Three acquisitions helping shape PepsiCo's beverage portfolio for the future
Speaking in last week's Q2 earnings call, CEO Ramon Laguarta updated analysts on how the company's plans for the three brands - acquired in 2018, 2019 and 2020 respectively - are faring: and revealed what they tell us about the future direction of PepsiCo's beverage portfolio.
SodaStream: 'A future consumption model we're betting on'
PepsiCo bought SodaStream for $3.2bn in 2018: taking on the brand which allows people to make their own sparkling drinks at home in a customized fashion, eliminating the need for plastic bottles to package the drink. It is, says Laguarta, an important brand because it represents a ‘future consumption model we’re betting on’.
Why? Simply put: “It's great in terms of consumer personalization of the product and obviously better for the planet,” says Laguarta.
Laguarta says the brand is performing ahead of PepsiCo’s initial expectations: but that there is still a lot of opportunity for the brand to grow in terms of geographies globally and wider product offer.
“The SodaStream business has a very solid penetration in Europe. And also in the US, we're gaining a lot of household penetration in the US.
“The latest thing we're doing - and it's working quite well - is putting some of our large beverage brands into the SodaStream consumption model. In the US, we started with bubly. bubly drops are working very, very well as an enhancer of the SodaStream experience, and we continue to push that combination of the bubly flavors and the SodaStream sparkling water experience.”
In growing the brand, there’s also the chance to gain insights relevant to the rest of the business, adds Laguarta.
“We continue to build the direct-to-consumer model, trying to get many more insights on consumption behaviors, and that is helping us not only to develop the SodaStream business but to develop the rest of our innovation and categories. So, a pretty good ecosystem we're building of consumption at home, but also insights and innovation for the broader business. So, we feel good about the momentum of the business, and it's going to continue to be a priority for us going forward.”
What’s sweet, refreshing and fun all over? A very bubbly addition to the SodaStream family! Introducing our SodaStream x bubly™ drops Limited Edition Kit, perfect for making your own bubbly sparkling water at home. https://t.co/WuX8Qqsraapic.twitter.com/9z91NqviBL— SodaStream USA (@SodaStreamUSA) November 1, 2020
Sport, protein, energy
Another important acquisition is the 2019 acquisition of CytoSport: the business behind protein shake brand Muscle Milk and protein bar Evolve, alongside others. PepsiCo bought the business from Hormel Foods Corporation, having already been CytoSport’s long term distribution partner.
“That business is really thriving,” said Laguarta. “Clearly, we see that consumers are moving into protein and sport, and that's a space that will continue to grow. Very positive momentum with the two brands, and there were some jewels in that business like Evolve and some others that we're trying to take the maximum out of those brands as you will see in the coming future.”
In March last year, PepsiCo announced it would acquire Rockstar Energy Beverages for $3.85bn in a move to expand its presence in the fast-growing energy category. This acquisition, says Laguarta, is a longer-term strategy to build its multi-pronged drive into the category – which also involves Starbucks RTD products and Mtn Dew.
ROCKSTAR XDURANCE. 300 MG of caffeine. ZERO sugar. 5,000 MG of Stoke. Go getcha one! pic.twitter.com/U7KIiAP2O6— Rockstar Energy Drink (@rockstarenergy) June 26, 2021
In April it unveiled an ‘emboldened new look at attitude’ for the brand. The same month, it pushed out into new territory with the launch of Rockstar Energy + Hemp in Germany – PepsiCo’s first foray into the hemp category.
“On Rockstar, we were always very transparent,” said Laguarta. “This is a multiyear effort, right, and we're trying to put strong foundations, strong foundations in the areas of product. So, we're changing some of the formulas. I think the non-sugar portfolio is excellent, and that's the area of the category that's growing the fastest.
“Our execution is improving a lot. We're getting distribution and we're getting better visibility of the brand. And I think our brand positioning is quite good. We found a niche that wasn't there. Clearly, it's differentiated from Red Bull and from Monster, and it's a unique position that we plan to insist on, and I think we're getting good feedback as well on that positioning.”