Deal Talk: PepsiCo to Acquire Poppi for $1.95 Billion

Good morning. Welcome to The Deal Talk where each week we break down a recent M&A deal.

Today we’re going to dive into PepsiCo’s acquisition of Poppi for $1.95 billion.

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DEEP DIVE
PepsiCo to Acquire Poppi for $1.95 Billion

PepsiCo, a global leader in the food and beverage industry, has signed a definitive agreement to acquire Poppi, a rapidly growing prebiotic soda brand, for approximately $1.95 billion. Founded by Allison and Stephen Ellsworth, Poppi gained recognition after its appearance on "Shark Tank" in 2018. The brand specializes in prebiotic sodas made with fruit juice, apple cider vinegar, and prebiotics, offering gut health benefits. With annual revenues exceeding $500 million, Poppi has established itself as a leader in the functional beverage market, closely competing with Olipop.

Strategic Rationale

The acquisition aligns with PepsiCo's strategy to diversify its beverage portfolio and address increasing consumer demand for health-conscious products. Traditional soda sales have been declining, prompting PepsiCo to focus on functional beverages that offer additional health benefits. Poppi’s emphasis on gut health complements PepsiCo’s long-term growth strategy, positioning it to better compete with rivals such as Coca-Cola, which has also ventured into health-oriented products.

Financial Impact & Valuation Premium

PepsiCo’s $1.95 billion acquisition price includes $300 million in anticipated cash tax benefits, bringing the net purchase price to approximately $1.65 billion. This valuation underscores PepsiCo’s confidence in Poppi’s growth potential within the expanding prebiotic beverage sector. The deal also features an earnout provision, allowing additional payments if specific performance milestones are met post-transaction.

Deal Structure & Financial Advisors

• Transaction Type: Acquisition

• Financing: $300 million of anticipated cash tax benefits for a net purchase price of $1.65 billion, opportunity for earnout

• Ownership: 100% acquisition of Poppi by PepsiCo

• Investment Strategy: Long-term growth, focusing on market expansion and integration of Poppi’s health-oriented products into PepsiCo’s portfolio

• Financial Advisors:

  • For PepsiCo: Centerview Partners, J.P. Morgan

  • For Poppi: Goldman Sachs

Opinion & Outlook

What Could Go Right?

• Market Expansion: PepsiCo’s extensive distribution network could significantly enhance Poppi’s market penetration and sales growth, Coke has said the market for these specialty sodas could exceed $2 billion by 2029.

• Health Trend Alignment: The acquisition positions PepsiCo to capitalize on increasing consumer interest in functional and health-conscious beverages.

What Could Go Wrong?

• Brand Integration Challenges: Maintaining Poppi’s unique brand identity within a large corporation may be difficult and could impact consumer perception.

• Market Competition: The functional beverage sector is becoming increasingly competitive, with new entrants and existing brands striving to capture market share.

Conclusion

PepsiCo’s acquisition of Poppi highlights a strategic shift towards health-focused beverages, reflecting evolving consumer preferences. This move not only diversifies PepsiCo’s product offerings but also strengthens its position in the competitive beverage industry. The transaction underscores the growing importance of functional beverages and could serve as a catalyst for further investments in health-oriented food and drink products.

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The Deal Talk Team