PepsiCo's stock rose by 1.6% in early trading, reflecting positive market sentiment following a significant acquisition. The company has recently announced a deal to acquire Poppi, a brand that specializes in prebiotic sodas, significantly enhancing PepsiCo's footprint in the healthy drinks category. This acquisition comes at a critical time when rising prices are impacting the demand for PepsiCo's traditional products, including sodas and Lay's snacks, leading the company to project a weaker annual profit.
The acquisition of Poppi is a strategic response to the growing consumer shift towards gut health-focused beverages. Prebiotic sodas have emerged as one of the fastest-growing segments in the U.S. carbonated drinks market, according to industry experts. J.P. Morgan analyst Andrea Teixeira noted that this deal allows PepsiCo to establish a strong presence in the rapidly expanding 'modern' soda segment, which has been crucial for revitalizing its carbonated soft drinks portfolio that has been losing market share to competitors like Coca-Cola and Keurig Dr Pepper.
Poppi's unique formula combines prebiotics, fruit juice, and apple cider vinegar to deliver a refreshing, low-calorie soda option that contains no more than five grams of sugar per serving. This aligns perfectly with current consumer preferences for healthier alternatives in the beverage sector. According to recent data from BNP Paribas, Poppi's retail sales surged by an impressive 122% year-over-year in the 12 weeks ending February 22, allowing the brand to capture approximately 1% of the total carbonated soft drinks market.
Founded by Stephen and Allison Ellsworth, Poppi was initially branded as Mother before undergoing a rebranding in 2020. The company gained significant visibility after appearing on the popular television show Shark Tank in 2018, where they received backing from Rohan Oza, an investor and co-founder of CAVU Consumer Partners. This exposure has contributed to Poppi's rapid growth and rising popularity among health-conscious consumers.
PepsiCo has outlined that the deal includes $300 million in anticipated cash tax benefits, leading to a net purchase price of $1.65 billion. However, the company did not disclose further details regarding the terms of the acquisition. This strategic investment is expected to bolster PepsiCo's market position as it adapts to changing consumer demands.
Reporting by Ananya Mariam Rajesh in Bengaluru; Editing by Sriraj Kalluvila. Ananya specializes in the U.S. Consumer and Retail Sector, covering breaking news and major firms such as Walmart, Nike, Procter & Gamble, and PepsiCo. She provides in-depth analysis on consumer trends and the effects of macroeconomic conditions on retailers, while also mentoring new team members in sector knowledge.
