PepsiCo entered into a 50/50 joint venture with Strauss for the Sabra and Obela brands in 2008 and 2012, respectively. PepsiCo’s acquisition will help it “meet the growing demand for positive choices from North American consumers,” the company shared in a statement.
The divestiture of Sabra and Obela will allow Strauss to focus on its core business — including dairy products, coffee and beverages — and leverage its “resources in the best possible way,” according to a LinkedIn post from the CEO and President of Strauss Shai Babad.
PepsiCo acquired the two brands for approximately $244 million, according to Babad’s post. Sabra alone brings in nearly $400 million in sales annually, PepsiCo stated.
“As we evolve our food portfolio and bring people more choices for more occasions, our aim is to meet the growing demand for positive choices and on-the-go options. Nutritious, simple foods like refrigerated dips and spreads represent a space we have long desired to expand in the US and Canada. We are grateful to the Strauss Group for our long and successful partnership and look forward to this next chapter for the Sabra and Obela brands, as well as the PepsiCo food portfolio,” Steven Williams, CEO of PepsiCo Foods North America, said in a press release.
PepsiCo stock was relatively flat on the acquisition news, trading around $160.60 at the closing bell on Nov. 22 up about a quarter of a percent. PepsiCo’s stock is down approximately 5% for the year.
PepsiCo revamps snack portfolio with the help of acquisitions
PepsiCo’s acquisition of Sabra and Obela is hot on the heels of its purchase of Texas-based family-owned snack marker Siete Foods. The CPG giant acquired Siete for $1.2 billion in a move to “bring a rich, new aspect to the PepsiCo multicultural portfolio,” the company shared at the time.
These acquisitions come at a time when PepsiCo’s North American Frito-Lay division is struggling with volume losses as consumers demand healthier snacks.
Volumes in PepsiCo’s Frito-Lay North American business declined 1.5% in the third quarter of 2024, ending Sept. 7 — the smallest decline since the third quarter of 2023. Frito-Lay North American business volumes declined 4% in the second quarter of 2024, and 2% in the first quarter of 2024, respectively.
The global snack market is projected to be worth $251.10 billion in 2024 and is expected to grow by a 6.33% CAGR from 2024-2029, spurred by demand for healthier and organic snacks, according to Statista.
Consumers feel the shrinkflation crunch
In recent years, CPG companies like PepsiCo, Mondelēz, Coca-Cola, General Mills and others reduced packaging size — i.e., shrinkflation — to create more entry level price points but have been criticized for their use to combat supply chain issues and prop up stock prices. Some market analysts blame these pack and price changes for recent volume declines across big CPG food and beverage companies.
PepsiCo walked back some of its pack size changes and said it will add about 20% more chips back into some of its products, as PepsiCo CEO Ramon Laguarta shared in the company’s Q3 earnings calls.
Some consumers seeking relief from high food prices switched to private-label food and beverages and called out companies for using pack and price changes. More than half of consumers (59%) said they strongly or somewhat agree that they would switch to a different brand if they noticed shrinkflation, according to a survey of 1,200 US shoppers as part of Purdue University’s College of Agriculture’s Consumer Food Insights Report.
Additionally, two-thirds of consumers (67%) said they strongly or somewhat agree that they are less likely to trust brands that practice shrinkflation tactics, and 76% said they either strongly or somewhat agree that companies use shrinkflation tactics to increase profits even when costs are not rising.