2026 is shaping up to be a year of significant losses for beverage and snack giant PepsiCo (DYNAMISM).
A double-digit percentage decline in the stock so far this year. Loss of sales in the main soda sector to compete with Coca-Cola (KO). Loss of earnings due to execution missteps and inflation (see recent reduction in full-year earnings guidance).
And the losses seem to continue to pile up, with the latest one being very difficult to swallow for long-time PepsiCo and Yum! Brands (YUM) followers (and probably a legion of former executives such as legendary former PepsiCo CEO Indra Nooyi and his equally legendary former Yum! Brands counterpart David Novak).
The WSJ reported Thursday evening that Yum! KFC, owned by Brands, has reached an agreement with Coca-Cola (KO) to become the beverage supplier to thousands of American restaurants. The deal is expected to begin in January. PepsiCo would still supply KFC international.
Note that in April Coca-Cola won the Marriott business (MAR) from PepsiCo.
But the loss of fast food is even more painful.
Yum! The brands spun out from PepsiCo in 1997 under the original name Tricon Global Restaurants. He changed his name to Yum! Brands in 2002.
The spin-off included PepsiCo’s fast food division: KFC, Pizza Hut and Taco Bell. The business relationship between the two companies has long been considered a sacred bond, apparently until today.
“Overall, this move highlights Coca-Cola’s strong brand equity as well as its relative gap with PepsiCo,” said EvercoreISI analyst Robert Ottenstein. “We think this announcement, in some ways, is more notable in that QSRs, more than hotel chains, are using beverages as their primary traffic driver.”
Ottenstein’s analysis shows that the revenue loss for PepsiCo could be around $50 million, “suggesting that retail revenue is closer to around $350 million to $400 million.”
Brian Sozzi is the editor-in-chief of Yahoo Finance, host of the Sozzi unleashed morning show, the ‘Powerful actors with Brian Sozzi podcast and member of the Yahoo Finance editorial leadership team. Follow Sozzi on @BrianSozzi, InstagramAnd LinkedIn. Any advice on stories? Email brian.sozzi@yahoofinance.com.
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