PepsiCo relinquishes control of Tropicana for $3.3 billion

PepsiCo will sell Tropicana and other juice brands to a private equity firm in exchange for pre-tax proceeds of 3.3 billion dollars.

It looks like PepsiCo is getting serious about cutting sugar from its drinks portfolio. The global food giant announced Tuesday it is parting ways with Tropicana, Naked and other juice brands in North America for good.

Private-equity firm PAI Partners is to pay $3.3 billion for a controlling stake in juice business. PepsiCo will also receive a 39% stake in a newly formed JV with PAI and the exclusive U.S. distribution rights for the juice brands for certain channels, such as food service. PAI will also have the irrevocable option to buy certain PepsiCo juice businesses in Europe.

PepsiCo Tropicana PAI Partners

Juice consumption in North America has fallen from 4.2 billion gallons in 2003 to 3 billion in 2017.

“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,” Pepsi CEO Ramon Laguarta said in a statement.

PepsiCo shrinks its sugary-juice portfolio for $3.3 billion

The North American juice market has been on the decline since early 2000s when low-carb diets grew in popularity. The trend has continued with more families choosing water or other sugar-free or low-calorie drinks. According to Ramsey Baghdadi, Consumer Analyst at GlobalData: “The juice sector in North America has been consistently declining, shown by its -2.1% CAGR between 2014 and 2019.”

 

PepsiCo’s juice unit delivered about 3 billion dollars in revenue last year, but its operating profits were way below the FNB giant’s overall numbers.

 

Juice consumption in North America has fallen from 4.2 billion gallons in 2003 to 3 billion in 2017, writes Brian Sudano, the managing partner of Beverage Marketing. Over the past several years, food and beverage giants like PepsiCo and Coke have been under immense pressure to shift away from sugary drinks and toward lower-calorie offerings such as diet soda and bottled water.

PepsiCo’s juice unit delivered about 3 billion dollars in revenue last year, but its operating profits were way below the FNB giant’s overall numbers. The company reported net sales of $70.37 billion in 2020.

“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,” Pepsi CEO Ramon Laguarta said in a statement.

PepsiCo acquired Tropicana in 1998 and Naked Juice brand about 10 years later.

The transaction is expected to close late this year or early next year. PepsiCo said it will use proceeds from the sale of Tropicana to strengthen its balance sheet and reinvest in its business.

Anna Domanska
Anna Domanska is an Industry Leaders Magazine author possessing wide-range of knowledge for Business News. She is an avid reader and writer of Business and CEO Magazines and a rigorous follower of Business Leaders.

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