PEP: What the $1.9 BLN Poppi Buy Says About the Beverage Market

Multinational food and beverage companies aren’t typically the lead story in markets because, quite frankly, they’re usually boring. Slow growth, boring business. But every now and again, we have an opportunity to talk about them. Today’s subject is PepsiCo Inc. (PEP), notes Tom Bruni, editor-in-chief of The Daily Rip by Stocktwits.

The beverage market is a high-margin business, but also one that goes through its phases. One of those phases has been the prebiotic soda boom, and Pepsi is betting that its popularity will continue as soda consumption continues its downward trend and beverage makers like itself look for new growth drivers.

Pepsi is acquiring upstart Poppi for $1.95 billion, with the net purchase price coming to $1.65 billion after $300 million in anticipated cash tax benefits. It will also make additional payments if certain performance milestones are met.

By 2023, Poppi’s annual sales had reportedly crossed $100 million, and with two straight years of Super Bowl ads, the company seemingly had deep pockets and a thirst to reach a wider audience for its products.

However, it’s a competitive market, with rival Olipop recently valued at $1.85 billion in its latest fundraising round and Coca-Cola Co. (KO) launching its brand, Simply Pop. As a result, Pepsi is hoping to use its size and economies of scale to supercharge the brand and establish a dominant market share in the space.

The Stocktwits community is seemingly skeptical of the move, with sentiment remaining in "bearish" territory after the news. With Celsius and other high-growth beverage brands taking a hit over the last year, bulls are staying cautious.