If anyone needed convincing that, in the US at least, ‘better-for-you’ soda isn’t a flash in the pan, perhaps PepsiCo’s latest acquisition will have persuaded them.
On Monday (17 March), just under 72 hours after Bloomberg reported PepsiCo was in late-stage talks to buy US prebiotic soda business Poppi, the US food and drinks giant announced a deal worth just under $2bn.
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Poppi, formerly known as Mother Beverage, was set up in 2015 and, after receiving funding on US business pitch TV show Shark Tank three years later, relaunched under its current brand in 2020.
Since then, Poppi, co-founded by Allison Ellsworth and her husband Stephen, has built what has become one of the more recognisable names in the growing market for ‘better-for-you’ sodas in the US.
Robert Moskow, a beverage-industry analyst at US investment bank TD Cowen, says Poppi generated sales of just over $391m in tracked channels in the last 52 weeks. A company spokesperson says Poppi ran up annual sales of “north of $500m” in 2024. Alongside Olipop, Poppi, with its low-calorie and low-sugar sodas in 15 flavours, has become a brand synonymous with ‘healthier’ soda in the US.
The purchase of Poppi is PepsiCo’s second $1bn-plus acquisition in six months and the food-and-drinks major’s latest attempt to tap into a growing part of the market through M&A.
Speaking at the annual CAGNY investment conference last month, PepsiCo chairman and CEO Ramon Laguarta called out “functionality” and “multicultural” as two product trends that would be central to the company’s investment strategy – and its recent deal-making underlines that thesis. In October, the Lay’s snacks maker agreed to buy Mexican-American snacks maker Siete Foods for a fee of $1.2bn.
“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,” Laguarta said on Monday. “Poppi is a great complement to our portfolio transformation efforts to meet these needs.”
After attending last week’s Expo West trade show in California, Moskow highlighted better-for-you soda as an area the major players in conventional fizzy drinks needed to focus on. “We believe carbonated soda leaders will need to take this segment of the market more seriously in 2025 rather than assuming it is a fad,” Moskow said at the time and, this week, he praised PepsiCo’s move.
“We believe ‘functional soda’ is becoming a mainstream segment of the market with sustainable appeal,” he said on Monday.
The transaction includes $300m of anticipated cash tax benefits for a net purchase price of $1.65bn, PepsiCo said. The deal also features an additional potential “earnout consideration” based on whether certain undisclosed “performance milestones” are reached, the company added.
Barclays analyst Lauren Lieberman says the price tag works out at around four times Poppi’s sales in the last 12 months, which, she says, “strikes us as more akin to a beauty valuation”.
However, Lieberman adds: “We see a lot of similarities between the fast-growth, emerging brand landscape of each industry. Poppi boasts both scale and credibility with consumers (the latter of which really coming to light in our data work), which screens particularly attractive, in our view, when considering the path for an internal build would be long and uncertain.”
Not all consumers have been happy, however. Poppi confirmed this week it had settled a lawsuit in the US filed by consumers who claimed they were misled by the company (Poppi said it “acknowledges no fault, liability, or wrongdoing”).
The settlement will allow Poppi and PepsiCo to look forward. For PepsiCo, it’s a chance to buy into a burgeoning market and attempt to grow the brand further. The company had planned to launch a similar soda under its Soulboost brand (which hit the market four years ago with a range of sparkling waters including “functional” ingredients like L-theanine and panax ginseng) but decided against the move (it’s said the early indications for the new product were not positive) and pounced for Poppi instead.
“A frequent strategic dilemma when entering a new segment or category is whether to build or buy your way in,” David Clark, a former General Mills executive and founder of the Avenir Strategies consultancy, says. “Buying typically involves paying a premium based on anticipated growth derived from past performance – the more solid the track record, the higher the premium. Building avoids this purchase premium but has a slow build and a high failure rate, circa 80%.”
Last month, Coca-Cola introduced its first prebiotic soda line, launching the Simply Pop brand in the US.
Simply Pop, initially set to go on sale “at retail in select regions” and via Amazon, is targeted at a product set that includes brands such as Poppi and Olipop.
“Of course, Coke may also be pursuing acquisitions … but these initial moves suggest that Coke and Pepsi may see the BFY soda opportunity and urgency differently. It’ll be interesting to see how this unfolds,” Clark says.
After Poppi, could Olipop be next?
Last month, Olipop was valued at $1.85bn after raising $50m in a Series C funding round, led by JP Morgan Private Capital’s Growth Equity Partners.
In 2023, CNBC quoted Ben Goodwin, Olipop’s CEO, as saying PepsiCo and Coca-Cola had made an approach about a potential sale.
Olipop said the new cash injection marked its “final anticipated round of equity financing”, after becoming profitable “in early 2024”.
The company, however, also confirmed that it fell short of its $500m sales target projected in May, generating over $400m in revenue for fiscal year 2024.
“The other big player in this space is Olipop and we fully expect them to get acquired by one of PepsiCo’s rivals in the near term,” Richard Wyborn, a partner at UK-based consultancy Food Strategy Associates, says. “Interest in prebiotics and gut health isn’t going anywhere and is a trend we expect to appear in more and more categories in the future.”
In the main, PepsiCo’s acquisition of Poppi is seen by industry watchers as a deal that could benefit both sides. PepsiCo has snapped up a significant player in a buoyant product segment – and a segment that’s expected to continue to grow.
Meanwhile, Poppi gets the benefit of PepsiCo’s distribution muscle. It wouldn’t be a massive surprise if we saw, perhaps with some tweaks to recipes and flavours, Poppi products in more international markets in the months ahead.
“They need to ensure they let management continue to do what they’ve been doing – if it ain’t broke don’t fix it – but also ensure that they don’t turbo charge the growth too much,” Wyborn says. “Distribution should be built up gradually all the while ensuring velocities remain high.”
However, not everyone is sold on the prospects for such functional sodas.
PepsiCo’s scale will undoubtedly help Poppi in the medium term and this type of bolt-on acquisition has delivered the best ROI in the FMCG industry. However, I remain sceptical about the long-term viability of these sodas,” Ivan Torossian, a consulting director at GlobalData, Just Drinks’ parent, says.
“At $2.5–$3 per can, Poppi lacks the ‘instant gratification’ factor. Red Bull gives you instant wings and electrolyte beverages instant hydration but prebiotics? Consumers too concerned with sugar and gut might as well stick to water for a quarter of the cost. Is there really enough differentiation to sustain Poppi’s positioning?”
