Pepsi’s Throwing $1.2 Billion at This Healthy Snack Brand to Offset Flat Soda Sales

In a year where food giants are playing “Who Wants to Buy a Billion-Dollar Brand?”, Pepsi's making sure they’re not left out of the fun. Their latest move? A $1.2 billion acquisition of Siete Foods, the company behind those trendy grain-free tortilla chips (you know, the ones that taste a little like styrofoam, but hey, they’re healthy).

To put it in perspective: Mars (yes, the candy and dog food people) just dropped $36 billion to grab Pringles’ parent company, Kellanova. And Campbell’s Soup shelled out $2.7 billion to scoop up Rao’s pasta sauce. It’s like a food industry version of Shark Tank, and Pepsi’s tired of watching from the bleachers.

Instead of coming out with a new bizarre soda flavor (remember the s’mores Pepsi they released in 2022? Yeah, we do too). Instead, they’re taking a more calculated approach to tap into the healthy snack game and make up for flatlining soda sales, which are down 3.5% over the last year.

Let’s talk about Siete for a sec. The Austin-based company, founded in 2014, made its name with grain-free tortillas but quickly turned into a full-blown snack empire. They’ve got everything from tortilla chips and taco shells to salsas and seasonings—basically, all the snacks your keto friend raves about. And with health trends skyrocketing, Siete’s raking it in. In 2023, they pulled in over $400 million in sales, and their snacks are now sold at big names like Target, Whole Foods, and CVS.

Meanwhile, over at Pepsi, the snack division has been carrying the company. Snacks now make up about 25% of Pepsi’s total revenue, bringing in a massive $6 billion—thanks to brands like Frito Lay, Quaker, and Tostitos.

Still, even with the soda slump, Pepsi's stock has had its moments, gaining 4.3% in the last three months. And if there’s one thing Pepsi excels at, it’s making smart acquisitions. A prime example? The 2001 purchase of Quaker Oats for $13 billion. While many might have seen that deal as a play for oatmeal and breakfast foods, the real gem in the acquisition was Gatorade. At the time, Gatorade controlled 80% of the U.S. sports drink market, providing Pepsi a valuable entry into the growing health and fitness sector. Today, Gatorade alone is valued at over $32 billion.  

And who can forget their 2018 buyout of SodaStream for $3.2 billion? Yeah, that one worked out too—SodaStream is now valued at $5 billion.

Pepsi’s also been quietly building a health-food portfolio in recent years, picking up brands like Bare Snacks and Health Warrior. These additions have helped diversify their offerings and keep investors happy. So, if the Siete Foods deal follows the same pattern, we could be looking at a recipe for success.

So, is now the time to buy some Pepsi stock? Well, with a P/E ratio around 26 (down from over 30 a year ago), shares are looking as tempting as a fresh bag of nacho cheese chips. Analysts like Bryan Spillane from B of A Securities certainly think so. He’s maintaining a strong buy rating and setting a price target of $185. That’s an increase of about 8% from its current price, suggesting Pepsi could have more room to run​, but it’s not enough to get me excited.

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Stocks.News has positions in Pepsi, Kellanova, and Campbell’s.