- Industry experts are questioning the benefits of Dr Pepper Snapple's purchase of Bai Brands, particularly the $1.7 billion bidding price, Food Business News reported.
- The Bai Brands acquisition is anticipated to contribute $132 million in incremental net sales and $43 million in incremental operational income.
- Experts project Bai Brands' 2016 sales to hit $231 million, a 139% increase over the prior year.
While the acquisition's price tag may seem high or premature, the board undoubtedly entered into negotiations with this or a similar sum already decided. DPS has been a national distributor for Bai Brands since 2013 and therefore intimately knows Bai's portfolio, business model and expansion plans more thoroughly than other potential buyers might.
Such a fact may dampen investors' concerns about the price tag of this deal relative to the incremental sales and operational income experts expect the acquisition to provide Dr Pepper Snapple — at least, at first. Dr Pepper Snapple expects Bai Brands' sales to continue to grow under its wing, so the size of its financial contribution would likely increase over time.
Growth is most likely assumed because of the products and categories that comprise Bai Brands' portfolio. Many easily align with today's consumer trends — particularly healthy and convenient beverages and exotic flavors. But DPS also considered more technical aspects, such as where various products were in terms of distribution at that moment and how their velocities added up by channel.