Dr. Pepper and PepsiCo diversify away from shrinking soda market

Soft drink giants like the Coca-Cola Company, PepsiCo and Dr. Pepper Snapple fear the growing pressure of levies on sugar-sweetened drinks and therefore diversify in related markets. On Tuesday morning PepsiCo, Inc. and Dr. Pepper Snapple Group Inc. announced in different press releases the purchase of companies for flavored water and probiotic drinks respectively.

Dr. Pepper acquires Bai Brands, one of the fastest-growing flavored-water companies in the US for $1.7 billion. Bai is the first sizable buy since Dr Pepper Snapple spun off from Cadbury in 2008. Bai is especially known for antioxidant-infused water, coconut water and ready-to-drink tea. The company had sales of $120 million last year, and this year it's on track to reach $300 million. Dr. Pepper has been distributing Bai’s drink line for the past three years as part of Dr. Pepper’s so-called “allied brand line-up” and invested last year $15 million into the emerging brand.

Hollywood actor and singer Justin Timberlake joined the Bai team last month as an investor and its first “chief flavor officer.” "He will be involved in everything from flavor innovation and product launches to marketing and digital content," Bai's founder and CEO Ben Weiss said. He will also star as the face of the brand in a $100 million marketing campaign next year. According to undisclosed sources Timberlake has now also been paid out.

PepsiCo, on the other hand, acquires KeVita, the maker of probiotic-infused and Kombucha drinks for an undisclosed sum. Informed sources close to PepsiCo report a purchase price of around $200 million. KeVita will continue to operate independently from PepsiCo.

Both companies, Dr. Pepper Snapple as well as PepsiCo, want to emerge the declining soda market. Soda sales plunge over the last decade as people opt for healthier drinks. In the November elections besides Philadelphia five more communities voted in favor of soda taxes — San Francisco, Albany (CA), Oakland, Boulder and Cook County.

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