PepsiCo Sells Juice Brand Including Tropicana and Naked in $3.3 Billion Deal

by Emily Morgan

PepsiCo is selling its 70-year-old juice business, which includes Tropicana and Naked juices. On Tuesday, the company announced that it would get $3.3 billion for the transaction. It will sell a 39 percent stake in its juice business. 

“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,” PepsiCo chairman and chief executive Ramon Laguarta said. 

“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.”

PepsiCo also announced it would sell Tropicana, Naked, and other select juice brands to a private equity firm known as PAI Partners. 

“We are focused on capital allocation and ensuring we are always optimizing our portfolio to get the best results. As we went through an exercise over the past 18 months or so, we came to the conclusion that given our orientation towards higher growth and improving our margins, Tropicana was probably less of a fit with the portfolio.

PepsiCo Vice Chairman and CFO said in an interview that they “made a decision” to move Tropicana elsewhere.”

PepsiCo purchased Tropicana in 1998 and Naked later in 2006. However, juice sales have slowed down as consumers look for less sugary options. PepsiCo has now set its sights on zero sugar drinks within its portfolio. 

“PepsiCo already has a good idea of how it will use the proceeds from the transaction. It plans to use a chunk of it for debt reduction among other corporate initiatives,” Johnston said. 

“Generally speaking we have been an acquirer,” Johnston added. “We have also re-franchised bottling businesses over time in international as well. We are constantly looking at how we make this portfolio even better and even stronger.”

Orange juice sales rose last year during the pandemic as more people ate breakfast at home, PepsiCo said. However, demand for fruit juices has generally been declining as consumers look for other options. 

In 2020, these juice businesses delivered approximately $3 billion in net revenue with operating profit margins not meeting expectations. 

According to The Wall Street Journal, fruit juices consumption and fruit drinks overall fell 19 percent to 2.8 billion gallons in 2020 from 3.4 billion in 2011, according to data from Beverage Marketing Corp. 

During the same period, PepsiCo’s sales of those products fell 36 percent to 436 million gallons. According to the WSJ, Tropicana is the top refrigerated orange juice brand in the nation. Coca-Cola’s Simply Orange follows Tropicana.

In 2020, PepsiCo launched a new drink, Driftwell, which helps people who can’t sleep. PepsiCo will retain exclusive distribution rights to the juice brands.

According to the company, the sale will close in late 2021 or early 2022.