PepsiCo’s purchase of SodaStream is the latest move by a big food and beverage company to grow in the health-conscious consumer segment.
PepsiCo will pay $3.2 billion to acquire the carbonated drink machine maker. SodaStream is popular amongst more health- and environmentally conscious consumers, who are cutting down on soda and also avoiding plastic bottles. PepsiCo could use a new source of growth, as its core drinks business has weakened. “With sugary carbonates and juices struggling and no turnaround in sight, mitigating the losses through newer and healthier products will be essential for PepsiCo,” said Matthew Barry, a beverages analyst at market research firm Euromonitor International.
Indra Nooyi, who is stepping down this year after 12 years as CEO, has led the way in expanding PepsiCo’s portfolio to include healthier food and drinks. Under her leadership, PepsiCo acquired KeVita drinks in 2016 and Bare Foods in 2018. Healthier offerings now make up nearly half of PepsiCo’s sales. The company said SodaStream will complement its water business, which includes Aquafina, as well as smaller brands Bubly and Lifewtr.
The health-conscious trend, which has fragmented the food and beverage industry, is likely here to stay. For big food and beverage companies, adapting to the new landscape means snapping up smaller, younger brands that appeal to health-conscious consumers. PepsiCo’s drinks business arch-rival Coca-Cola, for example, has in the past five years acquired coconut water company ZICO, the remainder of Honest Tea, an organic tea company in which it had owned a 40% stake since 2008, and cold-pressed juice maker Suja Life.
SodaStream’s own performance improved following a shift in emphasis from soda to sparkling water, Reuters reports. It has also succeeded in building a loyal following amongst customers who use its devices, which have been rebranded as “sparkling water makers” alongside claims that SodaStream users drink more water. The Israel-based company’s share prices have risen 85% this year, following a 75% rise in 2017. In the latest second quarter, revenue grew 31%, while net profit rose nearly 82%.
Ramon Laguarta, who will take over as CEO of PepsiCo in October, said SodaStream is attractive because it is growing fast. “Clearly, this is all about growth,” Laguarta said, noting that SodaStream will benefit from PepsiCo’s resources in research and development, design and distribution. The deal is expected to close by January 2019.
