PepsiCo buys SodaStream, $3.2b pivot away from sugary drinks

Posted by AFN Staff Writers on 22nd August 2018

PepsiCo is purchasing sparkling water maker SodaStream for $US3.2 billion, or $144 per share, as the beverage giant minimises its dependence on sugary drinks.

PepsiCo was reportedly the only bidder for SodaStream.

Indra Nooyi, PepsiCo’s CEO who announced plans to retire earlier this month, said the purchase aligns with the company’s long-term “philosophy of making more nutritious products while limiting our environmental footprint.”

PepsiCo said SodaStream would benefit from its strong distribution capabilities, global reach, research and development, design and marketing expertise.

Meanwhile, the maker of Tropicana, Mountain Dew, Gatorade and its namesake soda would gain a “differentiated and unique product range.”

Ms Nooyi is making one last major acquisition before her retirement, effectively doubling-down on her strategy of moving the company away from sugary drinks — a major focus of her time overseeing the snack and beverage giant.

In her 12 years as CEO, Ms Nooyi touted the need to reposition the company into better-for-you products that reflect changing consumer trends away from sugary drinks and into healthier teas, waters and juices.

In recent years, PepsiCo has introduced drinks like LifeWTR bottled water; acquired probiotics beverage manufacturer KeVita, a maker of kombucha and vinegar tonics; introduced new versions of its iconic Gatorade brand including an organic variety; and most recently launched sparkling water brand bubly to challenge LaCroix.

Growing demand for healthier drinks

The purchase of SodaStream reflects the trends taking place across the food and beverage space. In addition to the growing demand for healthier drinks, consumers are purchasing more of their groceries online.

Brands and retailers may be looking to sell smaller, lighter, easier-to-ship versions of products. With the possibility of lightweight flavor packets allowing consumers to create PepsiCo’s iconic sodas at home, this deal better positions the drink manufacturer to grab a bigger portion of that market, forecast to reach $US 100 billion by 2022. Pepsi has sold caps for these machines since 2015, fueling rumors that a takeover was imminent.

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It also cements the public’s desire to throw weight behind companies that are sustainable and willing to invest publicly in helping the environment. With its product created in a reusable plastic bottle, SodaStream ditches some of the waste that’s produced to get a traditional beverage to market — including the cans, bottles, cardboard packaging, shipping and manufacturing costs. The company has played up its eco-friendly business plan in controversial ad campaigns.

Sparking water is the fastest-growing segment in the bottled water category, according to the Beverage Marketing Corporation. Consumers still crave the bubbles and flavor found in sodas, but increasingly shun the sugar. The sparkling water category grew by 70 per cent between 2011 and 2016, according to Euromonitor International, and is on pace to hit $US3.1 billion in sales by 2022.

Increasingly the push to embrace healthier, low-calories drinks is forcing Coca-Cola, PepsiCo and Keurig Dr Pepper to innovate or look outside for more deals — a trend that is unlikely to abate anytime soon.