Pepsi invades Europe's juice sector

PespsiCo said it had agreed a deal to buy leading German fruit juice maker Punica Getranke from fellow US firm Sunny Delight Beverages, itself a subsidiary of private equity firm J.W. Childs.

The purchase will make Germany one of PepsiCo's largest juice and juice-drink markets in mainland Europe and provide significant potential for expansion of its Tropicana and affiliated brands across the continent.

Punica is already the number one nationally branded fruit-based drink in Germany, distributed through most grocery chains and drinks machines.

And the firm has three main product ranges that will help Pepsi to exploit the health trends taking the nation by storm: fruit nectars and juice drinks, tea and fruit blends and fruit juice with sparkling mineral water.

Punica spent some time struggling through its association with Sunny Delight, which has received several high profile complaints about artificial colourings, high sugar and low juice levels over the last couple of years.

But Pepsi now believes the German firm has great potential. "This investment is an important part of our ongoing effort to offer consumers a range of beverage choices. It also reflects our continuing optimism about growth prospects for PepsiCo in Germany and across Europe,"​ said Michael White, chief executive of Pepsi International.

Competition is hotting up between Pepsi and main rival Coca-Cola on the juice and water sectors across Europe, made all the more important by both firms suffering slower growth, and even some declines, in their traditional carbonated drink portfolios.

Coca-Cola has focused in on Eastern Europe as a key growth area in recent months, buying up Russian juice producer Multon and also Serbia's number two bottled water firm, Vlasinka.

But, the firm has announced it intends to push non-carbonated ranges harder in all markets during 2005, laying down the mantle for Pepsi to follow suit.

Both companies already have big juice brands of their own, Coke with Minute Maid and Pepsi with Tropicana, but both also recognise the need to expand in these strongly emerging sectors.

Juice and water were recently highlighted as the fastest growth segments of the soft drinks market in Europe by market analysts Euromonitor​.

Coca-Cola announced this week that it would spend more on developing functional soft drinks, possibly fortified with vitamins. In February this year, the company also received approval from UK regulatory authorities to market a new cholesterol-lowering juice drink in the UK.

Pepsi may have some catching up to do in the research and development department, but the acquisition of Punica will at least give it extra products on the market.

And Punica products lend themselves well to marketing, offered in distinctive glass bottles, paper cartons and PET containers. The company also has a state-of-the-art factory in Hamburg.

Further financial details of the Pepsi-Punica deal have not been disclosed, though Pepsi said it expected to have the move wrapped up within several weeks.