PepsiCo is seeking to boost its presence in the fast-growing energy drinks category, announcing it will buy Rockstar Energy Beverages for $3.85bn.
The deal reflects the trend among big beverage companies like PepsiCo and Coca-Cola to overhaul their portfolios to shift their reliance on sales of sugary, fizzy drinks and towards options ranging from tea and coffee to water of both still and sparkling varieties, which appeal to health-conscious and millennial consumers.
Neither PepsiCo nor Coca-Cola own a major brand in the energy drinks category, which is forecast to grow to more than $80bn over the next five years, and is currently dominated by Red Bull.
Ramon Laguarta, PepsiCo chief executive, described the acquisition as “highly strategic” and said it would allow the company to “both accelerate Rockstar’s performance and unlock our ability to expand in the category with existing brands such as Mountain Dew.”
The deal would mark one of the first big moves for Mr Laguarta, who took the reins from Indra Nooyi in 2018, and comes at a time when sharp moves in financial markets have prompted investors and bankers to rapidly reassess the outlook for merger and acquisition activity.
PepsiCo shares were down 3.8 per cent in pre-market trading on Wednesday, slightly worse off than the 3.4 per cent drop for the S&P 500 that was implied by futures as investors continue to grapple with volatility amid the coronavirus outbreak and following Monday’s oil price plunge.
PepsiCo has distributed Rockstar in North America since 2009. Its own stable of energy drinks is limited to Mountain Dew Kickstart, GameFuel and AMP. Coca-Cola owns a stake in Monster Beverage, and had a distribution agreement with the company that, until an arbitration ruling last year, meant it could not sell its own Coke-branded energy drinks in the US.
In February, PepsiCo said it would buy Hangzhou Haomusi Food, also known as Be & Cheery, one of the largest online snacks companies in China, for $705m, which it said at the time represented “an important step” in its goal to become China’s leading consumer-centric food and beverage company.
PepsiCo said in a statement on Wednesday it did not expect the transaction, which is subject to the usual customary closing conditions and approvals, to be material to its revenue or earnings in 2020. The deal is expected to close in the first half of this year.
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2020-03-11 16:36:30Z
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