PepsiCo to buy Naked Juice to compete with Coca-Cola

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PepsiCo to buy Naked Juice to compete with Coca-Cola

 

PepsiCo Inc., the world's second- largest soft-drink maker, agreed to buy Naked Juice Co. to expand sales of natural-juice drinks and compete with Coca-Cola Co.'s Odwalla brand.

Naked Juice makes 25 vitamin-fortified drinks such as a pineapple-banana protein shake. The company has annual sales of more than $150 million, the Azusa, California-based company said today in a joint statement with PepsiCo. Terms of the deal weren't disclosed.

PepsiCo acquired healthier beverage and food companies including Izze and Stacy's Pita Chips in the past year to lure drinkers shunning sugary sodas. Chief Executive Officer Indra Nooyi is adding Naked Juice to try to win consumers from Odwalla juices and smoothies, which Coca-Cola bought in 2001.

``We think Pepsi's recent acquisition activity highlights the company's level of commitment relative to Coke in terms of adding high growth, non-carb brands to continue to reposition its beverage portfolio,'' wrote John Faucher, an analyst with JP Morgan Securities Inc., in a research note today.

Faucher estimates PepsiCo will pay about $450 million to buy Naked Juice from North Castle Partners, a private-equity firm based in
Greenwich Connecticut. He is assuming a price of three times Naked Juice's annual revenue.

Shares of Purchase, New York-based PepsiCo rose 6 cents to $62.56 at
4 p.m. in New York Stock Exchange composite trading. PepsiCo shares are up 5.9 percent this year, compared with a 17 percent gain for Coca-Cola.

Nooyi, who succeeded Steve Reinemund as
CEO on Oct. 1, has said she intends to spend about $500 million a year on niche acquisitions such as Izze and Stacy's.

PepsiCo's sales have risen an average of 5 percent over the past five years on demand for noncarbonated beverages such as Gatorade and Tropicana, compared with a 3 percent average increase for Coca-Cola, which depends on soda for 80 percent of its sales.

Naked Juice, founded in 1983, will gain better marketing and access to retailers from PepsiCo, said Faucher.

The company currently distributes about 6 million bottles a month nationwide to more than 10,000 supermarkets, health-food stores and other retailers in the U.S. Naked Juice costs about $3 for a 15.2-ounce bottle.

Sales of Naked Juice rose 70 percent for the 52 weeks through Nov. 5, according to scanner data from Information Resources Inc., which excludes Wal-Mart Stores Inc. and some health-food stores.

``The super-premium juice category is small, but fits in the increasing health and wellness'' focus of companies including PepsiCo, said John Sicher, editor of Beverage Digest, an industry journal.

Coca-Cola paid $186 million in cash and assumed debt for Odwalla Inc. in 2001 to enter the so-called super-premium natural-juice category. At the time, Odwalla had sales of $94 million.

Between 2002 and 2005, Odwalla's sales rose more than 50 percent, Coca-Cola spokesman Ray Crockett said, without being more specific.