Brands Briefing: Poppi scores a big exit, but dealmaking is still off to a slow start in 2025

After speculation around a potential deal ramped up at Expo West, PepsiCo on Monday announced that it is acquiring prebiotic soda brand Poppi in a nearly $2 billion dollar deal. According to a press release, the deal includes “$300 million of anticipated cash tax benefits for a net purchase price of $1.65 billion.”

Despite the burst of excitement around the Poppi deal, early indicators suggest that dealmaking, in general, is off to a slower start in Q1 than many bankers, investors and CEOs had hoped for. Data that PE Hub analyzed from multiple sources indicates that U.S. dealmaking is off to its slowest start in 10-plus years. That, however, is not specific to the consumer sector, and it will take a few more weeks for Q1 data to fully trickle in. 

But the heart of the issue is that many in the consumer space had high hopes for 2025 as recently as December. The conversation centered around not if dealmaking would pick back up in 2025, but when, after IPOs and acquisitions ground to a near-halt in 2022 and 2023 amid high interest rates and inflation. And so far, conversations around M&A and fundraising haven’t picked up at a pace that many had hoped for — largely due to uncertainty around tariffs. 

“There was a great expectation for a groundswell of deal activity post the election and coming into this year,” David Shiffman, partner and head of consumer retail at Solomon Partners, said. There was a belief that “there had been a significant pent-up desire for companies to go public and significant monetization opportunities that have sat in private equity portfolios.” And he said while there have been pockets of sector-specific activity, “we haven’t seen the reopening that we expected.” 

“I don’t know that [the Poppi deal] is really indicative of much greener pastures ahead for all of consumer M&A,” Patrick O’Quinn, managing partner at investment banking platform Axcel, said. “I think it’s indicative of one particular brand having a fantastic outcome and being an outlier in both beverage and consumer.” 

To be sure, there have been bursts of intriguing M&A over the past two quarters. Also in the beverage space, Celsius announced that it was acquiring energy drink brand Alani Nu for $1.8 billion in cash and stock. And nail-care brand Olive & June was acquired by Hydroflask owner Helen of Troy in a roughly $240 million deal that was completed toward the end of last year.

There’s also plenty of shuffling in the retail space at large as some brands look to new owners to navigate the volatility. Walgreens and Nordstrom announced go-private deals within the past couple of months, Chico’s was acquired by private equity firm Sycamore Partners, and Lands’ End announced earlier this month that it was exploring strategic alternatives including a sale. 

But there are some different dynamics in the beverage category in particular, where better-for-you and functional beverages continue to attract new customers.

“We see strong fundamentals pointing to elevated beverage M&A activity, especially as emerging players opt out of the IPO market,” John LeVert, managing director of consumer retail at Solomon Partners said in a follow-up email to Modern Retail. “Since the market peak in 2021, emerging brands have sharpened their focus on sustainable and scalable unit economics. This financial discipline increases options for their investors and makes the brands more attractive to the big strategics – which are cash rich, starved for growth, and under significant investor pressure to reshape and modernize their portfolios.”

But for deals being announced now, conversations would have started months ago. And the biggest thing that’s changed between now and then is President Donald Trump’s on-again, off-again tariff policies. One of the biggest impediments right now to convincing more brands whether they should sell or buy another brand is uncertainty around which tariffs are here to stay, and which will go away. 

O’Quinn, who focuses on the smaller to mid-side of the M&A market, says for brands that feel like they need to transact — perhaps because the founder wants to get out of the business, or because they are running out of capital — conditions haven’t changed. But the biggest change in sentiment he’s seen is among “those businesses that don’t need to transact. They are performing well, they’re profitable.”

He added that, for some of these businesses, rather than taking meetings to kick off a potential sale process, their focus has shifted to making sure the growth plans they have laid out for the year are still feasible. “They are now waiting to see the impact of the tariffs on their own business, but also on the businesses of the respective strategics that otherwise may be interested in acquiring them.” After all, COGS and margins are an important part of any M&A conversation — and brands don’t know what those will look like in six months.

“It’s hard to plan and optimize your supply chain and your inputs if you don’t know the magnitude of the tariffs or the countries that will be impacted,” Shiffman said. 

But this isn’t just an issue for emerging brands. One concern, O’Quinn said, is that amid an uncertain business environment, bigger brands may focus on preserving their own cash flow and “are less likely to pay a premium for my business.” 

In addition to more certainty on tariffs, there are a couple of things that could bring more stability to the M&A markets, O’Quinn said. One would be lower interest rates, and another would be more IPOs that give the markets more confidence in how consumer brands should be valued. 

But perhaps the biggest concern is that the first few months of trade policy whiplash could leave the markets spooked for the rest of the year and contribute to an overall feeling that the defining theme of 2025 will be uncertainty. “Even if the tariffs are rolled back or negated, I don’t know that those sorts of [consumer] businesses are going to move forward with the same confidence that they had going into the year,” O’Quinn said. – Anna Hensel 

By the numbers: The state of healthy soda 

In light of PepsiCo.’s acquisition of Poppi, here is a breakdown of where the better-for-you soda market is currently. In short, it’s a small but fast-growing market. However, it’s one that may appear big to consumers as cans from the more notable players like Olipop and Poppi often appear in the background of influencer videos, while end caps at retailers like Whole Foods and Target are crammed with new flavors.

2%: The percentage of overall U.S. soft drinks sales that prebiotic soda accounts for, according to one Citi analyst. While the segment is growing quickly, it shows that healthy soda is still a relatively niche category.

23.9 million: The current number of TikTok posts featuring the term prebiotic soda. Much of the content focuses on “gut healthy” products from brands like Poppi and Olipop, with smaller entrants like Culture Pop and Cove sprinkled throughout.

30,000+: The number of doors where Poppi’s main competitor, Olipop, is sold. That’s up from 20,000 in the spring of 2023. – Gabriela Barkho 

Job openings to watch 

Babylist, the marketplace and media destination for all things baby, is hiring in a few key areas that indicate the company’s priorities and strategies as it continues to grow. Chief product officer Emily Levada posted that the company is seeking a senior director for customer support as it looks to blend AI and in-person touch points to improve customer experiences. But it’s also looking for a division merchandising manager to focus on furniture and softlines as it considers category expansion and scales the business. Currently, the company has over two dozen job listings that also span engineering, data and fulfillment. –Melissa Daniels

Quote of the week 

“Trends definitely evolve fast, but if you’re chasing trends, you’re never ahead. It’s really understanding where your consumer is going next. A month ago, we were like, ‘Alright, we can’t spend any more on TikTok. Where are we going next?’ That’s the fun part of being in marketing: getting into the consumer mindset and trying to get your brand ahead.”

Darren Brown, head of marketing at footwear brand OOFOS, on modern-day marketing challenges for consumer brands – Julia Waldow

What we’re reading

• Food52 laid off about 40% of its staff last week as it’s deprioritizing its commerce business. 
• In its 10-K, Solo Brands warned that it could file for bankruptcy and that it’s exploring options to refinance its debt. The company’s net sales dropped 13.2% during the most recent quarter. 
• Allbirds’ sales continue to slump, but the brand is betting on a new shoe launch to help spur growth by the end of the year. 

What we’ve covered 

• Cookware brands like Caraway and Made In say they’ve seen a bump in sales from people searching for products free of microplastics, and they’re adjusting their ad campaigns and social content accordingly. 
• How a surge in boycotts could upend the retail industry this year, as small businesses could get caught in the middle of consumers’ vows to boycott Amazon and Target. 
• Why M.M.LaFleur launched a Substack.