Taco Bell sticks with Pepsi as sister chain switches to Coke

Taco Bell is keeping PepsiCo through 2036 — a win for the Baja Blast maker after KFC switched to Coca-Cola last week. (Scripps News) KFC dumped PepsiCo last week, but its sister chain Taco Bell announced Thursday it’s keeping the Mountain Dew Baja Blast maker on for another decade.

The Taco Bell deal is a much-needed win for PepsiCo, whose business has had rough few weeks. Not only did it lose its longstanding contract with KFC to rival Coca-Cola, but its drink business in North America is also in a slump. The company reported a 2% decline for its North America beverage unit during its most recent quarter, and its CEO Ramon Laguarta bluntly said on its earnings call that it’s “not competing well in soft drinks,” including newly acquired Poppi brand.

IN CASE YOU MISSED IT | PepsiCo buys prebiotic soda brand Poppi to gain a foothold in functional drinks Losing the KFC contract is a blow for PepsiCo, considering it once owned the fried chicken chain. But keeping Taco Bell is a bigger deal, since the latter has generated $17 billion in US system-wide sales last year compared to KFC’s roughly $5 billion. (Both chains are owned by Yum!

Brands.) Taco Bell and PepsiCo said in a statement that the two will continue collaborating on new beverages and foods until 2036, including upcoming new flavors for their Doritos Locos Tacos. It also noted that the Baja Blast drink has become a $1 billion brand. As food prices rise and consumers look to cut back, the beverage category is a key growth area for Taco Bell and other fast food chains.

Taco Bell is aggressively expanding its beverage sales aiming to generate $5 billion in revenue by 2030. Last year, the chain released a lineup of “Refrescas” drinks aimed at attracting consumers searching for a beverage between meals. Further expansion will come from developing new Baja Blast options with Pepsi, including a limited-time pink lemonade with singer Olivia Rodrigo.

“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, previously told CNN.

“Especially as the industry faces steeper competition and consumers who are on the hunt for more value from fast food offerings,” she added. FROM THE ARCHIVES | Why Do We Use Different Words For Soft Drinks? Taco Bell and PepsiCo said in a statement that they plan to stay ahead on “emerging beverage trends across crafted, functional and energy beverages, including energy offerings designed to appeal to Gen Z consumers and unlock new morning and afternoon occasions.” Taco Bell has been a bright spot in the fast food industry, but saw a traffic decline over the summer due toa cyclospora outbreak that was linked to lettuce served at a number of restaurants.

The company will give a fuller view of the sales impact when it releases earnings next month. The-CNN-WireTM & © 2026 Cable News Network, Inc., a Warner Bros. Discovery Company.

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