Why is PepsiCo (NASDAQ: PEP) selling Tropicana, other juice brands?

Summary

  • PepsiCo had bought Tropicana for roughly US$3.3 billion in 1998. It also had acquired Naked Juice for US$150 million about a decade ago.
  • The company plans to use the funds to build a health-focused portfolio of snacks and beverages.
  • PepsiCo’s close rival Coca-Cola Co (NYSE: KO) also streamlines its product range to include more health-focused products.

PepsiCo Inc (NASDAQ: PEP) on Tuesday announced plans to sell its juice brands like Tropicana to the French company PAI Partners for US$3.3 billion. The move is part of its plan to shift from high-sugar drinks to health-focused snacks and beverages.

The company had bought Tropicana for around US$3.3 billion in 1998. It also had acquired Naked Juice for US$150 million about a decade ago. However, PepsiCo will hold a 39% stake in Naked Juice and distribution rights for the other brands in the US market.

The company will utilize the funds to build a portfolio of health-focused food like snacks and zero-calorie beverages, Reuters quoted CEO Ramon Laguarta as saying.

The New York-headquartered company is expected to focus more on profitable brands.

PepsiCo’s close rival Coca-Cola Co (NYSE: KO) also streamlines its product range to include more health-focused products. It has already discontinued TaB diet soda and some energy brands in the US and introduced the ZICO coconut water brand.

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Source: Pixabay

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In Q1 of 2021, the snacks and beverage maker had posted a 6.8% net revenue growth YoY to US$14.82 billion. In the year-ago quarter, it was US$13.88 billion.

Its organic revenue jumped 2.4% YoY during the period.

Some of its brands include Tropicana, Aquafina, Gatorade, 7 Up, and Doritos.

It generated US$5.07 billion in revenue from the North American beverages segment in the quarter, up from US$4.84 billion.

Its GAAP EPS rose by 29% to US$1.24 against 96 cents in the corresponding period of 2020.

PepsiCo’s net income increased from US$1.34 billion to US$1.71 billion in the first quarter.

The PepsiCo (NASDAQ: PEP) stock was priced at US$156.775, up 0.29% from the previous close at 10:05 am ET on Tuesday.

Please note: The above constitutes a preliminary view, and any interest in stocks/cryptocurrencies should be evaluated further from an investment point of view.

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