Beverage and food group PepsiCo sells its juice brands to French PAI. That investment fund will pay 3.3 billion dollars for Tropicana and Naked, including the juice factory in Zeebrugge.
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The world’s second-largest soft drink company is transferring its North American and European juice businesses into a joint venture with French investment fund PAI, which will hold a 61 percent majority stake. The remaining 39 percent will remain in the hands of PepsiCo, as will the exclusive distribution rights in the United States. The Alvalle (gazpacho) and Looza brands remain out of the deal.
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In our country, PepsiCo employs approximately 950 employees, spread over branches in Zaventem, Veurne (production of the chip brands Cheetos, Doritos and Lay’s) and Zeebrugge, where Tropicana and Naked are produced. The site and the approximately 250 employees of the juice factory in Zeebrugge are moving to the joint venture with PAI, a PepsiCo spokesperson confirmed to De Tijd.
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The essence
- The French investment fund PAI has paid 3.3 billion dollars for the juice brands Tropicana and Naked.
- The juice factory in Zeebrugge, which employs approximately 250 people, is also covered by the deal.
- PepsiCo will be fully committed to the production of ‘healthy snacks and calorie-free drinks’.
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Market leader
PepsiCo bought Tropicana for $3.3 billion in 1998. Tropicana came into existence in 1947 when Anthony Rossi, who had made the crossing from Sicily to the US at 21, bought a small orange juice company in Florida. The company delivered juice at home, but Tropicana soon ended up on the shelves of the New York department store Macy’s. Seeing bread on sale in the Big Apple, Rossi introduced a pasteurization process that allowed the juice to be packaged and stored in glass bottles. In 1957, the steamship SS Tropicana delivered nearly six million gallons of juice from Florida to New York every week. When Pepsico bought the company in 1998, Tropicana was the undefeated market leader in the United States, with a nearly 40 percent market share and annual sales of $2 billion.
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Naked Juice ended up in PepsiCo’s portfolio in 2006, in an effort to become less dependent on its namesake soft drinks.
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Falling sales
But the growth of fruit juices has come to an end in recent years. Many consumers exchanged the sugar-rich juices for healthier alternatives. The previous CEO of PepsiCo, Indra Nooyi, therefore already set his sights on a more balanced range with healthier products, such as bottled water and sugar-free soft drinks. The purchase of SodaStream, the well-known Israeli manufacturer of devices for making fizzy drinks at homeshould be seen in that light.
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The downward trend was also reflected in the sales figures. While 12.8 billion liters of fruit juices were still sold in the United States in 2011, consumption had fallen by almost 20 percent to 10.6 billion liters by 2020. During the same period, PepsiCo’s fruit juice sales fell 36 percent to 1.6 million liters. In the corona year 2020, the juice brands at PepsiCo still accounted for a net turnover of 3 billion dollars, out of a total of 70 billion dollars.
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The same Nooyi, who left PepsiCo in early 2019 after 24 years, promised his shareholders to boost the company’s margins and shift focus to faster-growing products such as breakfast cereals, oatmeal (Quaker Oats), potato chips (Lay’s ), tortilla chips from Doritos and nuts from Duvyis. The energy drinks market was also tapped last year with the purchase the energy drink Rockstar for $3.85 billion
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With the sale of Tropicana and other juice brands, current CEO Ramon Laguaerta is making good on the promise of his predecessor. “The deal gives us room to focus on growing our portfolio of healthy snacks, calorie-free beverages and products such as SodaStream, which are focused on being better for people and the planet,” he said in a statement. PepsiCo plans to use the proceeds from the sale “to strengthen its balance sheet.”
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PepsiCo
- Well-known brands: Pepsi, Lipton, 7Up, Lay’s, Cheetos, Quaker, Looza
- Revenue: $70.4 billion (2020)
- Gross operating profit: $10.5 billion (2020)
- Employees: 291,000 (2020), spread over branches in 26 countries
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That leaves the question of why the French private equity giant is interested in slacking juice brands, such as Tropicana and Naked. In an interview with the British business newspaper Financial Times, managing partner Frédéric Stévenin explains that PAI sees a ‘momentum’ for the juice brands. He refers to the surge in sales that many food companies noticed last year.
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There are of course a lot of natural sugars in juice, but there are also good things in it, such as vitamins and fiber.
Frédéric Stevenin
Managing Partner PAI
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That flare-up had everything to do with the corona pandemic. PepsiCo was able to profit from the lockdown measures that closed the catering industry and kept people at home. For example, there was a remarkable increase in the demand for orange juice, because many people were forced to have breakfast at home. ‘Of course there are a lot of natural sugars in juice, but there are also good things in it, such as vitamins and fibre’, says Stévenin optimistically.
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For PAI, which manages approximately 15 billion euros in funds, the purchase of the juice brands is not a step in the thin air. The investment fund has been active in the food sector for some time. Through a joint venture with Nestlé, PAI owns the ice cream brands Häagen-Dazs and Mövenpick. PAI also owns the Belgian outdoor chain AS Adventure and the French hotel group B&B Hotels.
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