BarFresh Forges PepsiCo Deal to Get Smoothies in Restaurants

BarFresh Food Group Inc. forged a deal with PepsiCo Inc. to bring its smoothie drinks to U.S. and Canadian restaurants, giving the fledgling company a bigger foothold in what it sees as a $25 billion frozen-beverage industry.

A cup is filled with a Pepsi soft drink

PepsiCo forged a deal with BarFresh to offer the smoothie company's drinks to restaurants alongside its own.

Photographer: George Frey/Bloomberg

As part of the agreement, the blended drinks will be presented to restaurants alongside PepsiCo’s lineup, with the soda giant getting a percentage of the sales, BarFresh Chief Executive Officer Riccardo Delle Coste said in an interview on Tuesday.

Teaming up with PepsiCo will accelerate BarFresh’s expansion and open the doors for large national accounts, Delle Coste said. The Beverly Hills, California-based company provides restaurants with pre-measured ingredients for nonalcoholic frozen beverages -- including the ice -- letting them sell blended drinks without a major capital investment. For PepsiCo, meanwhile, the pact lets it offer restaurants new options that may be seen as healthier.

“This is a fast-growing category that will add value for our partners,” Kirk Tanner, head of PepsiCo’s food-service operations, said in a statement.

Ultimately getting acquired by PepsiCo is “absolutely” a possibility, though it’s not BarFresh’s priority, Delle Coste said.

“Right now we’re really focused on growing the business at hand,” he said.

Shares of BarFresh jumped 20 percent to 70 cents in New York after the deal was announced. The company has gained 40 percent this year, bringing its market value to almost $55 million.

Frozen Growth

Frozen drinks are growing at a rate of almost 16 percent per year, outpacing the rest of the beverage industry, according to BarFresh, which cited data from NPD Group and Beverage Marketing Corp. The company’s smoothies and shakes contain no preservatives or artificial ingredients, a potential marketing advantage over traditional fountain drinks.

“With carbonated soft drinks where they are, there’s a great opportunity to partner with someone like PepsiCo,” Delle Coste said. “The revenues that we’re expecting are extremely significant.”

PepsiCo, which makes Mountain Dew and Doritos, has faced mounting health concerns from consumers in recent years. The Purchase, New York-based company and rival Coca-Cola Co. have both taken steps to expand nutritious beverage offerings. Coca-Cola, for instance, announced its investment in juice maker Suja Life LLC. in August.

PepsiCo has additional rights to sell BarFresh products in grocery stores in the U.S. and Canada, as well as some places internationally. The smoothie maker also has a distribution agreement with Sysco Corp.

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