PepsiCo Sells Majority Stake In Juice Brands To Private Equity Firm For $3.3B: What You Need To Know

PepsiCo, Inc. PEP is selling the majority stake in its juice brands, including Tropicana and Naked, to the French private equity firm PAI Partners for $3.3 billion.

What Happened: The Purchase, New York-headquartered beverage and snacks company will retain a 39% non-controlling in the brands, which will operate under a newly formed joint venture between PepsiCo and PAI Partners.

PepsiCo will also retain exclusive U.S. distribution rights to the brands for its chilled Direct Store Delivery for small format and food service channels.

"This joint venture with PAI enables us to realize significant upfront value, whilst providing the focus and resources necessary to drive additional long-term growth for these beloved brands," said PepsiCo Chairman and CEO Ramon Laguarta in a statement.

"In addition, it will free us to concentrate on our current portfolio of diverse offerings, including growing our portfolio of healthier snacks, zero-calorie beverages, and products like SodaStream which are focused on being better for people and the planet."

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Why It Happened: The consumption of fruit juices has been in decline for years as consumers have sought out beverages with lower sugar content. The Beverage Marketing Corp. reported U.S. consumption of fruit juices and drinks totaled 2.8 billion gallons in 2020, a 19% decline from the 3.4 billion recorded in 2011.

PepsiCo reported that its juice businesses delivered approximately $3 billion in net revenue for 2020, with operating profit margins below its overall operating margin for the year; the company as a whole reported $70 billion in net revenue.

PepsiCo acquired the Tropicana brand from The Seagram Co. Ltd. in 1998 for $3.3 billion, and the product is still the top refrigerated orange juice brand with American consumers. PepsiCo acquired Naked Juice Co. from the private equity firm North Castle Partners in 2006 for an undisclosed amount.

PEP Price Action: Pepsi shares were trading 0.58% higher at $157.23 premarket Tuesday. 

Photo: Tropicana juice product line-up, courtesy of Pepsico.