Here’s How PepsiCo Can Benefit From Acquiring Vita Coco

Reports suggest that PepsiCo (NYSE:PEP) is in talks to acquire All Market, the owner of Vita Coco, the popular coconut water brand. If this deal goes through, it will be a significant addition to PepsiCo’s  increasing portfolio of healthy beverages. In its recent earnings call, PepsiCo mentioned that 45% of its revenues now come from “Guilt Free Products” as the company is transforming itself to adapt to changing customer preferences. With consumption of carbonated soft drinks on the decline and consumers looking for sugar free, healthy beverages, coconut water can be a “healthy” addition to PepsiCo’s portfolio.

Competitive Edge Through A Stronger Portfolio Of Healthy Drinks

Vita Coco is the world’s largest coconut water brand and the company expects to reach $1 billion in sales this year. While these revenues might not be significant for PepsiCo, which has an annual turnover of more than $60 billion, this probable acquisition will give the company a strong holding in the growing market for coconut water. Demand for packaged coconut water is on the rise and the global coconut water market is likely to cross $5 billion by 2021, growing at a CAGR of 21%. Reports suggest that All Market – the owner of Vita Coco — is an attractive acquisition target and several players are looking to acquire the company. Vita Coco already has a partnership with Dr. Pepper Snapple as its distribution partner. Its chief competitor Zico was acquired by Coca Cola in 2013. If PepsiCo succeeds in acquiring Vita Coco, it will give the company a strategic edge over its competitors. PepsiCo will be able to expand further into the healthy beverages segment and with better control over a packaged coconut water brand the company can introduce other innovative products in this segment, increasing and expanding its revenues from this product line.

Healthier beverages are likely to drive growth for PepsiCo in the long term and the company already has a strategy in place to transform itself into a “healthier” company. Vita Coco can be a strong strategic addition for the company to enhance its portfolio of drinks, giving the company a competitive edge in the long term.

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