- PepsiCo will move forward with a deal to acquire probiotics beverage manufacturer KeVita, in which PepsiCo already owns a minority stake and distribution deal, sources told Reuters last week.
- This deal would be the first acquisition under PepsiCo's venture arm Naked Emerging Brands, which is tasked with diversifying the large corporation's beverages portfolio with better-for-you options for health-conscious consumers.
- PepsiCo could complete the acquisition as early as this month with an expected value of less than $500 million, the sources said. However, negotiations could delay or stop the deal.
KeVita's portfolio of sparkling probiotics, master brew kombucha and vinegar tonics center on the purported health benefits of probiotics. Probiotics have been a key trend in functional food and beverages in recent years because of their potential impact on digestive and immune health, though some experts question those health benefits.
This deal could show how PepsiCo made use of an exit strategy to make a venture capital investments in a startup. By investing early, major manufacturers can learn the inner workings of a startup's operations and portfolio, while positioning themselves to acquire the company outright for a lower price tag down the line.
Without an early investment and minority stake, an acquiring company could end up paying a much higher price for the startup after it grows and proves its market potential. Consequently, more manufacturers are launching venture arms, like PepsiCo's Naked Emerging Brands or Coca-Cola's Venturing and Emerging Brands.
PepsiCo has been diversifying beyond soda in recent years, including expanding its Naked line into the fast-growing cold-pressed juices category. PepsiCo also already expressed interest in probiotics with the debut of Tropicana Essentials Probiotics, which the company announced last month. Healthy foods and beverages have been key to growth for PepsiCo in its most recent earnings report.