Taco Bell has extended its beverage partnership with PepsiCo for another 11 years, securing the drinks company's presence across its participating US restaurants through 2036. The announcement comes just a week after KFC decided to replace PepsiCo with rival Coca-Cola across its US outlets, creating a striking contrast in the beverage strategies of two major brands owned by the same parent company.
Announced on October 22, the renewal will keep Pepsi, Pepsi Zero Sugar, Mountain Dew, Starry and Taco Bell-exclusive beverages, including Mountain Dew Baja Blast and Baja Midnight, on the menus of participating Taco Bell, Taco Bell Cantina and Live Más Cafe locations across the United States. PepsiCo will also remain Taco Bell's beverage partner in Canada, the United Kingdom, Ireland and Thailand.
The agreement reinforces a relationship built on more than two decades of collaboration, during which the companies have developed products that extend beyond conventional restaurant beverage offerings. However, the timing has placed the renewal in a wider spotlight as PepsiCo faces the loss of a longstanding restaurant account to its biggest beverage rival.
KFC's exit puts PepsiCo's Taco Bell renewal in focus
On October 15, KFC announced that Coca-Cola would become its beverage partner in the United States, ending a relationship with PepsiCo that dates back approximately four decades. The transition is expected to begin in January 2027, with Coca-Cola products reaching KFC's US restaurants by spring 2027.
The decision affects KFC's network of 3,718 US locations, according to Reuters, and marks a significant change in a relationship that continued even after PepsiCo spun off its restaurant business in 1997.
Both KFC and Taco Bell operate under Yum! Brands, but the latest announcements demonstrate that brands within the same restaurant group can pursue different beverage partnerships.
For PepsiCo, Taco Bell's renewal provides continuity with an established restaurant partner at a time when the company is losing access to KFC's US beverage business. The companies have not disclosed the financial terms of either agreement, making it difficult to quantify the direct commercial impact of the two decisions.
Importantly, there is no publicly confirmed evidence that Taco Bell's renewal was a direct response to KFC's switch. The announcements instead highlight two separate decisions that have broader implications for competition in the restaurant beverage market.
Baja Blast remains central to the partnership
A major feature of the renewed agreement is the continued development of Mountain Dew Baja Blast, one of Taco Bell and PepsiCo's best-known collaborative products.
Introduced through the Taco Bell partnership in 2004, Baja Blast has evolved from a restaurant-exclusive beverage into a billion-dollar brand, according to PepsiCo. The companies have subsequently expanded the platform through additional flavours and limited-edition products, building a distinctive identity around the drink.
Their collaboration also extends to food. Doritos Locos Tacos, which combines Taco Bell's taco format with PepsiCo's Doritos brand, will mark its 15th anniversary in 2027, with new flavours planned.
These products illustrate the commercial potential of partnerships that combine a restaurant's customer base with a beverage or snack company's product development capabilities. Rather than relying solely on standard soft drinks, the companies have developed offerings that give consumers additional reasons to associate particular products with Taco Bell.
Under the renewed agreement, the companies intend to build on this model through further beverage innovation.
New focus on functional and energy beverages
PepsiCo and Taco Bell plan to explore opportunities across crafted, functional and energy beverages, with particular attention to younger consumers and occasions beyond traditional lunch and dinner visits.
The companies have identified opportunities to develop products suited to morning and afternoon consumption, potentially expanding the role beverages play in Taco Bell's menu and customer experience.
The partnership also includes Refrescas, a premium beverage platform designed to create additional pairing opportunities with food. Further product development will draw on consumer insights, culinary capabilities and beverage expertise from both businesses.
The focus reflects a broader effort to make restaurant beverages more differentiated, rather than competing exclusively on familiar cola products. For Taco Bell, new drink formats could help expand its menu proposition; for PepsiCo, the restaurant network provides a platform to test and establish products through a major foodservice partner.
What the renewal means for PepsiCo
The Taco Bell agreement secures a long-term distribution relationship for PepsiCo in the US and several international markets. It also preserves a channel for developing exclusive products and introducing new beverage concepts to restaurant customers.
The renewal is particularly relevant as PepsiCo works to strengthen its North American beverage business amid softer demand in parts of the soft-drink market and competitive pressure from Coca-Cola.
However, the agreement should not be interpreted as a replacement for the KFC account. The two partnerships differ in their restaurant networks and commercial arrangements, and neither company has disclosed contract values that would allow a direct financial comparison.
What the announcements establish is that PepsiCo continues to have a long-term relationship with Taco Bell even as Coca-Cola prepares to take over KFC's US beverage business.
The contrasting decisions by Taco Bell and KFC underline how beverage supply agreements have become more than routine procurement arrangements. Exclusive products, menu innovation, customer preferences and the ability to develop new consumption occasions can all shape relationships between restaurant operators and beverage manufacturers.
For PepsiCo, retaining Taco Bell means preserving a platform associated with successful products such as Baja Blast and Doritos Locos Tacos. For Coca-Cola, the KFC agreement opens the door to a major US restaurant network that has been associated with PepsiCo for decades.
Neither development establishes a definitive shift in the global relationship between Yum! Brands and PepsiCo. KFC's announced change concerns its US restaurants, while PepsiCo has confirmed continued partnerships with KFC International and Taco Bell across several markets.
The immediate outcome is clearer: KFC is preparing to switch to Coca-Cola in the US, while Taco Bell has committed to PepsiCo through 2036. How the two beverage strategies perform will depend on consumer response, product innovation and the commercial results each partnership delivers over time.