Sources have confirmed that a deal for PepsiCo to acquire KeVita is nearing the end stages, with the larger company paying between $400 and $500 million for the brand. News that the deal may be imminent was first reported by Reuters.
In previous investment rounds, PepsiCo had purchased a small stake in the company as part of its Naked Emerging Brands group. Pepsi kept a board observer with the company as it grew, and KeVita began rolling out in through Naked trucks in 2014.
The company has maintained close ties to the group, including the hiring of Bob Nakasone, formerly of Naked Emerging Brands, as its Senior VP of sales in 2015.
Since 2014, revenues have skyrocketed — KeVita is on course for revenues between $80 and $100 million this year, according to company sources.
The company, started by Ojai, Calif. neighbors CEO Bill Moses — a former investment banker and cable television executive — and nutritionist Chakra Earthsong Levy in 2009, makes a sparkling probiotic drink (based on a water kefir) that is its best selling product, as well as Master Brew, a more traditional kombucha, and a cleansing probiotic tonic akin to a drinking vinegar.
KeVita’s growth has been buoyed by its willingness to commit strategically to sales in conventional retail channels; its sparkling probiotic formulation has always been less intense than the funkier kombuchas. The company has tried hard to walk the line between offering live probiotics that can be supported through scientific research and the more oblique claims of “raw” and “live” that have accompanied less carefully vetted product lines.
As part of its attempt to keep on top of any potential regulatory or class-action hiccups in a potential acquisition, Moses himself has become something of a probiotic gadfly, pushing the kombucha industry to create testing standards that might prevent the fermentation of on-shelf kombuchas into higher-than-legal alcohol levels.
He has worked closely with a team of CPG veterans on both his board — which counts investor and advisor Brad Barnhorn, and, at one time, Veev and M13 co-founder Courtney Reum, as well as investors. Shepherded by investment banker Mike Burgmaier, the company has been through at least four rounds of investment, including consumer-focused private equity firms KarpReilly and SPK Capital. Early advisors included former Odwalla executive Brian Lovejoy, and the company has had a succession of high-profile marketing professionals on board, including Billie Thein (Evolution Fresh), Russell Barnett (PopChips) and Bill Lange (Zico).
Speculation has been rampant through the summer and early fall that the deal to finally sell to PepsiCo was close; although there were no revenue triggers for the deal, the transition to Naked and the continued growth of the category — as well as competition from a new generation of kombuchas that have a more mainstream, less esoteric feel — played a role.
The impending final acquisition shows the power that kombuchas and other fermented drinks currently wield in the beverage business. KeVita’s sales as tracked by IRI, a retail information provider, indicate that the company has slightly more than $40 million in retail sales over the 12-month period ending on Sept. 9, although that does not represent a large portion of its channel volume; meanwhile, chief rival GT’s Kombucha has charted more than $140 million over the same period.
KeVita was up more than 100 percent in sales over the same period in tracked IRI channels, indicating strong penetration into more conventional sales channels like supermarkets and drug stores. There have also been several instances lately in which growing kombucha brands are “adding capacity” — a situation that calls to mind the growth signals that accompanied the craft beer category, in which fermentation tanks are brought online to meet demand.
Editor’s Note: An earlier version of this story indicated that Courtney Reum was KeVita board member; he is a former board member.