PepsiCo has been striving to diversify its price tiers and add new tastes to established brands like Lay’s, Doritos, and Cheetos to increase their appeal.
PepsiCo agrees to acquire the parent company Garza Food Venture of Siete Foods for $1.2 billion. The deal was confirmed by the Frito-Lay owner. It is expanding its snacking line in response to cost-conscious consumers’ preference for private-label goods.
The company is well known for their grain free tortilla chips and taco shells and is backed by actor Eva Longoria. The company is also known to make other food products like Mexican wedding cakes and enchilada sauce.
The deals coming through are making a strong mark in the packaged food market. The makers of Snickers acquired the company that makes Pringles, Kellanova in August for almost $36 billion.
PepsiCo has been striving to diversify its price tiers and add new tastes to established brands like Lay’s, Doritos, and Cheetos to increase their appeal.
Volumes for its North American snacking division declined 4% in the most recent quarter, which ended in July. The corporation is set to report its third-quarter earnings next week.
The acquisition is expected to complete in the first half of 2025.
Doritos, Fritos and Cheetos are the household staples on which the PepsiCo snacking roots are built. Although the company did spend a couple of years to lower the amounts of less healthy ingredients like saturated fat, salt and sugar in many of its brands. It has launched innovations such as Kettle Cooked Lays and other products with better ingredients, such as a black bean-based Sun Chips variation.
At the same time, PepsiCo has used M&A to diversify its snacking range. In 2018, it purchased Bare Foods, a company that creates baked fruit and vegetable snacks. A year later, it expanded to include BFY Brands, the creator of PopCorners.
Siete creates heritage-inspired Mexican-American meals to meet a wide range of dietary demands and tastes. It sells tortillas made from almond flour, vegan beans, and lentil-based grain-free puffs. As consumers stock up on healthier products, Siete hopes to benefit significantly.
In the US the Siete’s products are distributed across 40,000 retails outlets including Whole Foods and Target.
Owned by Veronica Garza and founded in 2014, the Texas based company is run by seven members of the Garza family. Consumers have turned to more affordable private-label goods for their snacking needs, following multiple quarters of price increases by packaged food manufacturers to cushion the sting of rising input prices.
Siete’s addition not only expands PepsiCo’s healthier range, but also lets it capitalise on expanding demand for culturally genuine products. According to Datassentials, Mexican cuisine is the third most popular in the United States, and it is becoming increasingly popular, particularly among young adults.
Due to the consumers pulling back on their purchases, and how often these purchases are made, amid a prolonged period of inflation, the food space is experiencing a hard hit.
The prices of certain unsalted potato chips or tortilla chips will require an adjustment to be made in order to make them more attractive to consumers. This may directly affect the levels of marketing as some might see an increase.
In addition, PepsiCo and other firms are under pressure from private labels. Siete’s distinct flavour profile and product combination will give PepsiCo a differentiated, on-trend brand, allowing it to better withstand external challenges.
The acquisition of the Pringles producer Kellanova by the maker of Mars and Snickers is known to be one of the biggest food transactions in years. The news of the Siete acquisition came 2 months after this. The combination will transform the confectionery icon into a top marketer of chips, crackers, and other sweets, giving it greater scale in the competitive snacking space and allowing it to compete with juggernauts such as Mondelez International and PepsiCo.