PepsiCo offloads juice businesses Tropicana & Naked in US$3.3B deal, new JV targets healthy beverages and snacks

04 Aug 2021 --- PepsiCo is slimming down its juice portfolio, having newly inked a deal to sell Tropicana, Naked and other select juice brands across North America to French private equity firm PAI Partners. The agreement includes an irrevocable option to sell certain juice businesses in Europe. 

The move will result in combined pre-tax cash proceeds of approximately US$3.3 billion while retaining a 39 percent non-controlling interest in a newly formed joint venture.

The transaction is expected to close in late 2021 or early 2022, subject to customary conditions, including works council consultations and regulatory approvals.

“Importantly, this new JV structure will also allow us to shift greater attention, focus and resources towards our current portfolio of diverse offerings, including growing our portfolio of healthier snacks, zero-calorie beverages and products like SodaStream,” a PepsiCo spokesperson tells FoodIngredientsFirst.

“This partnership with PAI is about unlocking growth and helping these iconic brands to reach their full potential and we believe this joint venture will accelerate growth and allow the brands to be more agile in a competitive marketplace.”

These juice businesses delivered approximately US$3 billion in net revenue last year, with operating profit margins that were below PepsiCo’s overall operating margin for 2020.

PepsiCo expects to use the proceeds from the sale of these assets primarily to strengthen its balance sheet and to make organic investments in the business. 

The transaction is expected to close in late 2021 or early 2022. (Credit: Tropicana)Portfolio building
PAI Partners is an active stakeholder in the F&B space, overseeing a portfolio that includes ice cream manufacturer Froneri and Ecotone, a health-oriented and sustainable food company.

It manages around €15 billion (US$17.8 billion) of dedicated buyout funds and, since 1994, has completed 84 investments in 11 countries, representing over €65 billion (US$77 billion) in transaction value.

“We believe there is great growth potential to be realized through investments in product innovation, expansion into adjacent categories and enhanced scale in branded juice drinks and other chilled categories,” says Frédéric Stévenin, a managing partner at PAI.

“We are also thrilled that PepsiCo will remain involved as our partner in the joint venture.”

PAI will be the majority shareholder of the transferred business. Meanwhile, PepsiCo will retain exclusive US distribution rights to the portfolio of brands in its chilled Direct Store Delivery for small-format and foodservice channels.

“This joint venture with PAI enables us to realize significant upfront value, while providing the focus and resources necessary to drive additional long-term growth,” concludes PepsiCo chairman and CEO Ramon Laguarta. 

Coca-Cola’s facility divestments
Over the last year, The Coca-Cola company made similar moves to offload underperforming brands, including its Odwalla and Zico juices. The soda giant’s TaB diet soda and Coca-Cola Life were among the most recent brands to be taken off its US portfolio. 

For now, PepsiCo’s rival is hanging on to its Minute Maid and Simply juice brands. The company will further direct funds to the launch of promising innovations like Topo Chico Hard Seltzer, Coca-Cola Energy and AHA flavored sparkling water.

In latest developments, Refresco – among the largest independent bottlers in Europe and North America – entered into an agreement with Coca-Cola to acquire three of its hotfill production locations in the US. This transaction is still subject to regulatory approval.

“The ongoing trend of A-brands outsourcing their production capabilities continues to provide opportunities for us as an independent beverage solutions provider,” comments Hans Roelofs, CEO of Refresco.

“With manufacturing and supply chain being at the heart of our business, the acquisition of three Coca-Cola facilities in the US is another step forward in our growth strategy.”

Brad Goist, COO Refresco North America, adds: “Adding three hotfill production sites to our footprint is a great opportunity to further enhance our offering.”

“I am convinced that our Retail and A-brand customers across North America will be able to benefit from our extended capabilities and broadened geographical footprint.”

In addition to the three US-based production facilities in Truesdale (Missouri), Waco (Texas) and Paw Paw (Michigan), the prospective transaction involves long-term agreements for contract manufacturing activities.

Refresco shares it is on track to become one of Coca-Cola’s strategic third-party contract manufacturers in the US.

By Benjamin Ferrer