In a strategic move to tap into the booming gut-health beverage industry, PepsiCo has announced the acquisition of prebiotic soda brand Poppi for $1.95 billion. The deal, which includes $300 million in anticipated tax benefits, effectively lowers the net purchase price to $1.65 billion. The acquisition is part of PepsiCo’s broader strategy to address shifting consumer preferences as traditional soda sales continue to decline.
A Changing Beverage Landscape
PepsiCo’s decision to acquire Poppi is not just about adding another product to its portfolio—it represents a fundamental shift in the soft drink industry. Over the past two decades, traditional soda consumption has steadily declined, with consumers increasingly turning to healthier alternatives. Beverages that offer functional benefits—such as gut health, lower sugar content, and natural ingredients—have seen explosive growth, particularly among Gen Z and millennial consumers.
Poppi has been at the forefront of this movement. The brand, founded in 2018 by Allison and Stephen Ellsworth, markets itself as a prebiotic soda designed to support digestive health. With a formula featuring apple cider vinegar and just five grams of sugar per serving, Poppi quickly carved out a niche in the competitive beverage industry.
The Prebiotic Soda Market
The market for gut-health beverages has expanded significantly in recent years. Poppi’s retail sales skyrocketed by 163% in the year ending January 2025, according to trade publication Beverage Digest. The brand’s rapid growth reflects a broader trend—consumers are no longer just looking for low-calorie drinks, but beverages that actively contribute to their well-being.
This demand has not gone unnoticed by major players in the beverage sector. PepsiCo’s biggest competitor, Coca-Cola, recently launched Simply Pop, a competing prebiotic soda under its Simply fruit juice brand. The entry of industry giants into this space suggests that gut-health sodas are no longer just a niche product—they are becoming a mainstream category.
Market analysts predict that the gut-health soda segment could reach $2 billion in sales by 2029, making it one of the most promising growth areas in the beverage industry.
PepsiCo’s Growth Strategy
PepsiCo’s acquisition of Poppi comes at a critical time for the company. While its North American beverage division generated $27.8 billion in sales in 2024, the company has struggled with declining unit volumes across several product lines, including bottled water, sports drinks, and iced tea. Consumers have become more price-sensitive amid economic uncertainty, leading to lower overall demand for packaged beverages.
The purchase of Poppi is a strategic bet on the future of functional beverages. By integrating Poppi into its portfolio, PepsiCo aims to capture market share in the fast-growing health-focused beverage segment while mitigating the slowdown in traditional soda sales. PepsiCo CEO Ramon Laguarta emphasized this shift, stating, “More than ever, consumers are looking for convenient and great-tasting options that fit their lifestyles and respond to their growing interest in health and wellness.”
Beyond revenue growth, the acquisition also provides PepsiCo with a stronger digital marketing presence. Poppi’s success has been driven in part by viral campaigns on TikTok and social media, a strategy that has resonated with younger consumers. By leveraging Poppi’s brand identity and digital engagement tactics, PepsiCo could enhance its overall marketing strategy for health-conscious consumers.
Potential Risks and Market Competition
Despite its rapid growth, Poppi has not been without controversy. The brand has faced scrutiny over its health claims, culminating in an $8.9 million class-action lawsuit settlement over allegations of misleading marketing. While the settlement does not prevent PepsiCo from continuing to market Poppi as a prebiotic beverage, it does highlight the challenges of branding health-oriented products in a highly regulated industry.
Additionally, the acquisition raises questions about whether the prebiotic soda market can sustain its momentum. As more companies enter the space, competition will intensify. While PepsiCo’s acquisition signals confidence in the segment, analysts warn that an oversaturation of gut-health beverages could dilute the market and limit long-term growth potential.
What This Means for Investors and the Beverage Industry
The acquisition of Poppi reflects a broader trend toward functional, health-conscious beverages, a segment that continues to outperform traditional soft drinks. For investors, this move could signal new opportunities in the wellness beverage market, as major corporations seek to adapt to evolving consumer preferences.
PepsiCo’s bet on Poppi also highlights the growing influence of startup brands in shaping industry trends. What began as a Shark Tank-funded idea in 2018 has now become a $2 billion acquisition, illustrating how consumer-driven brands can disrupt legacy markets.
As the beverage industry continues to evolve, the success of Poppi under PepsiCo will serve as a key indicator of whether functional beverages are a lasting shift or just another passing trend. With gut-health sodas now entering the mainstream, the battle between PepsiCo and Coca-Cola in this space is only just beginning.
