PepsiCo closes $1.95bn Poppi deal: Can the gut health soda scale globally?

PepsiCo, Inc. (NASDAQ: PEP) has officially closed the acquisition of fast-growing prebiotic soda brand poppi for $1.95 billion, marking one of its most significant moves in the functional beverage category to date. The deal, finalized on May 19, 2025, includes an estimated $300 million in anticipated cash tax benefits, bringing the net purchase price down to approximately $1.65 billion. A performance-based earnout component has also been structured into the deal, with undisclosed revenue or brand targets likely tied to future disbursements.

The acquisition is being framed by PepsiCo as a strategic leap in its “Positive Choices” portfolio transformation—a long-term vision focused on modern wellness, functional nutrition, and reduced-sugar alternatives. This move positions PepsiCo to scale a culturally relevant, health-forward brand that has found deep resonance among Gen Z and millennial consumers seeking soda alternatives with tangible health benefits.

Why Did PepsiCo Buy Poppi Now?

The rationale behind this high-profile transaction lies in the convergence of three consumer macrotrends: gut health awareness, demand for low-sugar beverages, and digitally native brand engagement. Poppi, known for its soda-style drinks infused with prebiotics, fruit juice, and apple cider vinegar, has become a breakout success in the U.S. functional drinks market. The company’s direct-to-consumer virality, especially on TikTok, has been instrumental in building grassroots brand equity. This acquisition lets PepsiCo absorb not just a brand, but a growing social media movement that aligns tightly with wellness-centric cultural shifts.

According to Ram Krishnan, CEO of PepsiCo Beverages North America, the acquisition is “just the beginning” of PepsiCo’s ambition to scale wellness beverages and create deeper consumer connections. While official financials from poppi remain private, industry analysts estimate the brand reached over $100 million in annual retail sales prior to the acquisition, more than doubling in size over the past 12 months.

What Is Poppi and How Did It Grow So Fast?

Poppi was originally born out of a kitchen experiment aimed at alleviating gut health issues using apple cider vinegar. Since then, it has grown into a full-fledged consumer movement with a mission to “modernize soda” by blending functionality with flavor. Each can of poppi contains no more than 5 grams of sugar and promotes digestive benefits from its prebiotic ingredients.

The brand’s growth trajectory has been nothing short of viral. From its colorful packaging and tongue-in-cheek product naming to influencer-driven campaigns, poppi has capitalized on Gen Z’s preference for authenticity and health transparency. Its biggest asset, arguably, is its loyal online community—built not just through marketing spend, but by creating culturally fluent, shareable content. Viral moments, including celebrity endorsements and TikTok challenges, catapulted the brand into retail expansion across Whole Foods, Target, and national convenience chains.

The company’s co-founder and CEO, Chris Hall, noted that PepsiCo’s acquisition is “a tremendous validation” of the brand’s mission and said that joining PepsiCo’s portfolio will allow poppi to “scale to the next phase of growth” without compromising on values.

Sector Context: The Rise of Functional Beverages in Consumer Portfolios

PepsiCo’s move reflects a broader sector trend: the shift from traditional sugary sodas toward functional drinks with added health benefits. The global functional beverage market, which includes categories such as hydration, probiotics, immunity boosters, and mood-enhancing beverages, is expected to surpass $200 billion in annual sales by 2027, according to Grand View Research.

Major consumer packaged goods companies are now racing to acquire early-stage brands that show traction in these segments. Coca-Cola has already made investments in kombucha and energy drink categories, while Nestlé has expanded into hydration-focused products. PepsiCo itself has a history of such strategic M&A, having previously acquired Health Warrior (plant-based snacks), Kevita (probiotic drinks), and Siete (grain-free food).

Poppi fits cleanly into this M&A pattern, but with one crucial difference: it is arguably the first mass-market functional soda that has combined gut health claims with soda-style taste and digital virality. For PepsiCo, acquiring poppi is not just about distribution—it is about future-proofing relevance in a market being reshaped by digitally fluent, wellness-driven consumers.

Institutional Sentiment and Investor Reaction

While the acquisition is not expected to materially impact PepsiCo’s short-term earnings per share, institutional investors have interpreted the move positively as part of the company’s long-range growth narrative. Analysts from JPMorgan and Morgan Stanley noted that the acquisition supports PepsiCo’s strategic focus on high-margin, high-growth wellness verticals that offset stagnation in legacy product categories.

Several fund managers praised PepsiCo’s ability to spot and scale emerging brands while preserving their core identity—something that larger players often struggle with post-acquisition. The integration of poppi will serve as a litmus test for PepsiCo’s broader capability to manage culturally resonant brands within a legacy framework.

Buy-side sentiment also appears aligned with this strategy. There was no meaningful short-term movement in PepsiCo’s stock following the announcement, suggesting that institutional investors have already priced in the company’s acquisition-led wellness push as part of its baseline growth model.

Financial and Legal Architecture of the Deal

The transaction was executed with a comprehensive M&A architecture reflective of high-growth brand buyouts. Centerview Partners LLC served as lead financial advisor to PepsiCo, while J.P. Morgan Securities LLC acted as co-advisor. Cravath, Swaine & Moore LLP provided legal advisory, and Davis Polk & Wardwell LLP assisted on tax-related structuring.

Poppi was advised by Goldman Sachs & Co. LLC as financial advisor and Cooley LLP as legal counsel. The presence of a performance-based earnout indicates that PepsiCo is aligning future payout milestones with brand performance, a common risk-mitigation structure in fast-scaling consumer brand acquisitions.

Will PepsiCo Let Poppi Stay Independent?

This question has loomed large in M&A circles. Based on previous precedent with brands like Sabra and Kevita, PepsiCo has demonstrated a relatively light-touch approach during the early post-acquisition phase. Analysts believe poppi will be allowed to retain its identity, team culture, and social voice, at least in the near term, while PepsiCo provides operational support such as supply chain expansion, category analytics, and retail strategy.

This hybrid model—a decentralized brand ethos backed by centralized distribution and capital—is increasingly favored by large CPGs aiming to capture Gen Z loyalty without diluting brand authenticity.

Future Outlook: What Comes Next for Poppi and PepsiCo?

Poppi is expected to roll out nationwide across all PepsiCo retail partners within the next 6 to 12 months, with significant marketing investment likely allocated to maintaining its Gen Z positioning. Analysts also speculate that poppi may soon expand into adjacent categories such as gut health hydration drinks, low-calorie sparkling waters with adaptogens, and even snack formats with functional claims.

For PepsiCo, the acquisition adds ballast to a broader transformation effort that has already seen legacy brands reformulated with lower sugar, the launch of premium hydration lines like LIFEWTR and Gatorade Fit, and the creation of an internal venture arm focused on nutrition innovation.

In parallel, analysts expect further M&A activity from PepsiCo as it continues to build a modular wellness portfolio. Categories like cognitive function beverages, plant-based recovery drinks, and microbiome-focused products are likely to see rising investment interest.

A $1.95 Billion Test of Modern Beverage Strategy

PepsiCo’s acquisition of poppi is more than a transactional event—it’s a strategic statement about the future of beverages. As traditional soda sales stagnate in mature markets and consumer preferences lean toward health, transparency, and digital-native storytelling, acquiring brands like poppi is less about shelf space and more about mindshare.

The deal serves as an endorsement of a new kind of beverage startup—one that grows through community, drives relevance through culture, and validates its value not in bottling volume but in social momentum and functional integrity. Whether PepsiCo can retain poppi’s magic at scale will likely shape its M&A blueprint for the next wave of consumer demand.