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PepsiCo Enhances Product Offerings with SodaStream Acquisition

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SodaStream acquisition

Snack food and beverage giant PepsiCo (PEP) announced its decision to acquire SodaStream International (SODA) on August 20. PepsiCo is acquiring SodaStream, a maker of home carbonation systems, for $144 per share in a deal valued at $3.2 billion. SodaStream caters to consumers who prefer healthier beverage options by marketing itself as a maker of sparkling water rather than at-home carbonated soft drinks.

PepsiCo stock was up 0.1%, and SodaStream stock rose 9.7% at 11:10 AM EDT on August 20. On August 17, PepsiCo stock was down 4.1% on a year-to-date-basis while SodaStream was up by a significant 84.6%.

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Deal synergies

PepsiCo (PEP) believes that the SodaStream acquisition could help it expand its portfolio of healthier products, particularly its portfolio of sparkling water offerings. The acquisition is expected to help PepsiCo broaden its presence in the at-home beverage solutions market.

PepsiCo has been focusing on the innovation of healthier beverage choices, as consumers seek options beyond traditional carbonated soft drinks with high sugar content. PepsiCo has been expanding its soda as well as non-soda beverage portfolio through innovation and strategic acquisitions. 

The company’s recent notable launch in the US market was that of Drinkfinity. Drinkfinity allows consumers to create personalized beverages by combining the dry and liquid ingredients, which are available in portable pods, with water in a reusable container.

SodaStream currently has a presence in 45 countries. PepsiCo’s extensive distribution network and its global reach in over 200 countries could boost the expansion of SodaStream’s product offerings. SodaStream’s revenues grew 14.1% to $543.4 million in 2017. Its guidance issued in August indicates ~23.0% revenue growth in 2018.

PepsiCo’s rival Coca-Cola (KO) is also looking for growth beyond traditional soda beverages through product innovation and bolt-on acquisitions. On August 14, Coca-Cola announced the purchase of a minority stake in Bodyarmor, which makes premium sports and hydration drinks.

To learn more about PepsiCo’s recent quarterly performance, please read How Analysts Reacted to PepsiCo’s Fiscal Q2 2018 Results.

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