PepsiCo announced on Monday that it will acquire the prebiotic soda brand Poppi for $1.95 billion. This move comes as the company seeks to strengthen its position in the growing "healthier soda" market, especially as demand for its traditional beverages and snacks has been declining.
PepsiCo’s stock saw a 1.5% increase in morning trading following the news. The trend among younger consumers is shifting towards healthier options, with many opting for sodas and energy drinks that promote fitness and wellness. Competitors like Coca-Cola are also getting in on the action, recently launching a prebiotic soda under its Simply brand.
The acquisition of Poppi is part of PepsiCo’s strategy to enhance its presence in the healthy drinks sector. The company has been facing challenges due to rising prices affecting sales of its sodas and Lay’s snacks, which has led to forecasts of weaker annual profits. Prebiotic sodas, which focus on gut health, are rapidly gaining popularity in the U.S. market.
Analyst Andrea Teixeira from JPMorgan noted that this deal will help PepsiCo solidify its foothold in the modern soda segment, which has been losing ground to Coca-Cola and Keurig Dr Pepper. Poppi, which combines prebiotics, fruit juice, and apple cider vinegar, offers a low-calorie alternative with no more than five grams of sugar per serving.
Founded in Austin, Texas, Poppi has seen impressive growth, with retail sales increasing by 122% year-over-year in the 12 weeks leading up to February 22. The brand now holds about 1% of the total carbonated soft drink market. The founders, Stephen and Allison Ellsworth, originally pitched their product on Shark Tank in 2018 and rebranded from its initial name, Mother, in 2020.
The deal with Poppi includes an anticipated $300 million in cash tax benefits, bringing the net purchase price down to $1.65 billion. PepsiCo has not disclosed further details about the terms of the acquisition.