PepsiCo has secured an 11-year extension of its beverage partnership with Taco Bell, delivering a much-needed victory in its escalating rivalry with Coca-Cola after losing two major customers this year.
The beverage and snack maker's stock jumped 2.6% in Thursday trading.
PepsiCo will continue supplying Pepsi, Mountain Dew, Starry, and other drinks to participating U.S. Taco Bell restaurants through 2036. The agreement also covers Taco Bell Cantina and Live Más Cafe locations. PepsiCo also will continue supplying beverages to Taco Bell restaurants across Canada, the U.K., Ireland, and Thailand.
The renewed partnership comes at a critical time for PepsiCo, which has struggled with sluggish demand, rising costs, and intensifying competition in North America.
Earlier this month, PepsiCo lowered its full-year earnings outlook after reporting a 2% decline in North American beverage volumes during the third quarter. The company now expects adjusted earnings per share to grow 2.5% to 3.5% this year, down from its previous forecast of approximately 5% growth.
PepsiCo shares have rebounded roughly 6% in October but remained down about 6% this year through Wednesday, reflecting investor concerns about its turnaround prospects.
The company has suffered a series of high-profile setbacks in the food service market.
Last week, KFC announced it would replace PepsiCo beverages with Coca-Cola products at its roughly 3,600 U.S. restaurants starting in January, ending a nearly 40-year relationship.
That followed Marriott International's decision in July to switch its global beverage partnership from PepsiCo to Coca-Cola after more than three decades.
PepsiCo hasn't lost every battle. In 2024, it secured a 10-year agreement to replace Coca-Cola at Subway's U.S. restaurants, with the transition beginning in 2025.
Keeping Taco Bell is particularly important because the partnership goes beyond supplying fountain drinks.
The two companies jointly developed Mountain Dew Baja Blast, initially a Taco Bell exclusive that has since become a billion-dollar brand. They also collaborated on Doritos Locos Tacos, demonstrating how PepsiCo can help restaurant partners create distinctive products.
Under the renewed agreement, the companies plan to expand into customized drinks, functional beverages, and energy offerings aimed at younger consumers.
The partnership also gives PepsiCo another channel to put its beverage brands in front of millions of consumers, which could help reinforce brand recognition and purchasing habits.
The deal won't solve PepsiCo's broader sales and profitability challenges. But after losing KFC and Marriott, it offers reassurance that the company's longstanding restaurant relationships can still withstand Coca-Cola's growing competitive pressure.
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