KFC has entered into a new beverage partnership with Coca-Cola, ending a longstanding relationship with PepsiCo that spanned approximately 40 years. The agreement, announced Thursday, will apply to KFC’s 3,718 locations across the United States.

The shift marks a significant change for PepsiCo, which has relied on KFC as a key customer for its soft drink products. The loss comes amid ongoing challenges for PepsiCo’s U.S. soda business, which has struggled to gain momentum, while the company’s snacks division continues to face pressures from rising input costs. Earlier this month, PepsiCo’s CEO Ramon Laguarta acknowledged that efforts to drive growth and recover profit margins were taking longer than anticipated.

PepsiCo’s association with KFC began when the beverage giant acquired the fast-food chain as part of its expansion into the food and snack sectors. While PepsiCo divested KFC in 1997, KFC remained a beverage client under Yum Brands, the parent company that took ownership after the spin-off.

Industry analysts suggest the loss of such a prominent brand partner could negatively impact PepsiCo’s market position. Jay Woods, chief market strategist at Freedom Capital Markets, described the development as “a bad look” for PepsiCo, highlighting the significance of the partnership’s conclusion.

The agreement with Coca-Cola positions the company to increase its presence within one of the largest quick-service restaurant chains in the U.S., potentially offering an opportunity to capture market share in the fast-food beverage sector. The full commercial details of the deal were not disclosed.