🥤 Pepsi Acquires Poppi, Startup Drink Brands Rejoice

Pepsi is acquiring Poppi, the prebiotic soda brand launched in 2018 by co-founder couple Allison and Stephen Ellsworth, for $1.95 Billion.

What makes this an attractive investment for Pepsi? 1) Health Trends: For years, Pepsi has diversified into healthier categories across not just drinks, but also snacks and other products. Poppi’s financial success rides the wave of healthier consumer behavior.

Poppi lives at the intersection of trends in gut health, lower calorie drinks, and health and wellness in general.

What’s also critical here is that Poppi targeted (and helped create) a new category — prebiotic drinks.

2) Cultural Relevance: Poppi has done a great job with marketing, appealing to both youth audiences and driving awareness for broader audiences. They straddle traditional and modern.

This is a brand that has simultaneously run two consecutive years of Super Bowl ads while also running partnerships with people like Alix Earle, Hailey Bieber, and Post Malone alongside a roster of influencers.

Allison Ellsworth has done a great job spearheading Poppi’s founder-led story and has become a mini-celebrity herself.

What Now For Prebiotic Sodas? From what I gather, Poppi’s annual revenue is around $100-$150 Million, which makes the $1.95 Billion acquisition a 13x-20x revenue multiple.

This is aligned with Poppi’s key rival Olipop, which was recently valued at $1.85 Billion. So should Olipop look for a buyer?

Coca-Cola has launched a prebiotic soda called Simply Pop but it probably makes more sense for Coke to acquire Olipop rather than bank on the success of Simply Pop.

I’d love to see Coke buy Olipop so we can have the modern version of the Cola Wars.

A “Cultural Relevance” Multiple? In order to justify this revenue multiple, I bet that Pepsi is banking on Poppi to be a cool, culturally relevant brand rather than just a prebiotic soda company.

If Pepsi thinks Poppi brand extensions are viable, that justifies the price of the acquisition. There must be a perceived halo effect of having Poppi in the Pepsi brand portfolio and possibly doing collabs with other Pepsi brands.

For startup consumer brands, they see the appetite from big CPG companies looking to acquire companies in new categories that drip in a good amount of cultural relevance.