PepsiCo / poppi

The same net price as Celsius paid, four weeks apart, for a brand in a different aisle. Two of the largest beverage buyers in America agreed on a number without agreeing on a category.

Why the structure matters

$1.95bn is the number in the headline. $1.65bn is the number PepsiCo actually cared about, because $300m of anticipated cash tax benefits comes straight back. Add a performance earn-out worth about $0.2bn at close and you get a deal where a real slice of the price only gets paid if poppi keeps doing what it was bought for.

That is a buyer being careful. Which is worth noticing, because the public story was that big soda was panic-buying growth.

The thing poppi had

poppi did not win on formulation, and prebiotic soda is not a defensible recipe. It won on being the can people wanted to be seen holding. That is audience, the same asset Celsius bought, and it is why these two deals landed at an identical net price within four weeks of each other.

What PepsiCo adds is the part poppi could never buy: coolers, routes, and shelf position in every store in the country.

Where I would push

• Audience brands decay when the audience stops feeling early. Ubiquity is the risk, not the reward.
• Prebiotic soda has no moat in the liquid. The moat is entirely in the memory of the buyer.
• PepsiCo has bought cult brands before. The record on preserving them is mixed at best.

My call

The most structurally disciplined deal of the five. Tax benefits and an earn-out do a lot of work here, and I suspect PepsiCo knew exactly what it was underwriting. The open question is whether a distribution machine can carry a brand whose value was partly that it was hard to find.

Sources

• PepsiCo, completion announcement.
• Cravath, headline and net consideration.
• PepsiCo Form 10-Q, contingent consideration at close.