SODA Sodastream International Ltd. - Ordinary Shares (delisted)

By Saabira Chaudhuri 

PepsiCo Inc. has agreed to buy home-carbonation company SodaStream International Ltd. for $3.2 billion, the latest move by the cola giant to diversify away from sugary sodas and salty snacks.

Israel-based SodaStream is a leading maker of countertop water-carbonation machines. Its devices let people carbonate tap water and other beverages at home by filling a reusable bottle. The company has in recent years focused on promoting itself as a maker of homemade sparkling water instead of a maker of homemade soda.

Pepsi has previously test-sold its cola with SodaStream machines in a few dozen stores, at the time describing the experience as a learning opportunity.

Its deal to buy SodaStream comes as consumer shift away from sugary soft drinks toward bottled water. More broadly, big brands are losing shelf space to smaller, trendier entrants and established players are scrambling for growth.

Under outgoing Chief Executive Indra Nooyi Pepsi has expanded far beyond its cola roots, into hummus, kombucha and other healthier products, although results have been mixed. The company has set a target for sales growth of nutritious products to outpace the rest of the portfolio by 2025.

Pepsi sells the Aquafina water brand in the U.S. and earlier this year launched a new brand of sparkling water called Bubly.

Sparkling water has grown far more strongly that the overall bottled water category, clocking volume growth of 38% last year up from 35% in 2016 according to data from industry tracker Beverage Marketing Corp. That compares with 7% growth for the overall packaged water industry, down from 9% in 2016.

Growth is being driven by a continued move away for carbonated soft drinks that use sugar or sweeteners and toward healthier, low-calorie drinks that lack artificial ingredients, say analysts. By contrast still, bottled water--a much bigger category--has seen sales slow amid competition from sparkling water, tea, coffee and other beverages.

Monday, Pepsi said buying SodaStream would give the Israeli company the muscle it needs to expand geographically while helping it accelerate its research and development.

The countertop carbonation-machine maker is widely accepted to have invented the notion of make-it-at-home soda and has roots going back to 1903. It now has 2,000 employees.

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

(END) Dow Jones Newswires

August 20, 2018 03:30 ET (07:30 GMT)

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