PepsiCo has announced its acquisition of the prebiotic soda brand Poppi for $1.95 billion, marking a strategic move into the rapidly growing functional beverage market. This deal comes at a time when PepsiCo is facing challenges due to declining demand for traditional beverages and an increasing preference among consumers for healthier alternatives. As noted by CBS News, young Americans are gravitating towards functional drinks as part of their health-conscious lifestyle.

The Poppi brand, founded in 2016, combines prebiotics, fruit juice, and apple cider vinegar to create a low-calorie soda with only five grams of sugar per serving. According to Reuters, Poppi's impressive retail sales have surged by 122% year-over-year, capturing a growing share of the U.S. carbonated drinks market.

PepsiCo's CEO, Ramon Laguarta, expressed that the company aims to evolve its offerings to align with consumer trends towards health and wellness, saying, “More than ever, consumers are looking for convenient and great-tasting options that fit their lifestyles.” The deal also incorporates $300 million in anticipated cash tax benefits, which ultimately lowers the net purchase price to $1.65 billion.

Allison Ellsworth, co-founder of Poppi, emphasized the benefits of the acquisition for expanding the brand's reach while maintaining its unique qualities. The beverage brand gained early recognition after receiving investment from the reality show Shark Tank, which helped propel its growth and rebranding.

However, the journey hasn’t been entirely smooth, as Poppi faces ongoing legal issues related to claims about the health benefits of its products. Lawsuits have challenged the effectiveness of its gut health promotion, leading the brand to revise its packaging. This aspect is covered in full detail at SFGate.

As the acquisition is finalized, it's expected to position PepsiCo favorably within the competitive landscape of health-oriented beverages, following competitors like Coca-Cola, which has also ventured into the prebiotic market.