Dr Pepper Snapple is joining the soft drinks industry’s shift to health-oriented beverages, announcing Tuesday it had agreed to acquire Bai Brands for $1.7 billion.
With consumers turning away from sugary drinks, Bai has prospered with a line of products — including carbonated flavored water, coconut water, and premium ready-to-drink teas — that have no artificial sweeteners. After generating $120 million in sales in 2015, it is on track to reach $300 million this year.
U.S. volumes of carbonated soft drinks, meanwhile, are expected to contract for a 12th straight year. Dr Pepper Snapple, in addition to its namesake products, makes Schweppes Ginger Ale, Mott’s Apple Juice, and 7-UP, with traditional sodas accounting for about 80% of its annual revenue.
“In a relatively short time, Bai has carved out a leadership position in the enhanced water category and has now extended that success into other fast-growing and profitable categories,” Dr Pepper CEO Larry Young said in news release.
“We’re equally impressed with their innovation pipeline, which will continue to meet the needs of consumers seeking great tasting, low-calorie beverages with natural flavors and no artificial sweeteners,” he added.
In a similar move, PepsiCo said Tuesday it is buying KeVita Inc., a maker of fermented probiotic and kombucha beverages, for slightly more than $200 million.
“The deals coincide with growing consumer thirst for exotic ‘functional beverages’ ranging from coconut water and kale juice to fermented tea and cider that promise to deliver more than just taste,” The Wall Street Journal reported.
U.S. sales of natural and organic foods and beverages alone have grown 23% over the past two years, now topping $40 billion annually, according to SPINS, a data service.
Bai, which means “pure” in Mandarin Chinese, was founded by Ben Weiss, a coffee-industry veteran who sold his first case of Bai in 2009. Dr Pepper Snapple became the brand’s main distributor and acquired a small minority stake in 2013.
“On our journey, we found a strong ally in DPS, an ally who embraced our mission to change the way the world drinks,” Weiss said. “Now, it only makes sense to continue our quest together.”