By Anna Chesca, Aditya Tatwawadi, Ahyaan Malik, and Alex Scothorn (University of Cambridge); Muditt Khurana, Amarthya Chandrappa (Massachusetts Institute of Technology)
Photo: Ian Dooley (Unsplash)
Overview of the deal
Acquirer: PepsiCo (NASDAQ: PEP)
Target: Garza Food Ventures LLC
Implied Equity Value: -
Total Transaction Size: $1.2 Billion
Closed date: 30/06/2025 (expected)
Target advisor: Lazard (financial), Weil, Gotshal & Manges LLP and Armbrust & Brown PLLC (legal)
Acquirer advisor: Centerview Partners (lead), Citi (financial), Gibson Dunn & Crutcher (legal)
The acquisition of Siete Foods expands Pepsico’s multicultural portfolio. It grows its ‘better-for-you’ food offering to include tortillas, salsas, seasonings, sauces, cookies, snacks and more as well as expanding its existing Latin American offering which currently includes brands such as Sabritas, Gamesa, Manzanita Sol. This offers potential revenue synergies with opportunities to cross-promote between brands. It helps PepsiCo better target consumers seeking authentic and health-conscious Mexican and Latin American products; expanding PepsiCo’s footprint in these markets.
For Siete, it offers a wider consumer base which will improve distribution. Additionally, Siete will benefit from greater resources, and recognition and cost synergies from operational improvements. Overall, the deal reflects PepsiCo’s desire to capitalise on what it believes to be a growing demand for value and health-conscious consumers across different levels of income.
"We hope this next chapter for Siete serves as inspiration for other Latino businesses, showing that it's possible to build a thriving brand that honors our heritage and celebrates our culture." - Miguel Garza, CEO and Co-Founder of Siete Foods.
Company Details (Acquirer - PepsiCo)
PepsiCo is a leading American Multinational corporation, specialising in food, snack, and beverage products. It operates in 200 countries and has an extensive portfolio including Pepsi, Lay's, Gatorade, Quaker, and Tropicana.
Founded in 1898, headquartered in New York, USA
CEO: Ramon L. Laguarta
Number of employees: 318,000
Market Cap: $228,004 Million (as of 14/11/2024)
EV: $265,119 Million (as of 14/11/2024)
LTM Revenue: $ 91,920 Million (as of 14/11/2024)
LTM EBITDA: $ 17,388 Million
LTM EV/Revenue: 2.9x
LTM EV/EBITDA: 15.2x
Recent Transactions: Acquisitions of Future Life Health Products CC, Illinois Corn Growers Association and Star Foods Factory.
Company Details (Target - Siete Foods)
Siete Foods is a Mexican-American food brand producing authentic heritage-inspired tortillas, salsas, seasoning, snacks, and more. Siete Foods was created with the mission of making authentic Mexican-American food more widely available while also focusing on providing dietary alternatives through grain-free and dairy-free products.
Founded in 2014, headquartered in Austin, Texas, USA
CEO: Miguel Garza
Number of employees: 105
Market Cap: N/A
EV: $1.2B
LTM Revenue: ~$500M
LTM EBITDA: ~$100M
LTM EV/Revenue: 2.4x
LTM EV/EBITDA: 12.0x
Projections and Assumptions
Short-Term Consequences
PepsiCo’s acquisition of Siete Foods will have several immediate impacts. Firstly, it diversifies PepisCo’s multicultural product offering and helps the company meet rising consumer demand for authentic food options. This expands PepsiCo’s consumer base, helping it reach the health-conscious consumer with Siete Foods' grain-free and health-oriented product offering. This increase in consumer base will lead to short-term revenue growth and improve market positioning in the health-focused and multicultural food markets.
PepsiCo stands to benefit from Siete Foods' higher-margin premium products, which are expected to enhance overall profitability. However, the scale of this impact will likely be limited due to the significant disparity in revenue between the two companies.
The potential cross-promotional opportunities with PepsiCo’s existing Latin American brands such as Sabritas and Gamesa as well as other products such as Chip brands, which is Siete’s main focus are set to bring potential revenue synergies to PepsiCo. The full realisation of these potential revenue synergies would, however, be medium to longer term.
For Siete, which has expanded into Target and Kroger stores, the acquisition will further grow its consumer base and it will hope to leverage the PepsiCo brand name to increase distribution across America. This is likely to accelerate product availability, beyond the 37,000 stores it is already found in, and revenue growth, which was reported to be around $500 million (end of 2024 projections, source: inc.com). However, there are concerns that Siete Foods' integration into PepsiCo’s large-scale production could compromise the quality of its products. Scaling up operations to meet increased demand may lead to changes in sourcing, production methods, or recipe adjustments, which could dilute the authenticity and premium appeal that has been central to Siete’s brand identity.
Long-Term Upsides
PepsiCo’s strategic acquisition of Siete Foods marks a transformative move to expand its footprint in the health-conscious consumer segment while making heritage-inspired Mexican-American cuisine more widely accessible. CEO Ramon Laguarta emphasises that the acquisition “expands our multicultural portfolio”, complementing PepsiCo’s existing lineup, which includes iconic brands like Lay’s, Doritos, Cheetos, Gatorade, Pepsi-Cola, and Mountain Dew.
The transaction is poised to generate substantial cost and revenue synergies for PepsiCo. With Siete Foods projected to generate an estimated $500m in annual revenue by the year-end, PepsiCo plans to leverage its expansive distribution network to boost these figures by 10-15% annually, potentially leading to additional revenues of approximately $30 million per year over the long-term. Additionally, integrating Siete into PepsiCo’s established supply chain is expected to yield annual cost savings of around $50 million, primarily through optimised procurement and logistics. Siete operates within the rapidly expanding health-focused food sector, where consumer preferences are increasingly shifting towards healthier, organic options. This acquisition sets up PepsiCo to nicely capture these trends. Such synergies are anticipated to enhance overall margins, supporting PepsiCo’s broader strategy of expanding its healthier food offerings.
Beyond financial gains, the deal underscores PepsiCo’s commitment to ESG initiatives, capitalising on Siete’s focus on sustainable sourcing and organic ingredients. By integrating these practices, PepsiCo can strengthen its ESG credentials, which have become critical for investors seeking socially responsible companies. Collectively, these factors position the acquisition not only as a strategic expansion into the premium snacks market but also as an earnings-accretive move for PepsiCo, likely increasing its EPS as synergies materialise in the years ahead.
Risks and Uncertainties
PepsiCo's acquisition of Siete Foods, announced on October 1st, remains contingent on regulatory approval, and is expected to close in the first half of 2025. Concerns have also been raised regarding the $1.2 billion valuation of Siete Foods, established less than a decade ago, especially as it has consistently not met its prior valuations. However, analysts highlight that PepsiCo’s valuation at 2.5 times its revenue makes Siete Foods’ acquisition at a lower multiple appear reasonable, provided that the brand's growth potential is realised.
While PepsiCo has a strong mergers and acquisitions track record, its history with integrating health and wellness-focused brands, such as Naked Juice, has been mixed. Siete Foods shares similarities with Naked, given its niche appeal to health-conscious and culturally aware consumers. Integrating the brand into PepsiCo’s mainstream portfolio could dilute its premium, health-focused image, potentially alienating its loyal customer base. This underscores the need for PepsiCo to adopt a unique strategy for integrating Siete Foods, rather than relying on standard approaches.
Siete Foods’ current pricing places it at a disadvantage against mass-market brands. Realising significant synergies would be critical for the company to achieve competitive pricing without compromising its product quality, a challenge that raises questions around the feasibility of such an outcome.