KFC switch to Coke puts PepsiCo's food service ties in focus, analysts say
PEP•Analysts said KFC's switch from Pepsi to Coca-Cola at its US restaurants could raise questions about PepsiCo's other food service partnerships, though they expect the financial hit to be manageable. BofA estimated the account represents about $500 million in annual sales, or roughly 3% of Pepsi Beverages North America's concentrate sales.
1. Estimated sales impact
BofA analysts estimate losing the KFC account represents about $500 million in annual sales, equivalent to roughly 3% of Pepsi Beverages North America's concentrate sales. They estimate the move could boost Coca-Cola's North America sales by about 2.5%.
2. Partnership concerns
Jefferies analysts said the bigger concern for PepsiCo is the loss of brand interaction and public perception. They said the switch raises questions about whether other longstanding accounts are now up for grabs. PepsiCo is also grappling with sluggish North American demand and higher costs, with its recovery in growth and margins taking longer than expected.
