PepsiCo cuts the value of Poppi's $300 million earnout to $12 million, padding its reported drinks profit

PepsiCo's latest quarterly report values the bonus it promised Poppi's sellers at $12 million, out of a possible $300 million. At the end of 2025 the company put that earnout at $278 million, and the cuts since then have been booked as gains that lifted the reported profit of its North American drinks business.

What the filing shows

PepsiCo agreed in March 2025 to buy Poppi for $1.95 billion, a price that included $300 million of expected cash tax benefits. On top of that, the deal promised Poppi's sellers a further $300 million if the brand reached performance milestones by the third quarter of 2027. If it misses them, PepsiCo pays nothing.

PepsiCo has to estimate what that promise is worth every quarter. Its report for the 12 weeks ended Sept. 5, filed Oct. 8, put the figure at $12 million. That compares with $117 million in June and $278 million at the end of 2025, when PepsiCo valued the payment at close to the full $300 million.

The company does not disclose the milestones. It values the liability with a simulation built on its own forecasts of Poppi's net revenue and margins, and it says lower forecasts produce a lower value.

How the estimate moved

When the deal closed on May 19, 2025, PepsiCo valued the earnout at $180 million. It raised the estimate by $98 million over the rest of 2025. This year it has cut the figure in every quarter: by $116 million in the first, $45 million in the second and $105 million in the third, a total of $266 million.

Why the markdown shows up as profit

An earnout that looks less likely to be paid is a smaller liability, and the reduction is recorded as a gain. PepsiCo booked this year's $266 million of cuts as lower selling, general and administrative expenses.

Those gains have lifted the reported results of PepsiCo Beverages North America. The unit's operating profit rose 45% in the third quarter to $1.06 billion, and the filing says the increase was driven primarily by credits related to the Poppi acquisition. The segment recorded $97 million of acquisition-related credits in the quarter, compared with $219 million of acquisition-related charges a year earlier. In the first quarter, when the unit's operating profit rose 60%, PepsiCo also listed the Poppi credits among the reasons.

PepsiCo leaves these items out of the core figures it uses for its forecasts. On that basis, the North American beverage unit's operating margin narrowed by 0.15 percentage point in the third quarter. Companywide, core operating profit rose 3%, while reported operating profit rose 19%. Acquisition-related items added 5 cents to third-quarter earnings per share, which were $2.23 as reported and $2.34 on a core basis.

What PepsiCo says about the brand

PepsiCo's public comments on the brand have been upbeat. In remarks prepared for its Oct. 8 earnings call, the company said Poppi "delivered improved results and gained volume and value share in the third quarter." On the call, Chief Executive Ramon Laguarta described Poppi as "another good example" of the smaller acquisitions PepsiCo looks for. He said the company was "dissatisfied" with its soft drinks and planned to "invest more behind Poppi, Pepsi, Mountain Dew."

The markdown indicates that PepsiCo's own forecasts for Poppi now fall well short of what the milestones require, even as the brand gains share. The wider North American drinks business is also under pressure: its revenue rose 5% to $7.71 billion in the quarter with help from acquisitions, but organic revenue declined slightly and unit volume fell 2%.

What it means for PepsiCo

Poppi was part of a push into lower-sugar and functional foods and drinks that also included the $1.2 billion purchase of Siete, a Mexican-American foods brand, in January 2025. PepsiCo does not report Poppi's sales separately, so the earnout estimate is the most direct public signal of how the brand is tracking against the plan PepsiCo paid for.

For anyone reading PepsiCo's reported earnings, the gain is close to finished. With the liability down to $12 million, at most $12 million of further gains can come from this source, so the boost it gave reported beverage profit this year will not repeat at the same scale.