• PepsiCo will acquire prebiotic soda maker poppi in a deal worth $1.65 billion. Pepsi’s purchase comes weeks after Coca-Cola launched a poppi competitor, Simply Pop.
• poppi started as Mother Beverage, a drink featured on Shark Tank in 2018.
• The prebiotic drink market is worth $820 million, or 2% of the soft drink market, according to Citi beverage analyst Filippo Falorni.

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PepsiCo agreed to acquire prebiotic soda maker poppi in a deal valued at $1.65 billion. Pepsi’s foray into the prebiotic beverage market is part of a decades-old trend of snack food giants entering the world of healthier alternatives.

As more Americans move away from Big Soda’s traditional brands, Big Soda is guzzling up its competition.

“poppi is a fast-growing functional soda brand that combines prebiotics, fruit juice, and apple cider vinegar to create a deliciously refreshing low calorie soda with no more than five grams of sugar per serving,” PepsiCo said in a press release Monday, March 17. “poppi’s consumer-first approach, cultural cache, and nutritional profile have nurtured a loyal fan base and driven rapid growth.”

From Shark Tank to billion-dollar payday

Allison and Stephen Ellsworth founded the company in 2015. The brand received its big break on a 2018 episode of Shark Tank. At the time, the company was called ‘Mother Beverage.’”

“I started drinking apple cider vinegar or ACV to detox and lose weight,” Allison Ellsworth said of the product during the episode. “I loved the way it made me feel, but the taste was so strong. So we created ‘Mother Beverage.’”

Beverage industry veteran Rohan Oza invested $400,000 for a 25% stake in the company. The company rebranded from Mother Beverage to poppi in January 2020.

“The poppi brand’s unique intersection with wellness and culture is a perfect addition to our portfolio,” Ram Krishnan, PepsiCo’s CEO for Beverages North America said in a press release. “Allison and the poppi team have built a magnetic brand that’s ahead of the trends, with a loyal consumer base and a demonstrated capacity for growth.”

Pepsi’s purchase comes as Americans drink considerably less soda

Soda drinking has been on the decline in eight of the last 10 years, according to market research firm IBIS World. Soda consumption per person is down 15% from its peak in 1999.

It’s becoming harder and harder for soft drink companies to capture younger audiences. Coca-Cola ditched its new “Spiced” flavor after less than a year on the shelves when it failed to gain traction with Gen Z drinkers.

Sugary beverage excise taxes are also taking a toll on soda-makers. Cities that introduced beverage ‘sugar taxes,’ including Philadelphia and Seattle, saw a corresponding decrease in soda purchases, according to a study from UC Berkeley. 

Sugar-sweetened beverages are the leading source of added sugars in the American diet, according to the Centers for Disease Control. 

“Frequently drinking sugar-sweetened beverages is associated with weight gain, obesity, type 2 diabetes, heart disease, kidney diseases, non-alcoholic liver disease, tooth decay and cavities, and gout, a type of arthritis,” the CDC says on its website.

How are prebiotic beverages making an impact?

The prebiotic beverage market is a relatively new and growing space. It currently accounts for $820 million in retail sales. That’s roughly 2% of the $42.4 billion soft drink market, Citi beverage analyst Filippo Falorni told Fortune. 

Coca-Cola launched its own prebiotic soda, Simply Pop, in February. The company moved into offering seemingly healthy offerings in recent decades. Coca-Cola bought full control of the sports drink Bodyarmor in 2021 and acquired Vitaminwater from Glaceau in 2007.

The drink space isn’t the only area where some of the largest processed food purveyors are purchasing health-conscious companies. Pepsi bought the simple-ingredient, gluten-free brand Siete Foods in January for $1.2 billion. Meanwhile, in 2017, Kellogg bought RXBAR, a company known for listing all of its ingredients on its package.