Pepsi, Coca-Cola Competing for Investment in Chobani

PepsiCo Inc (NYSE:PEP) and Coca-Cola Co (NYSE:KO) are in talks to invest in Chobani LLC, in a deal that the Greek yogurt maker hopes could value it at as much $3 billion, including debt, according to people familiar with the matter.

The negotiations illustrate how soft drink giants are making a push to diversify beyond the slow-growth carbonated beverage sector into the U.S. consumer market's faster-growing healthy lifestyle segment.

Chobani is exploring selling a minority stake, including warrants owned by private equity firm TPG Capital LP that account for between 10% and 20% of the yogurt maker's equity depending on its financial performance, the people said.

Chobani is looking for a strategic investor to help expand its supply chain, distribution, manufacturing base and geographic footprint for its popular yogurts like Flip, which combine yogurt with flavors such as peanut butter and coffee, the people added.

The deal under negotiation could change and there is no certainty that either Pepsi or Coca-Cola will reach an agreement, the people said. Other companies are also in talks with Chobani about a potential investment, the people said.

The sources asked not to be identified because the negotiations are confidential. Chobani, TPG and Cola-Cola declined to comment. Pepsi did not immediately respond to a request for comment.

Based in New Berlin, New York, Chobani was founded in 2005 by Turkish immigrant Hamdi Ulukaya, its majority owner and chief executive. While its yogurt has become one of the top-selling Greek brands in the United States, Chobani has also experienced some growing pains. Private equity firm TPG Capital LP gave a $750 million loan to the company last year to help it fund a turnaround.

Pepsi and Coca-Cola are no strangers to the dairy sector. In 2012, Pepsi started selling yogurt through a joint venture with German dairy company Theo Müller. This year, Coca-Cola began national distribution of a milk product called FairLife, which it created through a joint venture with Select Milk Producers.

Pepsi, whose snack category includes "better for you" products such as Quaker Oats, as well as Frito-Lay chip and other offerings, has a broader snack portfolio than Coke.

Coca-Cola has a track record of minority investments in growth consumer segments, including stakes in coffee company Keurig Green Mountain Inc (NASDAQ:GMCR), energy drink Monster Beverage Corp (NASDAQ:MNST) and juice brand Suja Life LLC.

(Reporting by Lauren Hirsch and Greg Roumeliotis in New York; Editing by Christian Plumb)