Where will PepsiCo’s acquisition spree lead?

PepsiCo Inc. (NASDAQ: PEP) appears to be on an acquisition spree. In the time span of just over a year, the food and beverages giant has announced the acquisition of five companies. These acquisitions include snacks and beverages firms both in the US and outside, which will help in enriching the company’s product portfolio and expanding its footprint.

The most recent one is energy drink maker Rockstar Energy Beverages, which the company has agreed to acquire for $3.85 billion. The deal is expected to close in the first half of 2020 and is not expected to be material to PepsiCo’s revenue or EPS this year.

PepsiCo’s North American beverages business delivered 3% revenue growth in 2019. Although overall volumes fell 1%, volume in non-carbonated beverages increased 2%. The company saw an increase in its water portfolio despite a decrease in its juice drinks portfolio. As consumer preferences shift away from sugary and carbonated drinks due to health concerns, energy drinks could gain more prominence, giving PepsiCo space to expand further.

Last month, PepsiCo announced the acquisition of Be & Cheery for $705 million. Be & Cheery is a leading online snack company in China which offers several products including dried fruits, meat snacks and confectionery. In 2019, PepsiCo’s Asia-Pacific division saw a 4.5% increase in revenue. Snacks volume increased by 6% with a double-digit growth in China. This acquisition will give PepsiCo a stronger footing in China as well as pave way for growth in ecommerce.

In December, PepsiCo said it agreed to acquire BFY Brands for an undisclosed amount. BFY, which manufactures PopCorners snacks, will become a part of the Frito-Lay division after the close of the transaction. Frito-Lay has been PepsiCo’s strongest division, delivering 4.5% revenue growth in 2019. This acquisition will further strengthen the snacks business, which accounts for the majority of the company’s revenue.

Also read: How has COVID-19 impacted these major Chinese stocks?

In July, PepsiCo announced an agreement to acquire South African company Pioneer Foods for around $1.7 billion. This acquisition will help the company expand further in the Africa, Middle East and South Asia region, where revenue was down slightly in 2019, despite a 7% increase in snacks volume.

In December 2018, PepsiCo acquired SodaStream International, which helped drive a 7% increase in revenue in Europe during 2019. Beverage volume rose 23%, driven again by the SodaStream acquisition.

PepsiCo is a well-established company with a solid portfolio of products in snacks and beverages. As mentioned earlier, the company’s strategic acquisitions will help in expanding this portfolio and broadening its footprint across new markets. This acquisition spree could lead to more streams of revenue further strengthening PepsiCo’s position in the industry.

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