PepsiCo’s Gatorade Acquisition Delivers Impressive Returns Over 22 Years

Beverage giant PepsiCo has made several acquisitions over the years, including one that brought Gatorade into its portfolio of drinks and snack foods. Gatorade was one of the fastest-growing brands in 2022.

Here’s a look at how an investment in Pepsi stock has turned out since Quaker Oats, the company that had owned Gatorade, was acquired by the company.

“PepsiCo has owned the Gatorade brand for many years, and it now is one of the strongest brands owned by the $250 billion company,” said Benzinga.

It’s hard to believe Gatorade once wasn’t owned by PepsiCo. The iconic sports drink has been a staple of the Pepsi portfolio for more than 20 years and a top performer, ranking first in market share in its field for over a decade.

A long negotiation battle between Pepsi and Quaker Oats came to an end in December 2000 when Pepsi announced a $14.5 billion acquisition of Quaker Oats made up of stock and debt.

The acquisition came after rival Coca-Cola Co previously entered negotiations with Quaker Oats that fell apart.

Quaker Oats previously bought the Gatorade brand in 1983 to diversify into beverages.

“Pepsi gained the Gatorade brand as the key asset in the acquisition and strengthened its food division with cereal, mixes and snacks in the Quaker Oats portfolio, including several market leaders,” said Benzinga.

The acquisition was seen as expensive at the time with Pepsi paying 29 times earnings for Quaker Oats compared to an industry average of 27.5 times for 14 recent food and beverage sector buyouts.

Investors who thought Pepsi was getting a good deal or believed in the long-term story of Gatorade could have invested in Pepsi shares at the time. The stock hit a high of $45 on December 4, 2000, after announcing the buyout.

A $1,000 investment could have purchased 22.22 shares of PEP at the time. The $1,000 investment would now be worth $4,086.26 not including dividends, based on a current PEP share price of $183.90 at the time of writing.

The investment in Pepsi would have returned 308.6% over the last 22+ years.

A $1,000 investment in Pepsi at the time of the Gatorade acquisition outperformed the broader stock market, including the SPDR S&P 500 ETF, which if $1,000 was invested at the time of the acquisition would be worth $3,346.43 today, representing a return of 234.6%, not counting dividends.

Produced in association with Benzinga

Edited by Bhujaya Ray Chowdhury and Judy J. Rotich