Natural Foods Merchandiser

Naked Juice poured into growing PepsiCo portfolio

Global beverage giant PepsiCo continued its naturals buying spree with its recent acquisition of Azusa, Calif.-based Naked Juice Co. The terms of the deal were not disclosed.

The purchase, along with its acquisition of Izze Beverages in October, gives PepsiCo wide access into the cold cases of natural and conventional grocers nationwide.

"It appears that Pepsi is working diligently to improve the healthfulness of its brand portfolio in response to consumer demand," said Scott Van Winkle, managing director of investment bank Cannacord Adams. "Faced with declining volumes on carbonated soda, Pepsi is seeking growth in its water, juice and energy categories—beverage categories that are still growing. Pepsi also owns Frito Lay and Tropicana and is [also seeking healthier alternatives] with these brands," he said.

No one seems surprised by Pepsi's push into naturals categories, Van Winkle said. "The days of natural food retailers responding with skepticism to acquisitions of natural food brands by large food and beverage companies is over. Big food and beverage ownership of natural and organic brands is now pervasive."

This may be because retailers have seen plenty of naturals acquisitions by the big boys without many brand changes but with the benefit of better distribution.

Pat Turpin, a partner with Bayside Ventures, points to Kellogg's acquisition of Kashi as a case in point. "Kashi was kept as somewhat a stand-alone division and brand. This appears to have been quite successful versus the traditional model of old where the large strategic acquirer eliminates the acquired brand after the acquisition," he said.

In line with that thinking, PepsiCo said in a statement that retailers and consumers will not see any changes to Naked's unique marketing approach, but rather will experience wider availability as a result of the purchase.

One change consumers and retailers will see is the addition of PepsiCo's Smart Spot designation on most of Naked's juice products. The green circle indicates that the product contains limited amounts of saturated and trans fats, cholesterol, sodium and added sugar.

Naked Juice has come a long way from 1983 when it was first distributed on California's Santa Monica Beach, from beach towel to beach towel, before a neighboring beach grocer began selling it. The company now boasts annual sales of more than $150 million of its 25-SKU juice line.

Natural Foods Merchandiser volume XXVIII/number 1/p. 31

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