In case you missed the news, Jack Owoc is a free agent.
After a drawn-out divorce worthy of Hollywood, Owoc’s Bang Energy finally settled its termination agreement with distribution partner PepsiCo in June, presumably closing that tumultuous chapter of the company’s story. Yet shortly after, PepsiCo reshaped the category again by making fellow Florida-based brand Celsius its new energy drink partner to the tune of a $550 million investment and a nationwide distribution agreement. The result is a fractured energy drink market in flux, having seen multiple large brands shuffled in and out of independent DSDs over the past several years while the major strategics continue to tweak and adjust their portfolios.
Against that backdrop, Owoc has a typically ambitious vision for Bang’s future: growing sales and rebuilding connections with the same DSD partners which it left behind to join with Pepsi, while continuing to bring the fight to the big guys. Answering questions sent via email, the CEO shared his thoughts with BevNET on a number of topics.
On KDP talks and a purported $3 billion valuation…
Just weeks after the Pepsi/Celsius partnership was announced, another potential deal threatened to reshape the category yet again, as Bloomberg reported early negotiations regarding a potential sale of Bang to Keurig Dr Pepper (KDP) at a valuation of between $2 billion and $3 billion. Within 24 hours, KDP, whose portfolio includes Bang competitor A SHOC, issued a statement denying it was pursuing an acquisition of the brand.
In an email, Owoc confirmed that Bang is not in talks with the conglomerate regarding a sale, but suggested they may be negotiating with one of its competitors.
“My guess is that KDP might be in talks with C4,” Owoc wrote. “KDP’s energy portfolio represents less than 1% of sales. Therefore, I think it is a better decision for them to develop this arm of the business with a smaller energy drink brand.”
However, if KDP were to hypothetically acquire distribution rights to Bang, he argued “they would have to restructure their entire beverage network and commission 4,000 Bang-dedicated trucks to keep up with Bang Energy’s massive volume.”
“More than likely, it would take several years and billions of dollars for KDP to build the infrastructure necessary to launch Bang,” Owoc wrote. “KDP’s biggest beverage brand is Dr. Pepper (mostly distributed by Coke and Pepsi) and Bang would be their #1 beverage in all of convenience and second overall to Dr. Pepper. Bang Energy is the third largest energy drink in the world and requires undivided focus.”
Owoc strongly pushed back on the potential valuation of $2 billion to $3 billion cited in Bloomberg, stating “we would never sell Bang Energy” for that amount. The brand has “reached over a billion in sales almost as fast as Google and Apple AND is a once in a lifetime unicorn brand and the third largest energy drink in the world.”
On Pepsi & Celsius…
Shortly after the company’s split from Pepsi, Owoc struck a conciliatory tone towards the conglomerate when he spoke to BevNET in June, stating “I have to give credit where credit is due and I believe Pepsi has done pretty close to $2 billion in retail sales with Bang Energy.Therefore, I’m appreciative of the learning experience and appreciative of all the business that we did with Pepsi and continue to do in the wind down phase.”
A couple months later, Owoc changed his tune. Reflecting on Bang and Pepsi’s defunct relationship, the CEO is now unequivocal in his belief that the soda giant intentionally implemented a methodical strategy to cripple his company.
“I was always suspicious why Pepsi would distribute and build a brand up to billions in sales but not push to take a stake in the business,” he wrote. “We learned that Pepsi had a 12 step plan to destroy Bang Energy. How would a brand like Bang Energy that was growing 244% to 343% in 2018 and 2019 experience zero growth in 2020 under Pepsi? The answer is because Pepsi was trying to destroy the brand. I believe Pepsi engaged in a premeditated plan to destroy Bang from day one.”
PepsiCo did not respond to a request for comment.
As for Pepsi’s new partner Celsius, Owoc used that deal to underline the value of his own company.
“Let’s look at some recent comps: Rockstar sold to Pepsi for $4.55 billion ($3.85 billion and $700 million in tax credits) with ~50 consecutive negative growth reads and now has ~60% less market share than Bang Energy. Rockstar and Celsius [are] number 4 and 5 in the energy drink category. Celsius just did a deal with Pepsi based on a $6.5 billion valuation with ~4% market share. Bang has a roughly 57% larger market share of the energy drink category (~6.3%) than Celsius. Using the $6.5 billion Celsius valuation and the same market share calculation, Bang Energy would be valued at $10.2 billion.”
Now that it’s free from Pepsi, Bang is in the process of transitioning back to its original distribution network, with Owoc citing growth of “344% in 2018 and 243% in 2019 before basically flatlining with Pepsi.” Owoc noted that at the time Bang moved to Pepsi’s system, it held a 9.9% market share. “Celsius was in this similar network (prior to the recent Pepsi distribution deal) and could only achieve a ~4% market share compared to Bang Energy’s ~9.9% market share,” he wrote.
But that shouldn’t matter, as Owoc insists that Bang is currently raising capital to launch around 400 distributors and is not currently for sale.
On that $175 million (+5% royalty fee) arbitration award to Monster/Orange Bang…
For many observers, a federal judge’s ruling in July upholding an arbitrator’s award against Bang represented the final chapter in a long-running saga pitting the energy drink maker against its chief antagonist, Monster Beverage Corp., and independent company Orange Bang, with whom Owoc’s company had a licensing agreement for use of the brand name.
But perhaps unsurprisingly, the Bang CEO sees things differently. He argues that not only is there a way forward to fight the arbitrator’s ruling — which calls for Bang to pay a $175 million fee on top of an ongoing 5% royalty fee on all Bang products moving forward — but “there’s a way to win it completely.”
“The ruling already has been appealed to the U.S. Ninth Circuit Court of Appeals, where we firmly believe a panel of real judges will overturn the underlying defective arbitration award and the epic injustice it imposes,” he wrote.
Owoc’s dispute centers on the arbitrator himself, whom he accused of “exceeding his authority” and demonstrating “rank fealty to Monster in a number of different ways that mandate the award’s undoing.”
“Our lone rogue arbitrator permitted Monster to hijack narrow claims that Orange Bang had purported to assert against us under a ten-year old trademark settlement agreement, while permitting Orange Bang to separately assert meritless trademark claims against us. He thereafter acquiesced to Monster’s hyper-expansion of the narrow contract claims it had hijacked to reach our flagship Bang energy RTD. He further insisted that he, and he alone, as the sole American Arbitration Association (AAA) arbitrator would dictate the outcome of both Monster’s hyper-expanded contract claims and Orange Bang’s separately-asserted trademark claims against us. He did so despite the fact that AAA’s very own rules for large, complex commercial cases require that a three-arbitrator panel be appointed to hear and decide a case like this one, in which more than $1 million is at stake. He ran afoul that AAA rule by refusing to grant our side’s request for a three-arbitrator panel, insisting, instead, that he keep the case entirely for himself to decide and bill for, even as he continued to charge the extraordinarily high AAA arbitrator rates applicable to large, complex cases for which three-arbitrator panels were mandatory.”
In his June 30 decision confirming the arbitration award, Judge Dale S. Fischer wrote, “The arbitrator in this case appears to have taken great care with both the factual issues and the law.”
“In short, there is no basis to find that the award was ‘completely irrational’ or that the arbitrator engaged in ‘manifest disregard of the law,’” he wrote. “At most, Plaintiffs’ arguments suggest that the arbitrator may have been incorrect in his rulings, but that falls far short of the standard for vacating an arbitration award.”
On social media and the Universal Music lawsuit…
Bang’s legal entanglements haven’t been limited to beverage companies. The energy drink maker is also currently being sued by Universal Music Group (UMG), which claims Bang used copyrighted music in its social media video content without permission. In July, a judge ruled that Bang did infringe on UMG’s copyrighted material in its promotional videos, but that the claims did not extend to content created by social media influencers.
Earlier this month, UMG asked the court to sanction Bang for deleting copies of the posts in question. According to court documents, Bang posted around 140 TikTok videos with portions of UMG’s copyrighted works.
“UMG lawyers wrote to us, identifying a relatively minute few of our social media posts that UMG claimed were infringing its music copyrights, and demanded we take them down,” Owoc said. “While reserving all rights and claims, we did as UMG demanded and a portion of those posts we took down ended up deleted, for reasons that we don’t yet fully understand.”
He continued, “We never deleted, nor would we ever delete, anything intentionally. In addition to the fact that we just don’t operate that way, we had always presumed that UMG made its own copies of whatever social posts it accuses of infringement. In our view, the most compelling question here should be why UMG didn’t preserve its own evidence of purported infringement by making copies of the accused posts? It makes no sense.”
For Owoc, the lawsuit represents how UMG and other music labels “don’t have their act together in dealing with social media platforms.” The crux of the dispute centers around who is covered by the licensing agreements that platforms like TikTok sign with record companies for authorized use of music. According to UMG’s lawyers, those agreements cover individual user generated content, but not brands.
“Social media platforms broadly represent that use of such music is authorized so long as it’s accessible within their libraries, and they do so without clearly delineating between commercial and non-commercial use, which explains why businesses and influencers pervasively use copyrighted music within social media posts for commercial, as well as non-commercial use. Adding to that, social media platforms have actively and continuously encouraged the use of such music for years, including for commercial purposes. In fact, it was just a couple of months ago that a TikTok representative—from the very same stage on which I had just spoken at BevNET Live — overtly promoted use of TikTok commercial accounts to industry attendees, all while playing popular music in the background.”
Owoc claimed that “given the current landscape, it looks like UMG, Sony and Warner Bros. are going to be suing millions of individuals and companies around the world who have used and continue to use music just like we did on IG and TikTok, despite the fact that such use was ostensibly authorized.”
He added, “What is hilarious but also shows the ineptitude of UMG, Sony and Warner Bros. is that when we reached out to them to use their music, it took them four months to get back to us. How on earth are millions of businesses and individuals posting tens of millions of daily posts with music on social media supposed to get permission to use the music from these antiquated relic companies of a bygone era?”
Owoc’s solution? Bang Energy offers approximately 600 free music tracks on Spotify and iTunes “that the entire world is free to use with no charge and no permission,” he said. As for the antiquated music labels – namely UMG, Sony and Warner Bros., companies that have “failed the world at large and are now trying to make the world responsible for their gross incompetence,” he said – there will be consequences.
“As I informed [UMG, Sony and Warner Bros.] under oath in my deposition – soon the social media army is going to rise up against them and [they] will experience a public relations nightmare that they will never recover from,” he warned.
On price increases…
Category leaders Red Bull and Monster have enacted price hikes this year, with the promise of more to come, as a way to battle inflation and rising input costs. Is Bang going to follow suit?
“Not any time soon,” said Owoc. “We want to support and be sensitive to consumers, retailers and resellers in this challenging economy by holding prices while Red Bull and Monster raise their prices.”
On falling sales…
According to NielsenIQ data, dollar sales for Bang are down -5.2% over the last 52-weeks through August 13. What’s the key to turning that around?
“Getting rid of Pepsi as fast as humanly possible! Under our new DSD network I believe that next month, after moving almost entirely away from Pepsi, that September, 2022 will be our highest sales month in history,” Owoc said.
On his message for beverage entrepreneurs…
“Keep moving vigorously toward your God given purpose and destiny. The world needs your innovations to save them from the health-robbing and planet-destroying beverages like Coke and Pepsi who have been implicated four years in a row as the biggest plastic polluters on planet earth. Send a clear message to Coke and Pepsi: OUR PLANET IS NOT YOUR GLOBAL GARBAGE DUMP!”