PepsiCo taps healthier drinks market with SodaStream deal

New York: PepsiCo on Monday said it was buying Israeli company SodaStream for USD 3.2 billion as the US beverage giant contends with falling demand for sugar-laden soft drinks among health-conscious consumers.

SodaStream makes machines that carbonate home tap water, and both PepsiCo and its arch-rival Coca-Cola have been diversifying away from their mainstay fizzy drinks in part to counter the onset of anti-obesity sugar taxes around the world.

SodaStream offers consumers "the ability to make great-tasting beverages while reducing the amount of waste generated", PepsiCo chief executive Indra Nooyi, who is stepping down following 12 years at the helm, said in a statement.

Along with the health appeal of its product over traditional soft drinks, SodaStream's reusable bottles are another marketing point exploited by the Israeli company as consumers are urged to shun polluting plastics.

Under the cash deal, PepsiCo is to pay USD 144 per share for SodaStream's outstanding stock, a premium of 11 per cent over its closing price on Friday.

SodaStream shares were up more than 10 per cent at USD 143.02 in pre-market US trading today. PepsiCo stock was flat ahead of the open.

Nooyi said SodaStream's approach was aligned with "our philosophy of making more nutritious products while limiting our environmental footprint".

Ramon Laguarta, who is set to replace Nooyi in October, added: "SodaStream is highly complementary and incremental to our business, adding to our growing water portfolio."

PepsiCo launched Drinkfinity this year, a new beverage based on tap water. Consumers buy flavoured pods to inject a choice of tastes into a reusable bottle, such as acai berry, coconut-watermelon and elderflower.

Coca-Cola, for its part, said last week that it was buying a stake in BodyArmor, a maker of sports drinks that is endorsed by retired basketball star Kobe Bryant.

The drink is a rival to PepsiCo's Gatorade, and the US titans have also been tussling in the market for diet sodas.

Matthew Barry, senior analyst of beverages at Euromonitor International, said deals like the SodaStream purchase were vital for PepsiCo as it passes to new management.

"With sugary carbonates and juices struggling and no turnaround in sight, mitigating the losses through newer and healthier products will be essential for PepsiCo," he said in a research note.