Please ensure Javascript is enabled for purposes of website accessibility

Pepsi Squeezes $3.3 Billion Out of Tropicana Sale

By The Daily Upside – Aug 3, 2021 at 10:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It's official, PepsiCo is all out of juice. Not metaphorically — we're talking about actual juice. On Tuesday, the American beverage giant...

For more crisp and insightful business and economic news, subscribe to The Daily Upside newsletter. It's completely free and we guarantee you'll learn something new every day.

It's official, PepsiCo is all out of juice. Not metaphorically — we're talking about actual juice.

On Tuesday, the American beverage giant said it is selling its Tropicana orange juice brand — as well as Naked and other juice lines — to French private equity firm PAI Partners for $3.3 billion. Ditching juice will allow Pepsi to focus on growth markets, as consumers try to avoid glucose overload by opting for less sugary drinks.

Cooling Their Peels

Pepsi and perennial taste-challenge rival Coca-Cola are both on a quest to siphon the sugar from their product portfolios. But that doesn't mean Pepsi's juice business is past its shelf life.

Quite the contrary, in fact — Tropicana is still the best-selling fridge-dwelling orange juice in America, and juices and fruit drinks earned PepsiCo $3 billion last year. But profit margins still lagged behind much of the company's $70 billion business, and juice's future is looking cloudier than concentrate:

  • People drank 2.8 billion gallons worth of juice and fruit drinks last year. That may sound like a lot, but it's 19% less than households consumed a decade ago, according to Beverage Marketing Corp. And Pepsi's sales of fruit drinks have fallen 36% in that time.
  • Energy drinks are all the rage nowadays — U.S. sales climbed to $3.7 billion last year from $2.8 billion in 2015, and Pepsi bought segment leader Rockstar last year for $3.8 billion to pair with its Mountain Dew Kickstart, Game Fuel, and AMP brands.

PAI, for its part, has done plenty of cherry-picking from companies trying to cut back on sugar — in 2019, the company relieved Nestlé of its Häagen-Dazs, Drumstick, and Mövenpick ice-cream brands.

A Little Juice Left: The deal between PepsiCo and PAI is valued at $4.5 billion in total, with the beverage giant retaining a 39% stake in the joint venture. Coca-Cola, meanwhile, still owns Simply Orange, America's number two orange juice after Tropicana.

None

Related Articles

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.