Author : Shalajiang
Source : GPLP
After $705 million acquisition of Be&Cheery under Haoxiang Ni (002582. SZ), a Chinese snack brand enterprise. Pepsi (PEP. NASDAQ) has been engaged in business again recently!
Enter the functional beverage market
On March 11, Pepsi reached an agreement with Rockstar Energy Beverages (below referred to as “Rockstar”) to acquire Rockstar for $3.85 billion. If approved by regulators, the deal will be completed in the first half of 2020.
Founded in 2001, Rockstar provides more than 30 flavors of products in convenience stores in more than 30 countries and regions. Many products take a differentiated route, focusing on low calorie, free sugar, organic, and even fruit juice products.
Pepsi has not been able to fully own a main brand in functional drinks at present, and the independently operated Rocksta has been picked by Pepsi.
Ramon Laguarta, chairman and CEO of Pepsi, said that functional drinks are high profit products and expected to gain share in the fast-growing functional drinks.
It is understood that the previous agreement signed by Pepsi and Rockstar in 2009 restricted Pepsi’s distribution of other third-party functional drinks in the North American market. The acquisition will break this legal barrier and win the initiative in the research and development of functional drinks.
In order to win the initiative in the research and development of functional drinks, Pepsi has to make a big move and spend a lot of money on continuous acquisitions. Can Pepsi win?
Fight for Functional drink
Compared with carbonated, juice and other categories of beverages, functional drinks have maintained a high growth rate in the market. According to Alied Market Research, the market size of functional drinks is expected to reach $86 billion in 2026.
For a “new player” like Pepsi, the challenge to enter the functional beverage market is difficult. As a competitor of Pepsi, Coca Cola has coveted the functional drinks market as long ago. In 2014, Coca Cola purchased 16.7% of Monster beverage for $2.15 billion.
Chinese functional beverage market has a huge scale. According to the data of China Beverage Market Industry Association, the market scale of Chinese energy beverage reached 36.2 billion yuan in 2018, and the market scale of sports beverage reached 10.58 billion yuan.
In terms of Chinese functional beverage market, the Red Bull from Thailand account for 60% of Chinese total functional beverage market, forming a business scale of more than 180 billion yuan in the past 25 years, with sales volume of 23.3 billion yuan in 2019.
Local functional beverage enterprises in China has also begun to emerge, and Eastroc Beverage has also frequently heard the listing news, and War Horse has also obtained sales of 1.33 billion yuan in 2019.
