23 Nov 2016 PepsiCo, Dr Pepper Snapple continue to diversify beyond soda
With soda consumption decreasing and US cities passing taxes on sugar-sweetened beverages, the big soda manufacturers are looking to diversify into growth categories. In separate news releases dated November 22, the Dr Pepper Snapple Group and PepsiCo announced that they are spending big to acquire flavoured water and probiotic drink companies, respectively.
DPS is acquiring Bai Brands and its complete portfolio of high-growth premium antioxidant-infused beverages for $1.7-billion, while PepsiCo has entered into a definitive agreement to acquire KeVita, a creator of fermented probiotic and kombucha beverages.
Both KeVita and Bai offer the bigtime beverage companies a chance to expand their health and wellness offerings in the premium non-carbonated and carbonated beverage sectors.
The Bai Brands acquisition, which DPS is expected to close in the first quarter of 2017, will generate approximately $425-million in net sales in 2017. With its Bai, Bai Bubbles, Cocofusion, and other brands, Bai is positioned for expanding growth in key beverage segments.
Bai will operate within DPS’ packaged beverages segment and continue to be led by founder Ben Weiss.
“Bai has contributed greatly to our allied brand lineup since we began distributing it broadly in 2013,” said Larry Young, DPS president and CEO.
“Adding it to the broad range of choices and options in our company-owned portfolio is a natural next step. Moving forward, we will empower Bai’s management team to continue the breakthrough and disruptive branding and innovation that have revolutionised their categories and work with them to put the brand in front of more consumers in more places.”
KeVita background
KeVita is a leader in fermented probiotic and kombucha beverages with three product lines. With more than two dozen flavours of Sparkling Probiotic Drink, Master Brew Kombucha, and Apple Cider Vinegar Tonic, all KeVita drinks are certified organic, non-GMO, gluten-free, and vegan.
Rumours of a potential deal between PepsiCo and KeVita surfaced last month when Reuters reported the parties were close to a deal the news agency pegged at “less than $500-million.” Fortune, however, has learned that the transaction price is actually around $200-million.
The transaction, which is set to close over the next couple of months, builds on the minority stake PepsiCo took in KeVita back in 2013.
PepsiCo helped KeVita expand distribution, and intends to further push the brand’s access to retail markets now that it will fully own it.
For PepsiCo, the deal is a way to bulk up on the consumer trend toward functional beverages, which are selling strongly as consumers look for more nutritional benefits in the foods and drinks they consume.
KeVita is also on-trend in other ways: the beverages in the portfolio generally contain between five and 45 calories per serving, and most of the flavors are sweetened with stevia and contain no sugar.
According to PepsiCo, upon closing KeVita will continue to operate independently with its production and bottling facilities located in Oxnard, Calif.
“I am pleased to welcome KeVita into the PepsiCo family. Under the leadership of CEO Bill Moses, KeVita has become an innovative, high-growth brand that is transforming the functional beverage space,” said Chris Lansing, general manager and vice president, PepsiCo Premium Nutrition.
“This announcement is further evidence of PepsiCo’s focus on delivering ‘Performance with Purpose’ by continuing to evolve our health and wellness offerings to meet consumers’ changing needs.”