PepsiCo Is Buying Tel Aviv-Based SodaStream For A Whooping $3.2 Billion

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PepsiCo is not the same company it was before Indra Nooyi took over as CEO. Nooyi knows sugary drinks are not consumer friendly. For the last twelve years, Nooyi let the world know that PepsiCo is expanding its reach outside of the sugary drink world. The 62-year-old Nooyi is stepping down as CEO in October. But before she leaves, she is making sure PepsiCo continues to expand its product base. She is doing that by acquiring Tel Aviv-based SodaStream for $3.2 billion.

SodaStream produces refillable cylinders for home soda machines. Users can make carbonated water drinks at home. The company distributes their machines in 80,000 retail stores in 45 countries. The biggest SodaStream markets are Canada, Germany, France and the United States. SodaStream reported strong quarterly earnings in 2018. The company crushed its earnings forecast for the year, and shares went up by 26 percent in the first quarter. Machine sales are up 22 percent and gas refills are up 17 percent so far this year. In the first quarter of 2018, SodaStream sold more than one million machines. SodaStream shares are up 85 percent since the beginning of 2018.

This is not PepsiCo’s first attempt to acquire SodaStream. Nooyi and her executive team knew that company was the right fit years ago. But SodaStream wanted to grow on its own before PepsiCo got involved. Once the executives and the SodaStream shareholders felt the time was right, they closed the deal with PepsiCo faster than expected.

PepsiCo is already in the sparkling water business. In 2018, the company launched “Bubly” which is PepsiCo’s answer to La Croix sparkling water. La Croix owns 30 percent of the sparkling water market in the United States. Perrier is La Croix’s main competitor with a 15 percent market share. PepsiCo wants to eat into those market shares by adding the SodaStream concept to their sparkling water product line. SodaStream had competition from Keurig Kold, but Keurig shut down their in-home carbonated water system in 2016.

The SodaStream deal will help PepsiCo reinvent itself, but losing Nooyi could hurt the company. PepsiCo’s President Ramon Laguarta is taking over for Nooyi so it should be a smooth transition. But some insiders say not having Nooyi around will create some issues. SodaStream shareholders still have to vote on the PepsiCo offer, but according to news reports, the deal should close in January 2019.

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