PepsiCo Inc.’s stock has usually had an advantage over its rival Coca-Cola thanks to its business diversification into the snacks segment.
That diversification has helped the company attract investors, though the business hasn’t gone as well as people expected.
The company has faced a consistent decline in its snacks segment, mainly because younger people prefer to opt for healthier food options.
Seeing that trend, the beverage maker is making a move by acquiring Siete Foods for $1.2 billion, a brand that offers healthier versions of Mexican cuisine.
What is Siete Foods?
Siete Foods is a family-owned Mexican-American food brand that specializes in grain-free products.
It has come to the limelight after becoming the fastest-growing Hispanic food company in the US. The positive public sentiment towards the natural foods industry has also helped the company.
The company offers grain-free tortillas, salsas, sauces, seasonings and snacks. It uses high-quality ingredients, using almond flour, cassava flour, and avocado oil to produce healthier alternatives to traditional Mexican foods.
Siete already has a presence in more than 40,000 locations in the US.
However, the acquisition by PepsiCo will help the company take its business to the next level.
The CEO of Siete Foods, Miguel Garza, believes the acquisition will not only make the company’s products accessible to a broader audience but will also inspire and encourage other Latino businesses.
What’s in it for PepsiCo?
PepsiCo already boasts a strong portfolio of food products but Siete Foods will help complement that portfolio with healthier food options.
On top of that, it will also help the company acquire a multi-cultural value that should help it penetrate increasingly multicultural societies not just in the US but also internationally. PepsiCo said in a statement:
Siete products will bring a rich, new aspect to the PepsiCo multicultural portfolio with delicious food that plays an important role in meal occasions and culinary experiences.
PepsiCo will announce its earnings report on the 8th of October and there is already some positivity heading into those earnings.
This positivity is limited to the news though, as Bank of America has recently lowered its estimates for the company’s expected quarterly performance.
The bank expects a continuation of the market share loss, lowering its EPS expectations from $8.14 to $8.
BofA isn’t the only one lowering their targets. 14 other analysts have cut down their estimates heading into the earnings call, with no analyst raising the projections.
This negativity is exactly the reason why PepsiCo is betting on the younger generation.
By acquiring a food brand like Siete Foods, the company intends to get back its market share.
This is easier said than done in a competitive market like the US.
PepsiCo’s job is further made difficult by its reliance on international operations, which are prone to supply chain issues that aren’t necessarily in the direct control of the company.
Investors will have to wait for about a year and a half before they can see any financial impact of this deal on the company’s books.
The deal is expected to close in the second half of 2025.
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