PepsiCo will sell Tropicana and other juices to a private equity firm in a $3.3 billion deal.
The New York drink and snack company will keep a 39% non-controlling stake in a newly formed joint venture in the deal with PAI Partners.
The sale reflects the industry’s uncertainty about demand for fruit juice as consumers look for healthier options with less sugar, said Howard Telford, head of soft drinks at Euromonitor International, a market research firm.
“This deal reflects the desire of the industry to focus and innovate around a smaller core of categories and brands, including water, energy drinks, coffee and the staple carbonated soft drinks,” Telford said.
U.S. juice sales volumes actually rose last year as more people enjoyed breakfast at home during the pandemic and sought the immunity benefits of vitamin C, Telford said. But that was a blip in a longer-term decline. Overall juice sales fell 3% between 2015 and 2020, the data firm said.
Juice consumption in the U.S. peaked in 2003 at 4.2 billion gallons, but by 2017, that had fallen to 3 billion gallons, wrote Brian Sudano, the managing partner of Beverage Marketing Corp. The group does not see that trend changing.
Pepsi rival Coca-Cola Co. has also been shedding slow-selling brands, including Odwalla and Zico juices, over the last year so it can focus on stronger performers. But Coke is holding on to its Minute Maid and Simply juice brands for now.
The juice business delivered about $3 billion in revenue for PepsiCo last year, but at operating profit margins that were below the company’s overall margins, it said. In its annual report, Pepsi said falling juice sales offset gains for other products in North America, including water, sports drinks like Gatorade and energy drinks like Propel.
PepsiCo Chairman and CEO Ramon Laguarta said in a prepared statement Tuesday that the deal “will free us to concentrate on our current portfolio of diverse offerings, including growing our portfolio of healthier snacks, zero-calorie beverages, and products like SodaStream.”
PepsiCo bought Tropicana in 1998 and the Naked juice brand, also part of the sale Tuesday, about 10 years later. It was heading in another direction by 2018 when it bought SodaStream, the carbonated drink machine company, for more than $3 billion.
PepsiCo Inc., based in New York, has the option to sell certain juice businesses in Europe.
The deal is expected to close late this year or early next year.
Pepsi shares were flat in early trading Tuesday.
AP Business Writer Dee-Ann Durbin contributed to this report.
Regulators authorized AstraZeneca’s coronavirus vaccine for use in adults throughout the European Union on Friday, amid criticism the bloc is not moving fast enough to vaccinate its population.
WASHINGTON (AP) — A former FBI lawyer was sentenced to probation for altering an email that the Justice Department relied on during its surveillance of an aide to President Donald Trump during the Russia investigation.
MADISON, Wis. (AP) — Democratic Gov. Tony Evers lashed out Friday at rival Republicans who tried to repeal his statewide mask mandate, saying killing the order would be a ridiculous move comparable to abolishing speed limits.
COLUMBIA, S.C. (AP) — As some conservatives in South Carolina celebrated getting a bill that would ban almost all abortions in the state past a legislative barrier and likely becoming law, they said they are not finished trying to end all abortions.
A Moscow court on Friday put the brother and several allies of Russian opposition leader Alexei Navalny under house arrest for two months as authorities sought to stymie more protests over the jailing of the top Kremlin foe.