Note: This story has been updated to include details of the transaction as announced by Hormel Foods during a Q1 2019 earnings call on Feb. 21, 2019.
Hormel Foods Corporation has announced a deal to sell CytoSport to PepsiCo for $465 million, as the company behind the Muscle Milk brand looks for a new start less than five years after its acquisition by the food conglomerate.
Financial terms of the transaction were not immediately released, but will be detailed during Hormel’s earnings call tomorrow at 9:00 a.m. ET, according to a press release.
CytoSport, founded in 1998, was acquired by Hormel in a deal valued at $450 million in 2014. The company markets a variety of protein-focused sports nutrition products under the Muscle Milk brand, including powders, ready-to-drink beverages and bars. In 2017, it launched a parallel brand platform for plant-based protein products, Evolve.
The acquisition, Pepsi’s first under new CEO Ramon Laguarta, gives the soda and snack giant another legacy brand that will allow it to further expand its product offerings. Within the Pepsi portfolio, CytoSport products will feature alongside Gatorade, which in recent years has broadened its offerings to include protein-based powders, RTDs and bars. Pepsi also purchased Health Warrior, which markets sports nutrition powders and bars, for an undisclosed sum in October 2018.
“PepsiCo has deep expertise and experience in the sports nutrition category and has been a long-standing distribution partner for CytoSport and the Muscle Milk brand, which puts them in a strong position to grow this dynamic business,” said Hormel president and CEO Jim Snee in a press release. “We look forward to working with PepsiCo to ensure a smooth transition for our team members, suppliers, customers and consumers.”
In an email to BevNET, a PepsiCo spokesperson said: “We look forward to welcoming CytoSport to the PepsiCo family. This transaction is yet another example of ways we are building a consumer-centric portfolio of brands that offer a breadth of options across convenient foods & beverages. It is also consistent with our tuck-in acquisition strategy and we look forward to working with the CytoSport team following Closing to continue to strengthen these brands and capture new growth opportunities.”
As one of the best-known legacy brands in the sports nutrition segment, Muscle Milk has faced increasing competition from direct rivals in RTD, such as The Coca-Cola Co.’s Core Power and fast growing brands like OWYN and Iconic Protein, as well as beverage products featuring protein as a value-added ingredient.
During an earnings call in November 2018, Snee said CytoSport had a “disappointing year” after declining sales in powders and RTDs. Hormel recorded a non-cash impairment of $17 million in the fourth quarter “associated with the CytoSport business.”