PepsiCo divestment of Tropicana, Naked Juice reflects evolving focus on zero-calorie beverages, water

The sale, which includes Tropicana orange juice brands, Naked and other juice brands in North America, brings PepsiCo approximately $3.3bn that the CPG giant plans to use to strengthen its balance sheet and make “organic investments in the business,” while simultaneously freeing the company to concentrate on its zero-calorie beverages, SodaStream and portfolio of healthier snacks, PepsiCo chairman and CEO Ramon Laguarta said in a statement.

PepsiCo will retain a non-controlling 39% interest in the newly formed joint venture, exclusive US distribution rights to the brands through its direct store delivery for small-format and foodservice channels, while PAI will become the majority shareholder of the transferred business.

The deal’s pre-tax price tag is the same as what PepsiCo paid Seagram Co. for Tropicana in 1998, and is only slightly more than the roughly $3bn in net revenues that the juice business brought PepsiCo in 2020, which represented a small fraction of the company’s approximate $70bn in total revenue.

While Tropicana is the top refrigerated orange juice brand in the US, fruit juice and drinks consumption have fallen significantly since PepsiCo acquired Tropicana.

According to the Beverage Marketing Corp., fruit juice and drink consumption fell 19% to 2.8bn gallons in 2020 from 3.4bn in 2011, and PepsiCo reported a 36% drop in sales to 436m gallons.

This drop likely is due in part to recent efforts to reduce consumption of sugar, which is often high in juice beverages, and underscores the uncertainty of the category in consumers’ evolving health and wellness initiatives.  

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