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Maybe we shouldn't bet against PepsiCo $PEP
On August 22, 2022, PepsiCo decided to invest $550 million to Celsius $CELH in exchange for a board seat and an 8.5% stake in the business. The stock price at that time was around $100/share. Today, Celsius's shares are trading at $194.22 per share. That's a return on investment of 94.22% so far. Can PepsiCo replicate that success with other investments?

As Instacart looks to go public, news broke that PepsiCo bought $175 million of the company’s Series A preferred convertible stock. Some speculate that the reason for this is that PepsiCo wants to expand its presence on digital channels like Instacart's platform. This investment could coincide with PepsiCo's investment in creating ghost kitchens for restaurant customers. Since ghost kitchens rely on digital ordering platforms like Uber Eats and DoorDash for orders, PepsiCo hopes that by providing the ghost kitchens to restaurants, that those restaurants will be more willing to sell Pepsi's beverages and snacks along with their main dishes.

Can Instacart replicate the success of Celsius? It's hard to tell especially when the platform relies on advertising to make a profit. Some say that its heavy investments in grocery tech and having its CEO as a former $META executive are what will make Instacart a tech giant in the future. McKinsey published an article last year noting that, "[b]efore the pandemic, online grocery had a more concentrated appeal, such as among young, urban, affluent families seeking the convenience of large-basket delivery to their home. Now, offerings have expanded to address more shopping missions (such as top-up shopping) and customer segments (such as younger and elder generations)." Besides the expanding adoption of grocery delivery by different demographics, McKinsey also notes that technology will be key in making the business sustainable through cost cutting and by encouraging people to increase the size of their orders.

If PepsiCo was able to see huge gains from Celsius, maybe it could see huge gains with the Instacart IPO. It has had a great record of acquiring businesses like Quaker and Tropicana and growing them to the big brands that they are today.

At the same time, there are acquisition deals that are performing sluggishly, like Rockstar Energy, which it acquired during the pandemic. Maybe Pepsi acquired a stake in Celsius because it knew that Rockstar wouldn't do worse, not better, overtime. Maybe Instacart will perform sluggishly like Rockstar Energy.

Altogether, the odds of Pepsi seeing a great return on investment from its Instacart stake are favorable. Maybe time is all it needs to play out Pepsi's next big windfall.
PepsiCo to acquire energy drink maker Rockstar Energy in a $3.85 billion deal
PepsiCo to acquire Rockstar Energy in a $3.85 billion deal, doubling down on energy drinks and with an eye toward turning around its struggling Mountain Dew brand.

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