PepsiCo has entered into an agreement with PAI Partners (PAI) to sell a majority stake in its Tropicana, Naked and other select juice brands across North America, and an irrevocable option for certain juice businesses in Europe.
PAI will pay $3.3bn to own a 61% stake in a newly formed joint venture that will hold the brand rights for the juices. PepsiCo will own the remaining 39% and retain exclusive US distribution rights.
The French private equity firm has extensive experience in the food and beverage space, with investments in companies such as Addo, Froneri, Ecotone, and Refresco.
The deal follows a decline in juice sales in recent years as part of wider moves by consumers to reduce their sugar intake. PepsiCo and rivals such as Coca-Cola have been working to shift their sales away from sugary soft drinks and towards lower-calorie and healthier options.
“This joint venture with PAI enables us to realize significant upfront value, whilst providing the focus and resources necessary to drive additional long-term growth for these beloved brands,” said PepsiCo Chairman and CEO Ramon Laguarta.
“In addition, it will free us to concentrate on our current portfolio of diverse offerings, including growing our portfolio of healthier snacks, zero-calorie beverages, and products like SodaStream which are focused on being better for people and the planet.”
Frédéric Stévenin, a Managing Partner at PAI, added: “We are delighted to bring these storied beverage brands into the PAI portfolio through another partnership with a leading global food and beverage company.
“We believe there is great growth potential to be realized through investments in product innovation, expansion into adjacent categories, and enhanced scale in branded juice drinks and other chilled categories.”
The juice businesses covered by the agreement generated approximately $3bn in revenue in 2020, although operating profit margins were below PepsiCo’s overall rate. The company said it plans to use the proceeds from the sale to “strengthen its balance sheet and to make organic investments in the business”.
NAM Implications:
- Rivals should anticipate two changes resulting from this move…
- A different focus on the selling of the juice brands to release potential
- A more intensive focus on PepsiCo’s current portfolio of diverse offerings
- Including growing their portfolio of healthier snacks, zero-calorie beverages, and products like SodaStream.
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