Pepsi Just Made a $1.2 Billion Acquisition of Something That Has Nothing to Do With Carbonated Beverages

Acquisition of Siete Foods - PepsiCo acquired Siete Foods for $1.2 billion, a deal announced in October and closed in January [1] - Siete Foods specializes in grain-free and dairy-free Mexican-American food products, with no beverages in its portfolio [2] - This acquisition aligns with PepsiCo's strategy to expand its food portfolio, following the November acquisitions of Sabra and Obela [3] PepsiCo's Revenue Breakdown - Over the last 12 months, PepsiCo generated over $90 billion in revenue [4] - North American beverage sales accounted for only 31% of Q3 2024 revenue [4] - Snacks and food in North America contributed 28% of Q3 revenue, nearly matching beverage sales [5] - International markets accounted for 39% of revenue through the first three quarters of 2024 [12] Profitability of PepsiCo's Divisions - North American Frito-Lay division contributed 39% of total Q3 operating profit, compared to 24% from the North American beverage unit [6] - Quaker Foods in North America, though small at 3% of overall revenue, had a Q3 operating margin of 15%, significantly higher than the 8% margin for North American beverages [7] Growth and Investment Potential - PepsiCo's revenue growth has been modest, averaging 7% annually over the last 10 years [8][9] - The company's P/E ratio of 22 is below its 10-year average of 26, and it offers a dividend yield of over 3.5% [11] - International markets are growing, with improving profitability, which could boost future profit growth [12] Strategic Focus - PepsiCo is focusing on food acquisitions due to higher margins compared to carbonated beverages [13] - The company's diverse product portfolio and stable profits make it a relatively safe investment [10] - International growth and improved profitability are key areas of focus for future growth [12][13]