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Pepsico Betting $3.2 Billion That The Future Of Soda Is Sparkling Water Made At Home With SodaStream – Maggie McGrath

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Pepsi is betting that the future of soda is at home and more in the realm of sparkling water than in aluminum cans laden with 41 grams of sugar: The beverage giant announced Monday morning that it is spending $3.2 billion, or $144 per share, to acquire at-home seltzer maker SodaStream.

The deal, which Pepsi plans to fund with its cash on hand, values SodaStream at a 32% premium to its 30-day volume-weighted average price and a 10% premium to its closing price on Friday.

“PepsiCo and SodaStream are an inspired match,” outgoing Pepsi CEO Indra Nooyi said in a statement Monday morning. “Daniel and his leadership team have built an extraordinary company that is offering consumers the ability to make great-tasting beverages while reducing the amount of waste generated.”

Added Daniel Birnbaum, SodaStream’s CEO: “I am excited our team will have access to PepsiCo’s vast capabilities and resources to take us to the next level. This is great news for our consumers, employees and retail partners worldwide.”

The marriage with Pepsi is a poetic turn for the at-home sparkling water maker; in 2012, Birnbaum told Forbes that the soft-drink and bottled-water industry was “flawed,” “broken,” “wrong,” “stupid” and “evil.” And though Birnbaum took an almost “if you can’t beat them, join them” approach in late 2014 when he struck a deal with Pepsi to test at-home versions of Pepsi and Sierra Mist

(A move that followed months of rumors that SodaStream was selling itself to the beverage giant), the company has in recent years been more focused on positioning itself as a “wellness solution” and a “leading manufacturer of sparkling water makers.” Instead of soda, it’s been marketing at-home seltzer—and the pivot has paid off in dividends.

SodaStream’s stock price, which was suffering at a mere $13 a share in early 2016, has gained more than 84% in value in 2018 alone. In its most recent quarterly earnings report, SodaStream reported quarterly profit that was double that of the Wall Street estimate; the company also tripled its earnings forecast for the year.

The focus on sparkling water is also a key reason Pepsi is so willing to bet billions on the company. As consumer tastes have shifted away from soda, Pepsi has been trying to establish itself in the seltzer arena with its line of Bubly sparkling waters (it launched the brand this February, one year after launching premium bottled water LIFEWTR). The SodaStream acquisition will increase its foothold in this part of the market.

“SodaStream is highly complementary and incremental to our business, adding to our growing water portfolio, while catalyzing our ability to offer personalized in-home beverage solutions around the world,” Ramon Laguarta, Pepsi’s incoming CEO, said in a statement Monday.

The transaction, which CNBC reported came together in a matter of weeks, is expected to close by January 2019.

Wall Street, meanwhile, is happy with what it sees, sending SodaStream shares for a 10% gain in Monday’s pre-market trading session. Pepsi, meanwhile, is up just half a percent in pre-market trading.

 

 

 

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Amazon Is Getting Ready To Crush LaCroix – Alison Griswold

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Amazon and Whole Foods are about to shake up the US seltzer market.

Whole Foods is currently offering steep discounts on 12-packs of flavored sparkling water by 365 Everyday Value, its private label, at stores in the San Francisco area. The $3.99, buy-one-get-one-free deal is exclusive for Amazon Prime members who download the Whole Foods app and sign in with their Prime accounts. It’s also a clear shot at LaCroix, a popular seltzer brand among American millennials, a 12-pack of which retails for $5.99 at Whole Foods stores in San Francisco.

The deal highlights how Amazon is using Whole Foods, which it bought for $13.7 billion in June 2017, to go after some of the hottest brands in consumer-packaged goods. Whole Foods introduced 365-branded canned sparkling water in September 2017, a month after Amazon closed the acquisition. The drink is available nationally in five flavors—lemon, lime, orange, grapefruit, and “pure”—with a new ginger flavor set to launch this September, a Whole Foods spokesman told Quartz.

“I’ve got to laugh when they do grapefruit,” said Barry Joseph, author of the forthcoming book, Seltzertopia. “LaCroix made grapefruit a standard flavor for seltzer. If someone’s putting out seltzers that include grapefruit, they’re clearly going after the market that LaCroix developed, even if they don’t call it pamplemousse.”

A deal for Amazon Prime members on 365 sparkling water at Whole Foods in Berkeley, California.

More Americans are drinking seltzer than ever before. From 2008 to 2017, sales of unflavored carbonated water more than doubled in the US to 770 million gallons, according to data from industry research firm Euromonitor.

The frothiest company in the market is National Beverage Corp., LaCroix’s parent, which reported $827 million in sales during its 2017 fiscal year, up 17% over the previous fiscal year. Once a favorite of Midwestern moms, LaCroix has been reborn a millennial status symbol whose shiny pastel cans fill the fridges of Los Angeles screenwriters and Silicon Valley startups, and have even inspired a line of T-shirts.

“WOW… what a year!” declared Nick Caporella, National Beverage Corp.’s 81-year-old chairman and CEO, in the 2017 annual report. The company’s stock price (ticker: FIZZ), rose 90% in the 2017 calendar year, hitting an all-time high of $126.40 in September.

Whole Foods’ 365 seltzer line was in the works before the Amazon acquisition, a spokesman told Quartz. Late last year, Whole Foods named sparkling water as a “top food trend” for 2018.

“Some people say LaCroix was the peak of seltzertopia,” Joseph said. “When we see things like Bubly from Pepsi and this from Amazon, it’s clear that we’re just moving up toward the next stage of the national battle over flavored seltzer.”

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