Beverage trade magazine Beverage Digest analyzed the deal as providing a “shot of cash to PepsiCo that can be invested into high growth areas, including coffee and protein drinks on the beverage side,” adding that “PAI will be able to focus more precisely on the juice business at a time when consumers have returned to the category for immunity benefits amid pandemic health concern.”
PepsiCo Chairman and CEO Ramon Laguarta in a statement said the deal will “free us to concentrate on our current portfolio of diverse offerings, including growing our portfolio of healthier snacks, zero-calorie beverages and products like SodaStream which are focused on being better for people and the planet."
The sale continues a trend of companies pruning their brand portfolios to simplify their businesses in the pandemic, or to free resources to pour into up-and-coming product categories. Coca-Cola Co. last year cut brands including Tab, Odwalla juice and Zico coconut water and, this year axed Coke Energy after it got off to a disappointing start. Molson Coors last week said it is discontinuing 11 economy beer brands.
Howard Telford, head of soft drinks at market research group Euromonitor International, in a statement said PepsiCo's deal "reflects the desire of the industry to focus and innovate around a smaller core of categories and brands, including water, energy drinks, coffee and the staple carbonated soft drinks." He added that the transaction also reflects the "uncertain role of fruit juice in the consumer’s routine long term and the ongoing concern about sugar, particularly in North America where Tropicana is largest. While the category in the U.S. enjoyed a boost in off-trade sales in 2020, with consumers seeking more vitamin C for immune support, the long-term trend has been one of decline. The role of fruit juice in future consumers’ diets will look significantly different in terms of portion size, functional need and packaged versus unpackaged formats.”
Tropicana was founded in 1947 by immigrant Anthony T. Rossi, who arrived in the U.S. with just $25 in his pocket, according to the brand’s website. He went on to develop flash pasteurization and “pioneered orange juice transport in 1970 via train from Florida to New York,” according to the web site. PepsiCo bought Tropicana in 1998 from then-owner Seagram Co. in $3.3 billion deal.
One of the brand’s more infamous chapters came in 2009 when it scrapped a package redesign after just two months in the face of declining sales and consumer complaints. Late last year, Tropicana faced a different sort of controversy when it was forced to apologize over a campaign urging stressed-out parents to stash the orange juice and Champagne in hidden mini-fridges, so they can enjoy surreptitious cocktails.
The effort, which came from MullenLowe PR and Cramer-Krasselt, was designed to empathize with parents going through rough times during the pandemic.