PepsiCo to acquire soda brand Poppi for nearly US$2 billion
The soda startup uses prebiotics, fruit juice and apple cider vinegar and its drinks have five grams of sugar or less per serving
[NEW YORK] PepsiCo will acquire healthier soda brand Poppi for US$1.95 billion, the Purchase, New York-based soda giant announced on Monday (Mar 17), confirming an earlier Bloomberg News report.
The deal includes US$300 million in expected cash tax benefits for a net purchase price of US$1.65 billion. PepsiCo will make additional payouts if Poppi meets certain performance metrics, according to the announcement.
The “functional soda” category has been growing, especially compared to standard sodas. The lower-sugar beverages can include ingredients not found in standard soda, such as prebiotics, probiotics and added fibre and say they are aimed at improving digestive health. Poppi uses prebiotics, fruit juice and apple cider vinegar and its drinks have five grams of sugar or less per serving.
Consumer demand for healthier products, combined with a wide variety of flavours and savvy social media marketing have catapulted these new soda brands, said Sean Harapko, leader of Americas supply chain transformation and global supply chain RPA at EY. Beverage behemoths such as PepsiCo have the massive distribution networks that these upstart soda brands lack, he noted.
The acquisition “could immediately make Pepsi the leader in the fast-growing, US$1 billion-plus US prebiotic soda market”, according to Kenneth Shea, a senior industry analyst at Bloomberg Intelligence.
PepsiCo shares rose 2 per cent at 2.06 pm in New York. The stock had dipped 2.3 per cent for the year to Friday’s close, while the S&P 500 index fell 4.1 per cent.
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Celebrity investment
Prior to the PepsiCo acquisition, Poppi attracted the attention of celebrities, athletes and influencers. In 2021, the soda startup closed a US$13.5 million funding round backed by stars including the singers Ellie Goulding and Halsey, as well as NBA players Russell Westbrook and Kevin Love. The round was led by CAVU Venture Partners, whose co-founder Rohan Oza supported the brand after an appearance on Shark Tank in 2018.
Olipop, Poppi’s biggest competitor, closed a US$50 million fundraising round in February. When combined, Poppi and Olipop claim a 2.7 per cent share of the US carbonated-beverage market, up from 1.4 per cent the year prior, Shea noted.
Coca-Cola, meanwhile, announced it was launching its own prebiotic soda brand called Simply Pop in February.
PepsiCo is working to diversify away from its standard soda and snacks by making acquisitions of healthier brands. In October, it announced plans to acquire snack food maker Siete Foods for US$1.2 billion. The following month, it said it would buy the remaining 50 per cent of Sabra Dipping and PepsiCo-Strauss Fresh Dips & Spreads International GmbH.
“More than ever, consumers are looking for convenient and great-tasting options that fit their lifestyles and respond to their growing interest in health and wellness,” said PepsiCo CEO Ramon Laguarta. BLOOMBERG
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