Beverage maker PepsiCo (PEP) is in advanced talks to acquire Poppi, a healthier soda brand, for over $1.5 billion. The deal could be announced as soon as next week, according to Bloomberg, which cited people familiar with the matter. This potential acquisition is part of PepsiCo’s strategy to expand its portfolio of healthier brands.
Interestingly, the “functional soda” category, which includes lower-sugar beverages with added ingredients like prebiotics and probiotics, has been growing rapidly. And Poppi has gained popularity for its line of prebiotic sodas that promote digestive health. Indeed, sales of functional beverages are up over 60% at FreshDirect, a New York-based grocer, and are being driven by brands like Olipop and Poppi. PepsiCo’s potential acquisition of Poppi would give the company a strong foothold in this growing market.
It is worth noting PepsiCo has also been actively acquiring other brands that are considered healthier, such as Siete Foods for $1.2 billion in October and Sabra Dipping Co. the following month. CEO Ramon Laguarta highlighted that there is a growing awareness among American consumers towards health and wellness, which is why the company is moving in this direction.
Is PEP a Buy or Sell?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on PEP stock based on nine Buys, seven Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average PEP price target of $166.93 per share implies 12.3% upside potential.
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