In the upcoming year, soda companies like Coca-Cola and Pepsi have decided to switch their focus onto non-carbonated beverages. This is the result of a soda tax following the recent election. Boulder and San Francisco are just two of the cities who are looking at a rise in taxes for their sugar-sweetened drinks. Dr. Pepper and Snapple soon announced they too were joining the ranks of soda companies who are changing up their approach.
This past Tuesday, Dr. Pepper, along with Pepsi, announced that they are pivoting toward acquiring more favored water and probiotic companies. As we all know, however, healthy alternatives cost money.
Pepsi is reported to be investing in a company known as KeVita, a maker of many different probiotic drinks. The details of this investment haven’t exactly been disclosed, but it is speculated that Pepsi will spend close to $200 million. Dr. Pepper has also spent close to $1.7 billion dollars investing in the acquisition of probiotic drink corporations as well which include, but aren’t limited to, antioxidant-infused waters and Bai brand.
Although the news seems new, these investments go back as far as 2013. Bai brand was previously allied with Dr. Pepper. Dr. Pepper helped Bai expand their merchandise and has been distributing their product for the last three years. Dr. Pepper then invested $15 million in Bai during 2015. The same goes with Pepsi who took minority shares of KeVita in 2013 and has been helping the company expand its product since then.
These investments aren’t made without big expectations. Dr. Pepper expects Bai brands to make at least $425 million in profit around 2017. Larry Young, president and CEO of Dr. Pepper, stated Tuesday he believes that:
“In a relatively short time, Bai has carved out a leadership position in the enhanced water category and has now extended that success into other fast-growing and profitable categories. We’re equally impressed with their innovation pipeline, which will continue to meet the needs of consumers seeking great tasting, low-calorie beverages with natural flavors and no artificial sweeteners.”
Pepsi boasted about KeVita as well. Pepsi general manager and vice president of its nutrition division, Chris Lansing said, “KeVita has become an innovative, high–growth brand that is transforming the functional beverage space.”
While this announcement is good news for consumers, it has caused a rise in the trading market. Since Tuesday, Pepsi went up 0.4% and Dr. Pepper went up 1.6%. When the deal closes, KeVita will function separately from Pepsi, and Bai’s founder Ben Weiss will continue to independently lead the industry even after it becomes part of Dr. Pepper’s brand. For Pepsi and Dr. Pepper, 2017 seems to be a year of growth.
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