How beverage M&A is changing in 2025: From functional drinks to TikTok taste tests

The consumer beverage industry is undergoing a structural transformation in 2025, led by an uptick in mergers and acquisitions centered on wellness-driven, direct-to-consumer brands. Functional sodas, prebiotic beverages, and adaptogenic drink formulations are now not only preferred by younger demographics but also generating strategic interest from global consumer packaged goods players. PepsiCo, Inc. (NASDAQ: PEP), the most notable mover this year, recently completed its $1.95 billion acquisition of Poppi—a gut-health-focused prebiotic soda brand that first rose to prominence on TikTok and Shark Tank. The deal signals a broader shift in how beverage portfolios are being rebalanced toward clean-label, low-sugar, and socially driven formats.

Unlike prior decades, where brand equity was established through legacy advertising and shelf dominance, today’s beverage contenders gain traction through digital virality and community-led innovation. This evolving landscape has changed how investors, marketers, and strategists evaluate acquisition targets, placing increased weight on social proof, niche identity, and functional ingredient trends. As a result, beverage M&A has become a channel for capturing not just revenue but relevance.

What does PepsiCo’s $1.95 billion acquisition of Poppi reveal about 2025 beverage portfolio strategies?

PepsiCo’s move to acquire Poppi—reportedly generating over $100 million in annual revenue as of 2024—is a clear attempt to deepen its wellness beverage footprint and capture early-stage consumer loyalty in the prebiotic space. Poppi’s signature feature is its apple cider vinegar formulation that delivers gut health benefits with only 4 to 5 grams of sugar per can. Its bright branding and influencer-driven growth strategy made it a staple on TikTok, where the brand regularly receives millions of views per product drop or taste test.

Institutional sentiment suggests the Poppi deal mirrors the strategic logic behind earlier acquisitions such as SodaStream and Kevita, but with a more aggressive pivot toward digitally native branding. The $1.95 billion price tag, including approximately $300 million in tax benefits, implies a forward multiple that bakes in strong future growth, with PepsiCo forecasting incremental EBITDA accretion by 2026.

How is TikTok reshaping beverage category launches and creating high-valuation acquisition targets?

Short-form video platforms, especially TikTok and Instagram Reels, have fundamentally disrupted beverage product discovery. In 2025, brands like Poppi, OLIPOP, and Hiyo no longer rely on conventional shelf marketing. Instead, they use creator partnerships, user-generated content, and taste-test virality to build brand identity. Poppi’s rise was accelerated by influencers sharing daily gut-health routines or low-sugar swaps, with video testimonials often doubling as product endorsements.

Industry analysts suggest that TikTok-born visibility has become a key valuation driver. Brands that demonstrate viral engagement often command 2–3x higher acquisition multiples than competitors with similar sales but lower digital visibility. For acquirers, these brands offer built-in communities, story-driven packaging, and performance-marketing compatibility—elements that are increasingly more valuable than traditional brand recall.

What broader consumer trends are fueling demand for functional, clean-label, and hybrid beverages in 2025?

Health-conscious behavior—especially among Gen Z and millennial consumers—has pushed beverage manufacturers to rethink ingredient sourcing and formulation. The demand for low-calorie, low-sugar, and functional beverages is outpacing conventional soda growth by a wide margin. NielsenIQ data from early 2025 indicates that U.S. functional beverage sales have grown at a compound annual growth rate (CAGR) of 10.7% since 2021, with gut-health and adaptogen categories leading the way.

Meanwhile, legacy players like PepsiCo and Coca-Cola have reported softening volumes in traditional carbonated soft drinks. Analysts believe this divergence underscores a multi-decade shift from taste-first to function-first consumption. From electrolyte-enhanced waters to herbal teas with anti-anxiety benefits, consumers now expect beverages to support physical or cognitive well-being without sacrificing flavor or portability.

How are institutional investors evaluating margins and brand scalability in beverage M&A transactions?

Institutional investors view functional beverage acquisitions as long-term plays that combine margin expansion with premium positioning. Brands like Poppi may carry gross margins above 50% due to direct-to-consumer pricing and low promotional spend, compared to the 30–35% margin typical for mainstream soda brands. As such, acquisition prices often reflect these future cash flow expectations and the cost of building similar brand affinity organically.

The Poppi acquisition, despite its hefty valuation, has received favorable reactions from investors. Following the announcement, PepsiCo shares posted modest intraday gains, and sentiment from institutional desks indicated confidence in the company’s ability to integrate the brand into its global distribution network without diluting product authenticity. Several funds are also revisiting their beverage exposure, seeking targets in low-acid, nootropic, and sugar-free niches that show similar viral behavior.

What could the next phase of beverage M&A look like as functional drinks become mainstream?

As functional drinks move from niche status to a category cornerstone, analysts expect beverage M&A activity to broaden across new frontiers that integrate wellness, personalization, and digital ecosystems. The next wave of targets is likely to go beyond gut-health sodas and include hydration platforms with proprietary mineral blends, adaptogen-infused formulations, and CBD-based functional beverages where regulations permit. Emerging players in these segments—especially those showing traction through direct-to-consumer channels—are already on the radar of multinational consumer goods conglomerates seeking Gen Z and health-first brand relevance.

Industry watchers also point to the growing appeal of alcohol alternatives designed to deliver mood enhancement or social uplift without ethanol. Functional spirits, kombucha cocktails, and low-ABV tonics formulated with botanicals, nootropics, or mushroom extracts are gaining popularity among urban wellness consumers. In this vein, Coca-Cola’s minority investment in Health-Ade Kombucha, and Unilever’s recent exploration of gut-brain axis nutrition platforms, suggest that traditional food and beverage players are willing to cross functional boundaries to stay competitive.

Parallel to these consumer-facing trends, a quieter but equally significant transformation is unfolding in beverage technology infrastructure. A new class of startups—operating at the intersection of food science, artificial intelligence, and data analytics—is developing B2B platforms that offer real-time customization, flavor modularity, and health scoring for beverages. These include AI-powered drink dispensers, microbiome-informed formulation engines, and embedded QR systems that offer transparency on ingredients and benefits. Such platforms are increasingly seen as strategic M&A targets for large bottlers, contract manufacturers, and wellness-focused food service providers looking to add tech capabilities to their core competencies.

Geographically, there is growing investor interest in Southeast Asia, the Middle East, and Latin America, where rising disposable incomes are fueling demand for lifestyle beverages with functional claims. Startups from these regions—particularly those leveraging local superfoods, traditional herbs, or fermentation cultures—could attract strategic capital or acquisition offers as part of global beverage portfolio diversification.

For global incumbents like PepsiCo and Coca-Cola, the long-term challenge is not just to acquire these emerging brands or platforms, but to scale them without diluting their credibility. Many of the most successful functional drink startups—such as Poppi, OLIPOP, and Hiyo—have built loyal communities around authenticity, ingredient transparency, and social engagement. Replicating those values at mass scale requires careful stewardship of brand identity, supply chain integrity, and innovation cadence.

Institutional investors believe the next phase of beverage M&A will also hinge on how well acquirers integrate data—from consumer health metrics to social engagement scores—into product development and marketing. Rather than relying solely on flavor profiles or retail data, the future of beverage innovation may depend on how quickly brands can personalize offerings based on consumer microbiome, genetic predispositions, or wellness goals. In this evolving paradigm, M&A will increasingly function not just as portfolio expansion, but as a conduit for acquiring new ways of thinking, selling, and connecting with consumers.

As functional beverages transition from trend to infrastructure, the definition of a “beverage company” itself may blur—pulling in diagnostics, AI, and bio-personalization at a deeper level. What remains clear is that the M&A roadmap for global beverage giants in 2025 and beyond will be shaped as much by platform dynamics and digital virality as by ingredient panels and taste tests.