PepsiCo Inc signaled its intentions to further simplify its product range and shift away from high-sugar drinks through the selling of its Tropicana and other juice brands in North America in a deal worth $3.3 billion to the French private equity firm PAI Partners, the beverage giant said on Tuesday.
The orange juice maker had been purchased by PepsiCo in 1998 for about $3.3 billion while the United States based Naked Juice was bought by the company about a decade after that for $150 million.
A stake of 39 per cent in the new joint venture will be retained by PepsiCo while also retaining exclusive distribution rights for the brands in the United States.
PepsiCo’s Chief Executive Officer Ramon Laguarta said that funding for the development and growth of the company’s portfolio of health focused snacks and zero-calorie beverages would be done from the money generated by the sale while the company will focus on the more profitable brands.
It is noteworthy that PepsiCo’s rival Coca Cola has been also trimming down its range of products since the last one year with the company discontinuing manufacturing of its TaB diet soda and Coca-Cola Energy brands in the United States and selling off its ZICO coconut water brand. read more
“Companies are finding it difficult to provide effective marketing support behind an infinite number of brands that often compete for very similar occasions,” Rabobank Food and Beverage analyst Stephen Rannekleiv said in May.
Launching of new products that have been developed in-house is not the target of boht the companies, he added.
While about $3 billion in net revenue was generated by the juice businesses of PepsiCo in 2020, this business generated operating profit margins that were much lower than the average fort the entire group.
Over the last few years, many food and beverage investments have been made by PAI and this deal with PepsiCo is another one of them. A joint venture backed by PAI purchased the US ice cream business, including brands such as Häagen-Dazs of Nestle SA in 2019 ikn a deal that was worth about $4 billion.
Centerview Partners is the financial advisor to PepsiCo on the deal, while J.P. Morgan Securities LLC is advising PAI.
(Adapted from EconomicTimes.com)