REVENUE STREAM
PepsiCo agrees to buy drink-machine maker SodaStream International for $3.2bn.
JERUSALEM/LONDON: PepsiCo Inc agreed yesterday to buy household drink-machine maker SodaStream International Ltd for $3.2 billion as it battles Coca-Cola Co for an edge in the health-conscious beverage market.
Founded in Britain in 1903, SodaStream was a coveted device in British kitchens in the 1970s and 80s, allowing people to create fizzy drinks by adding flavoured syrups to carbonated tap water, but its popularity faded as bottled sodas became cheaper.
The Israel-based company now markets itself as a sparkling water maker to appeal to younger and more health- and environmentally-conscious consumers, who do not drink much soda.
“With sugary carbonates and juices struggling and no turnaround in sight, mitigating the losses through newer and healthier products will be essential for PepsiCo,” said Euromonitor International analyst Matthew Barry.
Euromonitor said bottled water sales saw 6.2% compound annual growth in the
five years to 2017, while carbonated soft drinks sales were flat.
The deal may be the last for PepsiCo chief executive Indra Nooyi, who hands over to Ramon Laguarta later this year.
In 12 years as CEO, Nooyi sought to expand the company’s offering of healthier food and drinks. It agreed to buy Bare Foods in May and KeVita drinks in late 2016.
PepsiCo will pay $144 per SodaStream share in cash, representing a 10.9% premium to Friday’s closing price of SodaStream’s US-listed stock and a 32% premium to its 30-day average.
The New York-based group will fund the deal with cash on hand.
PepsiCo said SodaStream complements its water business, which includes Aquafina and smaller brands Bubly and Lifewtr. The company is also experimenting with other non-bottled drinks, including Drinkfinity, which is sold in pods.
PepsiCo said the transaction, unanimously approved by the boards of both firms, was expected to close by January 2019. It said the purchase was another step in its bid to “promoting health and wellness through environmentally friendly, cost-effective and fun-to-use
beverage solutions.”
Speculation about PepsiCo or CocaCola buying SodaStream has bubbled for years. The company had marketed itself as a more environmentally friendly alternative to mainstream bottled drinks and therefore a threat to the giant producers.
But the notion of creating soft drinks at home has had limited success. Over the years, many drinkers have used SodaStream only for making fizzy water, without the flavoured syrups it sells.
Coca-Cola and Keurig Green Mountain forged a partnership in 2015 to market a counter-top cold-drinks machine, but pulled the plug the following year after it failed to take off.
It remains to be seen what Keurig Dr Pepper will do in the space. The company was created last month by the merger of Keurig Green Mountain, now owned by private investment firm JAB Holding Co, and Dr Pepper Snapple Group.
In second-quarter results issued earlier
in August, SodaStream’s revenue grew 31%, driven by growth in Germany, France, Canada and the United States, while net profit rose nearly 82%.
PepsiCo said its global distribution network would help SodaStream expand further.
SodaStream was acquired by Israel’s Soda-Club in 1998 before private equity group Fortissimo Capital bought a controlling stake in 2007. The company went public in 2010.