PURCHASE, NY. — PepsiCo, Inc. is acquiring the prebiotic soda brand Poppi for $1.95 billion. The transaction, announced March 17, encompasses a net purchase price of $1.65 billion plus $300 million of anticipated cash tax benefits, Purchase-based PepsiCo said. In addition, the deal includes a potential earnout consideration based on the achievement of certain performance milestones within a specified period after the acquisition closes.

A functional beverage, Poppi combines prebiotics, fruit juice and apple cider vinegar to create a low-calorie soda containing no more than 5 grams of sugar and 25 calories or less per serving. Allison and Stephen Ellsworth began developing the soda in 2015, and in 2018 it appeared under the name Mother Beverage on the TV show “Shark Tank,” where it drew investment from entrepreneur Rohan Oza and was relaunched as Poppi in 2020, later receiving funding from CAVU Consumer Partners in its initial seed round.

Austin, Texas-based Poppi has since garnered an expanding and loyal base of fans seeking a better-for-you beverage.

“We’ve been evolving our food and beverage portfolio over many years, including by innovating with our brands in new spaces and through disciplined, strategic acquisitions that enable us to offer more positive choices to our consumers,” said Ramon Laguarta, chairman and chief executive officer of PepsiCo. “More than ever, consumers are looking for convenient and great-tasting options that fit their lifestyles and respond to their growing interest in health and wellness. Poppi is a great complement to our portfolio transformation efforts to meet these needs.”

With more consumers focusing on wellness, beverage companies have been working to diversify their portfolios with flavorful beverages that don’t carry the negative health impacts of traditional soda and functional benefits. Prebiotic sodas have been one of the hottest beverage trends, led by fast-rising brands such as Poppi and Olipop. Last month, The Coca-Cola Co. jumped into the prebiotic soda category with its own product, called Simply Pop.

PepsiCo cited Poppi’s “consumer-first approach, cultural cache and nutritional profile” as a growth driver for the brand.

PepsiCo closed its acquisition of Siete Foods in January.

| Photo: ©ANDRIY BLOKHIN – STOCK.ADOBE.COM

“As we look to reorient our portfolio offerings to address white-space consumer needs, the Poppi brand’s unique intersection with wellness and culture is a perfect addition to our portfolio,” said Ram Krishnan, CEO of PepsiCo Beverages US. “Allison and the Poppi team have built a magnetic brand that’s ahead of the trends, with a loyal consumer base and a demonstrated capacity for growth. We are big fans of the Poppi brand movement and believe this incredible brand, paired with our commercial capabilities, will drive continued growth and innovation for years to come.”

PepsiCo didn’t specify a closing timetable for the transaction, which is pending regulatory approval and customary closing conditions.

Sold at retailers nationwide, Poppi currently comes in 14 flavors: strawberry lemon, raspberry rose, orange, ginger lime, watermelon, cherry limeade, grape, wild berry, classic cola, root beer, Doc Pop, lemon lime, orange cream and cherry cola. The company said the brand also has drawn a strong base of celebrity fans, such as Hailey Bieber, Kylie Jenner, Billie Eilish, Russell Westbrook, Jennifer Lopez and Olivia Munn.

“When I created Poppi in our kitchen, it was fueled by a desire to create a better-for-you soda,” said Allison Ellsworth. “We never imagined how many people we could reach through hard work, determination and a clear mission to create a functional soda that stands the test of time. We believe Poppi is the soda that will be embraced for generations to come, and we’re beyond grateful to the amazing poppi team, our partners who believed in us from the very beginning and most importantly our incredible community. We can't wait to begin this next chapter with PepsiCo to bring our soda to more people.”

Citing NielsenIQ tracked channels data, investment firm TD Cowen reported that Poppi generated $391.3 million in sales over the latest 52-week period, representing a 152% year-over-year gain.

“The deal makes sense to us because we believe PepsiCo’s North American beverage business can provide another boost to Poppi's distribution and because we believe ‘functional soda’ is becoming a mainstream segment of the market with sustainable appeal,” TD Cowen analyst Robert Moskow said in a March 17 research note.

Plans call for the Poppi organization to operate independently in the near term, according to the TD Cowen report.

“PepsiCo’s strategic rationale was centered around its portfolio evolution to address growing consumer interest in health and wellness,” Moskow said. “Poppi’s functional soda, which is low in sugar and claims to promote gut health, is well-positioned to address growing health and wellness trends. PepsiCo planned to launch a functional soda of its own under the Soulboost brand, but they view Poppi’s first-mover advantages (e.g. popularity with consumers, taste) as highly valuable.”

In January, PepsiCo finalized its $1.2 billion acquisition of Siete Foods, a Mexican-American food and snack brand with products that include better-for-you attributes. During a Feb. 4 conference call to discuss first quarter results, Laguarta indicated PepsiCo is shifting some of its focus to healthier products.

“I think there is more awareness from consumers to the food and the drinks that they consume,” he said. “I think there … has been a multi-year evolution of the consumer in the US (and) globally, as well.”

He added that through social media monitoring PepsiCo has seen consumer behaviors toward being more health-conscious shift and that the trend may be accelerating in the United States. To respond, PepsiCo is emphasizing portion control, the low sodium and fat content of some of its products, and the elimination of artificial ingredients from formulations. The company also plans to emphasize the better-for-you aspects of its products, specifically whole grain, legume and protein content. 

TD Cowen estimated PepsiCo has spent about $3 billion in capital over several months on better-for-you brands, including the purchases of Siete Foods and the remaining 50% interest in the manufacturers of Sabra.

“On an inorganic basis, we estimate Poppi and Siete add 200 basis points to PepsiCo’s latest 12 weeks tracked channel US growth (or 80 basis points if included in the base),” Moskow said in his note. “This translates to 120 basis points and 50 basis points on a total enterprise basis.”