PepsiCo has acquired prebiotic soda brand Poppi in a $1.95 billion deal, expanding its portfolio to meet growing consumer demand for health and wellness products.
The net purchase price of $1.65 billion excludes $300 million in anticipated cash tax benefits, and an additional potential earnout is contingent on performance.
High levels of innovation in the functional beverage subsector contributed to the overall food and beverage sector reaching a dealmaking peak in Q3 with 151 transactions, according to PitchBook’s Q4 2024 Food & Beverage CPG Report. This surge in activity has made functional beverage brands attractive targets for private equity sponsors and corporate buyers alike.
Poppi has successfully captured health-conscious consumers at a time when demand for “better-for-you” products is rising; prebiotics, a type of fiber that can improve gut health, have emerged as a major trend, said PitchBook senior emerging technology analyst Alex Frederick.
He said “fiber is the new protein” was a common refrain at food conferences last year.
“I’m not sure if that’s true yet,” he said. “At Expo West, protein was everywhere. But I definitely saw a lot of functional foods and beverages promoting gut health/fiber.”
With this acquisition, PepsiCo strengthened its competitive position against Coca-Cola, which recently launched its own prebiotic soda brand, SimplyPop.
It follows Pepsi’s attempt to grow its functional beverage presence with the 2021 launch of Soulboost, a sparkling water beverage intended to help improve mental stamina and relaxation, which the company later discontinued, Bloomberg reported.
The deal comes amid increased investor interest in functional beverages. Last month, California-based Olipop, a soft drink brand designed to support digestive health, secured a $50 million Series C funding round led by JP Morgan Growth Equity Partners, valuing the company at $1.85 billion.
Austin-based Poppi, founded by couple Allison and Stephen Ellsworth and backed by investors including CAVU Consumer Partners, formulates its sodas with prebiotics and fruit juice, offering a low-calorie option with five grams of sugar per serving.
Centerview Partners and Cravath, Swaine & Moore acted as lead financial adviser and legal adviser to PepsiCo, respectively. Goldman Sachs and Cooley advised Poppi.
Featured image by Peter Dazeley/Getty Images
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