$3.3 bn deal affixed by PepsiCo to sell off Tropicana & other Juices to PE firm

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PepsiCo will be selling off Tropicana, Naked, and other juice brands to French private equity firm PAI Partners for about $3.3 billion to bolster its balance sheets and focus on healthier snacks and zero-calories drinks more.

The US drinks giant PepsiCo will retain a 39 percent 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 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 of its mergings with R&R ice-cream business with large parts of Nestle’s ice-cream division to create Froneri and this joint venture with PAI will enable to realize significant upfront value, whilst providing the focus and resources necessary to drive additional long-term growth for these beloved brands, stated PepsiCo Chairman and Chief Executive Officer Ramon Laguarta. In addition to that it will free them 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.

The following deal will incrementally benefit the margins of the US Drinks giant.