August 5, 2021

By Lynda Kiernan-Stone, Global AgInvesting Media

PepsiCo has announced it has entered an agreement with PAI Partners (PAI) to sell select North American juice brands, including Tropicana and Naked, along with an irrevocable option to acquire certain juice businesses in Europe, through a deal valued at $3.3 billion.  

PepsiCo will retain a 39 percent non-controlling stake in a newly-formed joint venture, with PAI becoming the majority shareholder in the transferred business. Under the terms of the agreement, PepsiCo will retain exclusive U.S. distribution rights for the brands. 

Driven by its rivalry with Coca-Cola, which owns Minute Maid, PepsiCo acquired Tropicana in 1998 from Seagram Co. for $3.3 billion. Nearly 10 years later it acquired Naked Juice for $150 million. However, due to their high sugar content, fruit juices have been falling out of favor with consumers, reflected in consumption rates bottoming out at their lowest point since the USDA began tracking such data in 1970 at 5.2 gallons per capita in 2017. 

Likewise, another report released last year concluded that the U.S. juice market is poised to decline by 7 percent between 2016 and 2021, and experience significant decline by 2024.

And despite the pandemic fueling a bit of a renaissance for orange juice, in particular, due to its reputation for immune support and vitamin C content, the writing is on the wall for PepsiCo, which realizes that the juice category is not where the company is targeting its efforts. 

“This joint venture with PAI enables us to realize significant upfront value, whilst providing the focus and resources necessary to drive additional long-term growth for these beloved brands,” said Ramon Laguarta, chairman and CEO, PepsiCo. “In addition, it will free us 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.”

A Different View

PAI is a leading global private equity firm with significant experience in the food and beverage space. Since 1994, the firm has completed 84 investments in 11 countries, accounting for more than EUR 65 billion in transaction value, and today manages about EUR 15 billion of dedicated buyout funds.

Currently held by PAI is Ecotone, a leader in healthy and sustainable foods, and Froneri, the second largest ice cream manufacturer in the world, which acquired Nestlé’s U.S. ice cream business in 2019 in a deal valued at $4 billion. 

“We are excited to bring Nestlé’s stellar U.S. ice cream business to Froneri,” said Frédéric Stévenin, partner, PAI Partners at the time. “This is a great opportunity for further growth, building on the expertise of the world’s leading pure-play ice cream company.”

These newly-acquired juice businesses posed approximate net revenue of $3 billion last year, along with operating profit margins that were below PepsiCo’s overall operating margin for the year. But PAI sees pure potential.

Today, Stévenin stated that PAI  sees great potential waiting to be capitalized upon through this partnership, which is expected to close in late 2021 or early 2022, saying, “We are delighted to bring these storied beverage brands into the PAI portfolio through another partnership with a leading global food and beverage company.”

“We believe there is great growth potential to be realized through investments in product innovation, expansion into adjacent categories, and enhanced scale in branded juice drinks and other chilled categories. We are also thrilled that PepsiCo will remain involved as our partner in the joint venture as we execute our plans to drive the future success of these brands.”

– Lynda Kiernan-Stone is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Oilseed & Grain News. She can be reached at lkiernan-stone@globalaginvesting.com.