On March 17, PepsiCo announced its acquisition of the prebiotic soda brand Poppi for $1.95 billion, marking its foray into the "healthier soda" market as it grapples with declining demand for its traditional beverages and snacks. PepsiCo's shares rose by 1.6% in early trading following the news.
Amid a growing trend among young Americans towards healthier sodas and energy drinks, PepsiCo's move aligns with competitors like Coca-Cola, which recently expanded its Simply brand to introduce a prebiotic soda called "Simply Pop". Companies like Celsius Holdings and Keurig Dr Pepper have also entered this market by making strategic acquisitions.
The acquisition of Poppi enhances PepsiCo's position in the market for healthy beverages, at a time when the company faces challenges from price increases affecting the demand for its sodas and Lay's snacks. Prebiotic sodas, touted for their gut health benefits, are one of the fastest-growing segments in the U.S. carbonated drinks market.
According to J.P. Morgan analyst Andrea Teixeira, this deal helps PepsiCo establish a presence in the rapidly evolving "modern" soda segment, strengthening its CSD portfolio against competitors like Coca-Cola and Keurig Dr Pepper.
Poppi's unique formula, blending prebiotics, fruit juice, and apple cider vinegar, results in a low-calorie soda with no more than five grams of sugar per serving. The Austin, Texas-based company experienced a 122% increase in retail sales year-over-year in the 12 weeks ending February 22, claiming a 1% share of the overall carbonated soft drinks market according to BNP Paribas.
Initially known as Mother and later rebranded in 2020, Poppi was founded by Stephen and Allison Ellsworth, gaining attention when the founders appeared on Shark Tank in 2018 and secured the backing of investor Rohan Oza, a co-founder of CAVU Consumer Partners.
PepsiCo revealed that the deal with Poppi includes $300 million in anticipated cash tax benefits, resulting in a net purchase price of $1.65 billion, although the exact terms of the agreement were not disclosed.