 "Pepsico")
PepsiCo is to sell Tropicana, Naked and other juice brands to French private equity firm PAI Partners for about $3.3 billion as it seeks to bolster its balance sheet and focus on healthier snacks and zero-calorie drinks.
The US drinks giant will retain a 39 per cent noncontrolling interest in a new holding company for the brands and has also granted PAI an irrevocable option to buy certain juice businesses in Europe, according to a statement Tuesday.
PepsiCo said it plans to use the proceeds from the deal to strengthen its balance sheet and invest in the wider business. Paris-based PAI is an experienced investor in the food and beverage space and is behind Refresco, the biggest independent bottler of beverages globally.
PAI’s proposed joint venture with PepsiCo is similar to one it created when it merged its R&R ice-cream business with large parts of Nestle’s ice-cream division to create Froneri.
“This joint venture with PAI enables us to realise significant upfront value, whilst providing the focus and resources necessary to drive additional long-term growth for these beloved brands,” PepsiCo Chairman and Chief Executive Officer Ramon Laguarta said in the statement. “In addition, it will free us to concentrate on our current portfolio of diverse offerings, including growing our portfolio of healthier snacks, zero-calorie beverages, and products like SodaStream which are focused on being better for people and the planet,” he said. The PepsiCo juice businesses delivered about $3 billion in net revenue in 2020.
Juice sales began to decline significantly in the early 2000s when low-carb diets grew in popularity, and that trend has continued with more families choosing instead to buy waters or other no- or low-calorie drinks. Juice consumption in the US peaked in 2003 at 4.2 billion gallons, but by 2017, that had fallen to 3 billion gallons, wrote Brian Sudano, the managing partner of Beverage Marketing Corp. The group does not see that trend changing.
Chief Financial Officer Hugh Johnston noted in an interview that the margins for the business are lower than PepsiCo’s average, and so the deal will “incrementally benefit margins.” “The juice category has obviously had some challenges over the past 10 or so years, and recently as the business gained a little bit of momentum and we started to think about where we wanted to prioritise our efforts, we made a decision that it might make sense for someone else to run Tropicana,” Johnston said.
