Strauss sells Sabra stake to PepsiCo for $244 million
Strauss sells Sabra stake to PepsiCo for $244 million
The Israeli food giant shifts focus to snack foods and core business growth.
Strauss Group, the Israeli food company, is selling its 50% stake in Sabra, the hummus producer, to its partner PepsiCo for approximately $244 million, marking the end of a nearly 20-year partnership. While the deal will generate a substantial profit for Strauss, exchange rate differences slightly diminished the net gain. Concurrently, PepsiCo granted Strauss an option to acquire a majority stake in their joint venture, Strauss Frito Lay, a snack food company, signaling a strategic pivot for Strauss as it refocuses its business priorities.
Sabra’s journey with Strauss began in 2005, when Strauss acquired a 51% stake in the U.S.-based Mediterranean salad company for $8.7 million. By 2007, PepsiCo joined the fold, purchasing the remaining shares and forming a 50/50 partnership with Strauss. This collaboration thrived, leveraging Strauss's expertise in hummus and PepsiCo's robust market presence. Sabra became a market leader in refrigerated spreads in North America, achieving remarkable growth: sales reached 1.4 billion shekels in 2015, with an impressive 63% market share.
However, the partnership faced challenges in recent years. A salmonella recall in 2020 significantly impacted Sabra's sales and profitability, with 2022 revenue falling to 656 million shekels and operating losses hitting 208 million shekels. Amidst these difficulties, the company streamlined operations, closing its hummus business in Germany and appointing new leadership.
The sale aligns with Strauss's broader strategy to streamline its operations. The company has announced plans to divest from non-core areas, including its fresh vegetable, honey, and coffee shop ventures, and refocus on its strengths. The $244 million proceeds from the Sabra sale will provide Strauss with the financial flexibility to reinvest in growth opportunities or return value to shareholders.
PepsiCo and Strauss’s collaboration is not ending entirely. Their option agreement for Strauss Frito Lay allows Strauss to acquire a controlling stake in the salty snack producer, highlighting Strauss’s intent to deepen its presence in this growing market. The agreement values Strauss Frito Lay at approximately $396 million, with an exercise price of $9.9 million for the additional shares.
