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10 months ago

Pepsi Buys SodaStream For A Bubbly $3.2 Billion. What Could This Mean For The Future Of Soda?


PepsiCo’s soon-to-exit CEO, Indra Nooyi, recently announced that Pepsi is buying SodaStream, maker of that ingenious device that allows consumers to make sparkling beverages at home. The price tag? A very bubbly $3.2 billion.

As head of Pepsi, Nooyi has tried to push the company towards healthier options. The SodaStream deal seems like another step in that direction. Other initiatives spearheaded by Nooyi include Pepsi’s shift towards newer brands like LIFEWTR and Simply Organic Doritos, a product meant to court grocery powerhouse Amazon/Whole Foods.

This move isn’t a pet project for Nooyi. The data show that soda consumption has been on the decline in the US for more than a decade. To freshen up existing products, Nooyi has a multi-year plan in place to cut sugar, salt and fat from many of Pepsi’s products by 2025.

In light of Nooyi’s navigation of Pepsi toward healthier offerings, the SodaStream deal makes sense. Nooyi has stated repeatedly that it’s vital for Pepsi’s future to shift attention to more health-conscious choices because that’s where consumers are looking when they do their weekly shopping. And SodaStream’s products are marketed as the healthy alternative to sugary sodas. So, the company’s offerings align with Pepsi’s goal to “make more nutritious products while limiting our environmental footprint,” said Nooyi in a statement. “Together, we can advance our shared vision of a healthier, more sustainable planet.”

During Nooyi’s time as CEO, Pepsi’s products have been arranged into three “health rating” categories: Fun For You, which includes higher-calorie, traditional soft drinks and snacks; Better For You, which includes diet sodas and lower-calorie snacks; and Good For You, which includes such foods as Quaker Oats oatmeal and Sabra hummus, and beverages like Naked Juice smoothies.

Buying SodaStream (SODA) will is also a healthy move for Pepsi’s bottom line, as SodaStream’s stock has grown more than 320% over the past two years. With SodaStream’s market cap standing at $2.95 billion before the offer, Pepsi’s offer represents “only” an 11% premium on the latest share price.

The current plan is for the deal to be funded using Pepsi’s cash on hand. The purchase was unanimously approved by the boards of both companies and is expected to close by January, so long as SodaStream gets a majority shareholder vote and regulatory approvals.

And, if history is any indication of present performance, Nooyi is making a good deal. After all, it was she who helped turn Pepsi into one of the most successful food and beverage companies in the world, with sales growing 80% during her 12-year tenure.

“PepsiCo is finding new ways to reach consumers beyond the bottle,” Ramon Laguarta, PepsiCo’s president, said in a statement on Monday. As a seltzer water lover, I’ll drink to that.

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11 months ago

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