Following the announcement of PepsiCo’s pending acquisition of prebiotic carbonated soft drink (CSD) brand poppi, many have wondered how this will impact the burgeoning segment. In an interview with Beverage Industry, Nik Allen, senior analyst at Euromonitor International, Chicago, shares how the market will respond to the acquisition

Beverage Industry (BI): What could PepsiCo’s acquisition of poppi signal to the rest of the beverage market?  

Nik Allen (NA): I think it further increases the credence of this emerging category, but also the increasing difficulty posed for organic brand growth in the segment going forward.

BI: What will be some initial shifts we might see following the completion of this acquisition? 

NA: The most immediate shift will be in retail channels where this category under-indexes and consumer spending has been shifting, particularly discounters or c-stores. We can also stand to see a quick ramp up in the on-trade to establish not only presence but quick dominance in a tightening window of opportunity.

BI: What kind of pressure will put on other players in the modern soda/prebiotic soft drink market? 

NA: Promotional activity is going to be aggressive to cannibalize on the existing target market or bring people into the space who have not yet fully embraced functional ingredients as a value add. This will be harder for smaller and nascent brands to compete against, especially as managing margins against rising input and packaging costs is only going to become more difficult.

BI: Do you anticipate more acquisitions or innovations in the prebiotic soft drink market are on the horizon?  

NA: If the market climate continues to incentivize consolidation, I see more likelihood in larger players trying to capitalize on existing brand equity. Shelf space is only going to grow harder to carve out for new brands seeking a larger footprint. Innovation will be a necessity for sustained growth in, either in reformulating/extending traditional soda brands to address shifting consumer interest or expanding the category scope of functional ingredients that align with gut health-adjacent need states.