‘Functional soda' seen in rude health as PepsiCo takes plunge
If anyone needed convincing that, in the US at least, 'better-for-you' soda isn't a flash in the pan, perhaps PepsiCo's latest acquisition will have persuaded them.
On Monday (17 March), just under 72 hours after Bloomberg reported PepsiCo was in late-stage talks to buy US prebiotic soda business Poppi, the US food and drinks giant announced a deal worth just under $2bn.
Poppi, formerly known as Mother Beverage, was set up in 2015 and, after receiving funding on US business pitch TV show Shark Tank three years later, relaunched under its current brand in 2020.
Since then, Poppi, co-founded by Allison Ellsworth and her husband Stephen, has built what has become one of the more recognisable names in the growing market for 'better-for-you' sodas in the US.
Robert Moskow, a beverage-industry analyst at US investment bank TD Cowen, says Poppi generated sales of just over $391m in tracked channels in the last 52 weeks. A company spokesperson says Poppi ran up annual sales of 'north of $500m' in 2024. Alongside Olipop, Poppi, with its low-calorie and low-sugar sodas in 15 flavours, has become a brand synonymous with 'healthier' soda in the US.
The purchase of Poppi is PepsiCo's second $1bn-plus acquisition in six months and the food-and-drinks major's latest attempt to tap into a growing part of the market through M&A.
Speaking at the annual CAGNY investment conference last month, PepsiCo chairman and CEO Ramon Laguarta called out 'functionality' and 'multicultural' as two product trends that would be central to the company's investment strategy – and its recent deal-making underlines that thesis. In October, the Lay's snacks maker agreed to buy Mexican-American snacks maker Siete Foods for a fee of $1.2bn.
'More than ever, consumers are looking for convenient and great-tasting options that fit their lifestyles and respond to their growing interest in health and wellness,' Laguarta said on Monday. 'Poppi is a great complement to our portfolio transformation efforts to meet these needs.'
After attending last week's Expo West trade show in California, Moskow highlighted better-for-you soda as an area the major players in conventional fizzy drinks needed to focus on. 'We believe carbonated soda leaders will need to take this segment of the market more seriously in 2025 rather than assuming it is a fad,' Moskow said at the time and, this week, he praised PepsiCo's move.
'We believe 'functional soda' is becoming a mainstream segment of the market with sustainable appeal,' he said on Monday.
The transaction includes $300m of anticipated cash tax benefits for a net purchase price of $1.65bn, PepsiCo said. The deal also features an additional potential 'earnout consideration' based on whether certain undisclosed 'performance milestones' are reached, the company added.
Barclays analyst Lauren Lieberman says the price tag works out at around four times Poppi's sales in the last 12 months, which, she says, 'strikes us as more akin to a beauty valuation'.
However, Lieberman adds: 'We see a lot of similarities between the fast-growth, emerging brand landscape of each industry. Poppi boasts both scale and credibility with consumers (the latter of which really coming to light in our data work), which screens particularly attractive, in our view, when considering the path for an internal build would be long and uncertain.'
Not all consumers have been happy, however. Poppi confirmed this week it had settled a lawsuit in the US filed by consumers who claimed they were misled by the company (Poppi said it 'acknowledges no fault, liability, or wrongdoing').
The settlement will allow Poppi and PepsiCo to look forward. For PepsiCo, it's a chance to buy into a burgeoning market and attempt to grow the brand further. The company had planned to launch a similar soda under its Soulboost brand (which hit the market four years ago with a range of sparkling waters including 'functional' ingredients like L-theanine and panax ginseng) but decided against the move (it's said the early indications for the new product were not positive) and pounced for Poppi instead.
'A frequent strategic dilemma when entering a new segment or category is whether to build or buy your way in,' David Clark, a former General Mills executive and founder of the Avenir Strategies consultancy, says. 'Buying typically involves paying a premium based on anticipated growth derived from past performance – the more solid the track record, the higher the premium. Building avoids this purchase premium but has a slow build and a high failure rate, circa 80%."
Last month, Coca-Cola introduced its first prebiotic soda line, launching the Simply Pop brand in the US.
Simply Pop, initially set to go on sale 'at retail in select regions' and via Amazon, is targeted at a product set that includes brands such as Poppi and Olipop.
'Of course, Coke may also be pursuing acquisitions ... but these initial moves suggest that Coke and Pepsi may see the BFY soda opportunity and urgency differently. It'll be interesting to see how this unfolds,' Clark says.
Last month, Olipop was valued at $1.85bn after raising $50m in a Series C funding round, led by JP Morgan Private Capital's Growth Equity Partners.
In 2023, CNBC quoted Ben Goodwin, Olipop's CEO, as saying PepsiCo and Coca-Cola had made an approach about a potential sale.
Olipop said the new cash injection marked its 'final anticipated round of equity financing', after becoming profitable 'in early 2024'.
The company, however, also confirmed that it fell short of its $500m sales target projected in May, generating over $400m in revenue for fiscal year 2024.
'The other big player in this space is Olipop and we fully expect them to get acquired by one of PepsiCo's rivals in the near term,' Richard Wyborn, a partner at UK-based consultancy Food Strategy Associates, says. 'Interest in prebiotics and gut health isn't going anywhere and is a trend we expect to appear in more and more categories in the future.'
In the main, PepsiCo's acquisition of Poppi is seen by industry watchers as a deal that could benefit both sides. PepsiCo has snapped up a significant player in a buoyant product segment – and a segment that's expected to continue to grow.
Meanwhile, Poppi gets the benefit of PepsiCo's distribution muscle. It wouldn't be a massive surprise if we saw, perhaps with some tweaks to recipes and flavours, Poppi products in more international markets in the months ahead.
'They need to ensure they let management continue to do what they've been doing – if it ain't broke don't fix it – but also ensure that they don't turbo charge the growth too much,' Wyborn says. 'Distribution should be built up gradually all the while ensuring velocities remain high.'
However, not everyone is sold on the prospects for such functional sodas.
PepsiCo's scale will undoubtedly help Poppi in the medium term and this type of bolt-on acquisition has delivered the best ROI in the FMCG industry. However, I remain sceptical about the long-term viability of these sodas,' Ivan Torossian, a consulting director at GlobalData, Just Drinks' parent, says.
'At $2.5–$3 per can, Poppi lacks the 'instant gratification' factor. Red Bull gives you instant wings and electrolyte beverages instant hydration but prebiotics? Consumers too concerned with sugar and gut might as well stick to water for a quarter of the cost. Is there really enough differentiation to sustain Poppi's positioning?'
"'Functional soda' seen in rude health as PepsiCo takes plunge" was originally created and published by Just Drinks, a GlobalData owned brand.
The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site.
Hashtags

Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles

15 minutes ago
China's exports climb 4.8% in May as shipments to the US fall nearly 10%
China's exports rose 4.8% in May from a year earlier, a bit lower than expected, as shipments to the United States fell nearly 10%, according to data released Monday just hours ahead of another round of trade talks between the U.S. and China. Imports declined 3.4% year-on-year, leaving a trade surplus of $103.2 billion. China exported $28.8 billion to the United States in May, while its imports from the U.S. fell 7.4% to $10.8 billion, the report said. Still, exports to Southeast Asia and the European Union remained robust, growing 14.8% and 12%, year-on-year. 'The acceleration of exports to other economies has helped China's exports remain relatively buoyant in the face of the trade war,' Lynne Song of ING Economics said in a commentary. Still, trade slowed in May from an 8.1% jump in China's global exports in April. Many businesses had rushed orders to try to beat higher tariffs, even as some new import duties took effect or remained in place. Exports will likely rebound somewhat in June thanks to a 90-day suspension of most of the tariffs China and the U.S. imposed on each other in their escalating trade war. 'But with tariffs likely to remain elevated and Chinese manufacturers facing broader constraints on their ability to sustain rapid gains in global market share, we think export growth will slow further by year-end,' Zichun Huang of Capital Economics said in a report. Despite the tariffs truce, the rancor between Beijing and Washington has persisted, with angry exchanges over advanced semiconductors, 'rare earths' that are vital to many industries and visas for Chinese students at American universities. The next round of negotiations was due to take place later Monday in London, following a phone call last week between Trump and Chinese leader Xi Jinping. Other data released Monday highlight the pressure on the world's second largest economy from slowing exports, since China imports many of the components and materials needed for the goods it assembles for the world. But at the same time, China's own domestic markets are suffering. The government reported that consumer prices fell 0.1% in May, evidence of sluggish demand. The persisting deflation partly reflects lower food prices, economists said. Producer price deflation was worse, contracting 3.3% in May, its lowest level in almost two years, after falling 2.7% in April.


Bloomberg
21 minutes ago
- Bloomberg
Saudi Arabia's IPO Boom Faces Multiple Challenges
June 9th, 2025, 6:42 AM GMT+0000 Saudi Arabian firms have raised about $3 billion from new share sales this year, making it one of the world's hottest IPO markets. But a series of recent setbacks is threatening to take the sheen off that boom, Bloomberg's Laura Gardner Cuesta reports on Horizons Middle East & Africa. (Source: Bloomberg)


Bloomberg
26 minutes ago
- Bloomberg
Bloomberg: The China Show 06/09/2025
'Bloomberg: The China Show' is your definitive source for news and analysis on the world's second-biggest economy. From politics and policy to tech and trends, Yvonne Man and Stephen Engle give global investors unique insight, delivering in-depth discussions with the newsmakers who matter. (Source: Bloomberg)