(Reuters) -Keurig Dr Pepper is buying a 60% stake in energy-drink maker Ghost for $990 million, with a plan to purchase the rest in 2028, as it looks to spruce up its refreshment beverages portfolio, the companies said on Thursday.
Energy drinks have garnered popularity mainly among the younger population in the U.S. in recent years as more people turn to fitness and lifestyle products, pushing companies to scout for deals in the sector.
In 2022, PepsiCo paid $550 million for an 8.5% stake in energy-drink maker Celsius Holdings, while Keurig Dr Pepper acquired a 30% stake in Nutrabolt, the maker of C4 Energy, for $863 million.
Ghost, founded as a lifestyle sports nutrition brand in 2016 by Dan Lourenco and Ryan Hughes, will operate as part of Keurig Dr Pepper’s U.S. refreshment beverages segment.
The initial step to purchase the 60% stake is expected to close in late 2024 or early 2025 and is likely to be neutral to modestly aid Keurig’s adjusted profit starting in 2025.
Keurig Dr Pepper expects to invest up to $250 million starting in mid-2025 to transition Ghost’s existing distribution agreements before beginning to sell and distribute the brand.
Keurig Green Mountain and Dr Pepper Snapple Group had combined in 2018 through a deal worth more than $21 billion, bringing brands such as 7UP and Sunkist under one roof, to better compete with soda giants like Coca-Cola and PepsiCo in the North American region.
Also, in the day, Keurig reported a 2.3% rise in its third-quarter net sales to $3.89 billion, but missed analysts’ estimate of $3.93 billion, according to data compiled by LSEG.
The company is seeing softer demand in its U.S. coffee segment due to weaker at-home consumption mainly from the lower income consumer group.
Its adjusted profit of 51 cents per share met analysts’ expectation.
Shares of the company were down 1.5% in premarket trading.
(Reporting by Ananya Mariam Rajesh in Bengaluru; Editing by Abinaya Vijayaraghavan and Shilpi Majumdar)
