• by Nina Lentini  @Nina_Lentini, November 22, 2006

PepsiCo's acquisition of Naked Juice Co. puts it in another head-on battle with Coca-Cola, which only recently began to put marketing support behind Naked rival Odwalla, which Coke bought in 2001.

That is how Gerry Khermouch, editor of Beverage Business Insights, sees it.

Pepsi bought IZZE Beverage in September for a reported $75 million, as it moves in a "healthier for you" product direction. The purchase of Naked is a surprise, Khermouch said, because it is a different kind of business than IZZE's sparkling fruit beverages.

Naked is 100 percent juice, and needs to be refrigerated because it is not shelf-stable. This category was historically unprofitable until Pom Wonderful "told its antioxidant story, charged ridiculously high prices, and found that consumers have not hesitated to pay three to five dollars for 10 to 12 ounces of liquid."

From its humble beginnings as a drink distributed "beach towel to beach towel" in California more than 20 years ago, Naked produces and ships 6 million bottles every month, nationwide. With sales of more than $150 million, it reaches its loyal consumer base mainly through grassroots marketing.

Pepsi said the acquisition is in line with its intention to grow products that address consumer health and wellness needs. It follows Pepsi's initiative to put new products--in disguise--into Whole Foods Markets. The company said it will continue Naked's marketing approach while broadening its reach.

Khermouch says Pepsi has played the health card more deftly than Coke. He cited Pepsi's diverse portfolio, including Tropicana, reformulated Frito-Lay snacks, Gatorade and Quaker brand lines. "Pepsi has taken the high ground, boasting about its balanced products," he said.

In a presentation to investors last month, PepsiCo CEO Indra Nooyi said the company would continue to plug holes in its product line through acquisitions. Terms of the latest deal were not disclosed.