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October 2, 2024
How Might PepsiCo’s Acquisition of Siete Foods Affect the Industry?
PepsiCo’s recent acquisition of Siete Foods has raised interest and concerns in the market. As the company looks to expand its healthier offerings, questions linger about the potential impact on Siete’s brand. What might this deal mean for both companies moving forward?
PepsiCo Inc. announced its acquisition of Siete Foods, known for its Mexican-American culinary products, for $1.2 billion on Oct. 1, 2024. This move aims to enhance PepsiCo’s offerings in the better-for-you food segment and expand its multicultural portfolio.
Similar to many food companies, it seems that PepsiCo has been working to diversify its portfolio by incorporating healthier options in recent years, often achieved through acquisitions. Recent additions to its lineup include Health Warrior, Bare Snacks, and PopCorners, according to NBC News.
Founded in 2014, Siete Foods produces a variety of heritage-inspired items, such as tortillas, salsas, and snacks, widely available in U.S. grocery and organic stores. Siete also offers various products advertised as being healthy, grain-free, and consumable by those with strict diets, an example being their range of gluten-free products. The acquisition will not only broaden PepsiCo’s product range but also introduce more authentic flavors to its offerings.
The deal is pending regulatory approvals and is expected to finalize in the first half of 2025.
According to Food Dive, as consumers increasingly gravitate toward healthier products, Siete is poised to greatly benefit. Adding Siete to PepsiCo’s portfolio not only strengthens its lineup of healthy options but also enables the company to capitalize on the rising demand for culturally authentic products. Datassential reports that Mexican food is ranked as the third most popular cuisine in the U.S., and it is especially gaining traction among younger adults.
Per Kavout, “Industry analysts generally view PepsiCo’s potential acquisition of Siete Foods as a positive strategic move.” This procurement aligns with larger market trends and positions PepsiCo to take advantage of the increasing demand for health-oriented products. Analysts have also pointed out the “potential for synergies between PepsiCo’s extensive distribution network and Siete Foods’ innovative product line, which could drive sales growth and enhance market penetration.”
The consumer side of things could potentially tell a different story. It seems that the majority of users on a Reddit thread have expressed disappointment or concern with the acquisition. Overall, they worry that the quality of Siete Foods will decline once PepsiCo takes over the brand.
One user commented, “I’m struggling to remember any ‘healthier food company’ getting acquired by a bigger one, that managed to maintain the high quality or ‘healthy’ bits that made the original company famous.” Another predicted, “Bad quality incoming. Prices will be adjusted higher as an extra smack in the face for people who buy these.”
In a similar move, Mars, Incorporated announced in August a definitive agreement to acquire Kellanova, whose portfolio includes brands like Cheez-It, Pringles, and Eggo.
Mars has acquired many other brands as well, including KIND in 2020. At the time, the brand explained how “as a result of the partnership, KIND has expanded into more than 35 countries (including China, Germany and France) and into eight total categories (including frozen and refrigerated), and has launched new products such as KIND Bark, KIND Frozen Bars and KIND Smoothie Bowls.”
Discussion Questions
How might Siete Foods’ integration into PepsiCo’s portfolio affect consumer perceptions of brand authenticity and product quality among health-conscious shoppers?
In what ways could this acquisition highlight broader trends in the food industry regarding the demand for healthier and culturally diverse products?
What implications does PepsiCo’s strategy of acquiring niche brands like Siete Foods have for the future of retail innovation in catering to evolving consumer preferences?
Poll
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Given that Pepsi has purchased Siete to help drive its growth in the healthy snacking segment, it is unlikely that it will make many changes other than to try and scale the business and use its power to increase efficiencies. What the deal really signals is that with weak organic volume growth many of the big CPG companies are on the hunt for additions to their portfolios. This will create some modest consolidation over the years ahead, although there is still a distinct advantage for the smaller innovative food brands, which continue to capture market share because of their authenticity and fresh takes on the segments they operate in.
With PepsiCo’s acquisitions and new launches in “better for you” snacks, foods, and beverages, the company is in line with consumer trends, and these are good business moves, given PepsiCo’s size, retail strength, and advertising budget, which can lead to greater success than smaller competitors.
I would like to issue a word of caution, however, in that consumers are discovering to their great dismay that most “healthy” snacks are not substantially healthier than their better tasting counterparts.
Often, lower fat content comes at the expense of higher sugar, salt, or artificial substitutes that are in many cases worse than fat. Sugar-free or low-sugar snacks are similar, except they generally contain more fat, and more saturated fat.
As a general rule, if the snack comes in a bag or can, it’s probably not healthy. Db
This acquisition and future acquisitions are likely reacting to several major societal trends.
For several years now, we are seeing increased diversification of the United States which impact demand for different flavors. While the snack aisle in the past had a just a few different flavors and taste, younger consumers now appear to be looking for a wider variety of flavors including some that tie to their heritage.
The trend of increased use of weight loss medications and focus on healthy eating is obviously going to negatively impact impulse-driven traditional salty snacks. We are seeing some new high protein snacks & cookies in Walmart and in Grocery and that may be cutting into the core snacking aisle. As a result, top tier CPGs may look toward some of these high protein snacks as acquisition targets in the future.
PepsiCo continues to accrue brands to its powerhouse core snacks portfolio. Siete makes sense for two reasons – its Mexican flavor profile appeals to an ever-widening swath of American consumers, and its “healthier” positioning helps set it apart from most of its peer brands.
Leveraging its powerhouse Frito-Lay distribution system should provide a huge boost for Siete products, while parent PepsiCo may see its portfolio broaden to include mealtime foods to complement its strong position in snacks.
Just last week, I opined that big beverage companies will remain relevant not through breakthrough product introductions but through acquisitions. “Buy,” not “build”. Siete makes terrific products and Pepsi has no incentive to fiddle with them. Well played.
PepsiCo buying Siete shows remarkable sales upside not only for them, but for the direction of the entire snacking industry. They are tapping into quickly growing interest by consumers to eat a larger percentage, or most of their diet as seed-oil and GMO free. And it’s likely with Siete, there is untapped market share and new customers available to them.
The growth opportunity ahead for titans PepsiCo and other industry CPG’s will be to decide if they want to actively build themselves or invest in more companies. Many small and upstart food and snack brands who are seeing sales growth are using olive oil and avocado oil (instead of vegetable oil), or going back to beef tallow for fry oils (instead of canola oil).
Ironic that the Pepsi acquisition follows the recent RetailWire story about the challenges to the beverage industry. Portfolio diversification is critical to insure continued growth. While Reddit users have shared concerns, there is no evidence that Pepsi would denigrate Siesta Foods offerings.
All of these basically unhealthy packaged goods brands trying to remake themselves, while the core business remains…unhealthy.
This acquisition is more about desperation than anything else. Will Pepsi still be around 10, 20 years from now? Probably. But people are (finally) acting on the fact that you are drinking processed sugar.
Siete Foods’ integration into PepsiCo’s portfolio may raise concerns among health-conscious shoppers about the brand’s authenticity and product quality. However, while some loyal customers might be aware of the acquisition, they likely won’t notice a difference in the products they’ve grown to love. Acquisitions like this rarely impact the product line itself and instead focus on the operational side. If Siete maintains its commitment to high-quality, clean-label products, it can effectively retain consumer trust. The real value of this acquisition lies in the increased resources Siete will gain, such as access to better supply chains, funding, and manufacturing capabilities, which could lead to even more innovation and expanded product offerings.
PepsiCo’s strategy of acquiring niche brands like Siete Foods reflects a broader trend in catering to evolving consumer preferences for healthy, specialized products. These acquisitions are common because they’re a win-win for all parties: Siete gains the resources to grow while PepsiCo taps into an expanding market of health-conscious consumers. As a result, consumers benefit from more choices without compromising the quality they expect. This trend indicates that large corporations like PepsiCo are adapting to consumer demands for authenticity and wellness, driving future retail innovation and expanding product lines aligned with shifting preferences.