Dew Baja Blast. The tropical-flavored drink became closely associated with Taco Bell after debuting as an exclusive offering at the restaurant chain, and it has grown into a brand valued at $1 billion.
Taco Bell plans to build further on that popularity as it expands its drink business. The company has set a goal of generating $5 billion in beverage revenue by 2030, making drinks a significant part of its broader growth ambitions. New Baja Blast choices are expected to be part of that push, including a limited-time pink lemonade tied to singer Olivia Rodrigo.
Exclusive beverages can give fast-food restaurants a reason for customers to choose one chain over another, especially when menus across the industry compete for attention with value deals, limited-time items and loyalty promotions. Taco Bell’s beverage strategy is intended to create more opportunities beyond traditional meal periods, including visits in the morning and afternoon.
“Taco Bell’s Baja Blast lineup has often been a key differentiator for the brand, and leaning into product exclusives can help drive visitation to quick service restaurant chains.”
Elizabeth Lafontaine, director of research at location analytics firm Placer.ai, has noted that the approach can be especially valuable as restaurant operators face more intense competition and customers seek greater value from fast-food purchases.
“Especially as the industry faces steeper competition and consumers who are on the hunt for more value from fast food offerings.”
A Bigger Win Than the KFC Loss
Although PepsiCo’s loss of KFC’s beverage contract was notable, Taco Bell represents the larger commercial opportunity. Taco Bell generated $17 billion in U.S. systemwide sales last year, compared with roughly $5 billion for KFC. Both restaurant brands operate under Yum! Brands.
The KFC change also carried historical significance because PepsiCo once owned the fried chicken chain. Still, the Taco Bell relationship offers PepsiCo access to a much larger U.S. sales base and a brand that continues to place drinks at the center of its customer experience.
The companies said they intend to pursue emerging trends in crafted, functional and energy beverages. Their plans include energy-oriented products aimed at Gen Z consumers, as well as drinks designed to encourage purchases outside the lunch and dinner rush. That focus reflects how beverage innovation can support traffic, add variety to the menu and give customers a lower-commitment reason to visit between meals.
Drinks Become More Important as Diners Watch Spending
As food prices remain a concern for many consumers, restaurant chains are looking for growth categories that can complement core meals. Beverages have become an increasingly important area because they can be promoted as stand-alone treats, paired with food or adapted to seasonal flavors and cultural collaborations.
Taco Bell moved further into that space last year with its Refrescas lineup, aimed at people looking for something to drink between meals. The chain’s continued emphasis on Baja Blast and other new beverage formats suggests that it sees drinks as more than an add-on to tacos, burritos and other traditional menu items.
The strategy also gives Taco Bell a way to maintain fresh marketing moments without relying entirely on new food launches. A recognizable drink can be updated through flavor variations, colorful limited-time versions and celebrity partnerships while retaining the familiarity customers already associate with the brand.
Traffic Pressure Still Looms
Taco Bell has been one of the stronger performers in the fast-food sector, but it faced a traffic decline during the summer after a cyclospora outbreak was linked to lettuce served at several restaurants. The company is expected to provide a clearer assessment of the sales effect when it releases earnings next month.
Even with that recent setback, the extended PepsiCo deal underscores Taco Bell’s confidence in beverages as a long-term growth engine. For PepsiCo, the agreement protects one of its most valuable restaurant partnerships at a time when it is working to improve its position in North American soft drinks.
The next decade of collaboration will test whether Taco Bell can turn beverage exclusivity, energy products and new flavor launches into more frequent customer visits. With Baja Blast already established as a billion-dollar brand, both companies have a powerful foundation for that effort.
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