PepsiCo plans to buy in-home carbonated drinks maker SodaStream for $3.2 billion (JUSTIN SULLIVAN)

New York (AFP) – PepsiCo said Monday it was buying Israeli company SodaStream for $3.2 billion as the US beverage giant contends with falling demand for sugar-laden soft drinks among health-conscious consumers.

SodaStream makes machines that carbonate home tap water, and both PepsiCo and its arch-rival Coca-Cola have been diversifying away from their mainstay fizzy drinks in part to counter the onset of anti-obesity sugar taxes around the world.

The acquisition also is a pitch to consumers concerned about mounting waste from soda cans and plastics in landfills around the world, since SodaStream employs reusable bottles.

PepsiCo chief executive Indra Nooyi, who is stepping down following 12 years at the helm, characterized the purchase of Tel Aviv-based SodaStream as consistent with the US company’s sustainability push, which involves pledges on producing healthier goods, boosting water-use efficiency and reducing waste.

“Together, we can advance our shared vision of a healthier, more-sustainable planet,” Nooyi said.

SodaStream Chief Executive Daniel Birnbaum said the deal would open new markets to his company through PepsiCo’s global distribution and marketing network, adding that the company would keep its operations in Israel.

“Nobody has come here to obtain, to take, to close down and build a copy anywhere else,” Birnbaum said at a news conference in Tel Aviv that was attended by incoming PepsiCo Chief Executive Ramon Laguarta.

The company’s website celebrated the news with a 20 percent discount offer using the code “PEPSICO” — but it’s only good for 24 hours.

– Staying in Israel –

Laguarta said PepsiCo committed to keeping Israel the headquarters for 15 years, praising the company’s infrastructure and the “amazing” knowhow of factory staff.

Israeli Prime Minister Benjamin Netanyahu welcomed PepsiCo’s commitment to the country, saying “recent large acquisitions of Israeli companies prove not only their technological abilities but also the business abilities which have been developed in Israel.”

SodaStream, which is listed on the New York and Tel Aviv stock exchanges, has not been immune to the complex politics in its home region.

In 2015, SodaStream shut down a plant in the West Bank following a boycott campaign that included targeting Hollywood actress Scarlett Johansson after she advertised its product.

Under the cash deal, PepsiCo is to pay $144 a share for the fizzy water makers outstanding stock, a premium of 11 percent over its closing price on Friday.

SodaStream’s revenues were $543.4 million, while PepsiCo had revenues of $63.5 billion.

SodaStream shares were up more 9.7 percent in mid-morning trading in New York at $142.46, while PepsiCo was unchanged at $115.01.

– Healthier options –

Under Nooyi’s vision to move away from traditional sugary sodas, PepsiCo launched Drinkfinity this year, a new beverage based on tap water. Consumers buy flavored pods to inject a choice of tastes into a reusable bottle, such as acai berry, coconut-watermelon and elderflower.

Coca-Cola, for its part, said last week that it was buying a stake in BodyArmor, a maker of sports drinks that is endorsed by retired basketball star Kobe Bryant and offers a diet version of the drink is naturally sweetened.

Matthew Barry, senior analyst of beverages at Euromonitor International, said deals like the SodaStream purchase were vital for PepsiCo as it passes to new management. 

“With sugary carbonates and juices struggling and no turnaround in sight, mitigating the losses through newer and healthier products will be essential for PepsiCo,” he said in a research note.

“Consumers around the world are more and more interested in low-sugar beverage options. Sugar taxes also represent a prominent threat.”

“This deal gives PepsiCo sort of a beachhead for at-home water prep systems,” said Briefing.com. “It also boosts their ‘eco-friendly’ reputation, which has been a goal for them. 

“Another benefit is that it’s not just the water maker sales, SodaStream’s business model creates a recurring revenue stream as consumers need to purchase consumable gas refills and flavor packets.”

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