PepsiCo will buy the Israel-based DIY soft drink company SodaStream in a deal worth $US3.2 billion ($4.4 billion). The move is widely seen as an effort by Pepsi to prop up its catalogue of “healthy” food and drink options as it continues to wage battle against longtime rival Coca-Cola. Both PepsiCo and Coca-Cola have invested heavily in both healthier and eco-friendly alternatives over the past decade.
The deal between Pepsi and Sodastream still needs to clear cursory regulatory hurdles, but PepsiCo plans to pay $US144 ($197) cash per SodaStream share in the transaction using cash on hand. According to a press release, the deal has already been approved by the boards of both companies.
“Today marks an important milestone in the SodaStream journey. It is validation of our mission to bring healthy, convenient and environmentally friendly beverage solutions to consumers around the world. We are honored to be chosen as PepsiCo’s beachhead for at home preparation to empower consumers around the world with additional choices,” SodaStream CEO and Director Daniel Birnbaum said in a statement issued today.
“I am excited our team will have access to PepsiCo’s vast capabilities and resources to take us to the next level. This is great news for our consumers, employees and retail partners worldwide.”
Will the purchase pay off for Pepsi? Some people aren’t so sure. As Reuters notes, Coca-Cola and Keurig Green Mountain tried to make their own at-home soft drink system work in 2015 called the Keurig Kold but that project was quickly abandoned.
In fact, the Keurig Kold often made the list of worst products of 2015 both for its high price point ($US369) and for being both loud and “unreliable”. Soft drink is already so cheap that the primary draw for DIY products - cost-savings - doesn’t make a lot of sense in 2018.
The keys to Sodastream’s business relies on selling flavour packs that allow consumers to add their own mixes to the carbonated water. But many consumers only buy the SodaStream machines to make fizzy water without adding any flavours.
That hasn’t stopped SodaStream from growing tremendously, at least on paper. The company has seen its share price skyrocket since it went public in 2010 and has had a really strong couple of years, jumping 85 per cent in the past year alone.
If everything goes smoothly, the deal is expected to close around January of 2019. Whether PepsiCo can escape the curse of the Keurig Kold remains to be seen.