Less than a year after entering an exclusive distribution agreement with PepsiCo that was touted as a blockbuster deal at the time, Bang Energy announced today it has terminated the relationship.
According to a press release, Bang gave PepsiCo notice of termination on October 23, citing “multiple issues and concerns regarding PepsiCo’s performance since the parties’ distribution partnership began.” The release claims that PepsiCo is “no longer the exclusive distributor” of Bang or any other brands produced by parent company VPX Sports.
“Bang Energy has had, and continues to have, a remarkable 11-year relationship with many of its prior distribution partners, including the independent Pepsi bottlers,” CEO Jack Owoc said in a press release. “Therefore, we sincerely expected PepsiCo to execute at an even higher level based on their enormous resources and promises. Unfortunately, we were wrong. PepsiCo, you’re fired.”
In response to Owoc, PepsiCo reiterated in a statement to BevNET that it will remain the exclusive U.S. distributor of Bang Energy drinks through October 2023.
“We were disappointed to receive VPX’s … notice of termination without cause, especially given the rapid success we’ve had in significantly expanding the presence and availability of Bang Energy drinks,” the company said.
PepsiCo also noted that it will continue to fulfill its obligations under the contract, which does not include a minimum purchase commitment. The company said it will also be “defending and enforcing our exclusive rights granted in the agreement.”
The move follows months of declines for Bang, which began steadily this spring after a period of rapid triple-digit growth from $345 million in retail dollar sales in spring 2019 to over $1.1 billion this year. Since the first quarter, however, sales fell 1.3% to $1.09 billion in the 12-week period ending October 31, according to Nielsen. Overall growth for the 52-week period has slowed to 5.2% year-over-year.
In March, PepsiCo acquired Rockstar Energy for $3.85 billion in a move that was largely believed to be in anticipation of the then-forthcoming Bang deal. By acquiring Rockstar, which itself had experienced years of sliding sales, PepsiCo ended an exclusive distribution agreement and allowed the conglomerate to expand its energy portfolio, which also includes MTN Dew Game Fuel.
Speaking during the company’s Q2 earnings call in July, PepsiCo CEO Ramon Laguarta said the strategic was taking a “three-pronged approach” to the energy category, in which Bang played a significant role as its entry in the fitness energy sub-space while efforts to return Rockstar to growth and new innovations on MTN Dew would provide multiple use occasions.
PepsiCo itself has seen sharp declines in energy sales, according to Nielsen, down 12.5% to $1.06 billion in the 12-week period and down 10% for the 52-weeks.
Moving ahead, Bang’s decision to pull out of the agreement once again leaves the energy space at an uncertain crossroads. This spring, DSD distributors, retailers and competing brands saw the partnership as resetting the direction of the category due to the heightened presence of strategic players and disruption to DSD portfolios.
Bang’s departure to PepsiCo left many Anheuser-Busch InBev DSD houses without a leading energy player, creating a void that many competitors in the performance energy space rushed to fill. The growth of brands like A-Shoc, Nutrabolt (C4) and Celsius — the latter two of which are projected to eclipse $100 million in sales this year — has given those distributors more viable options to fill those open slots.
Noting that many beer wholesalers were disappointed to lose their distribution rights to Bang in the first place, Nik Modi of RBC Capital Markets wrote in a research note that the termination may be “a precursor to a partnership with another beverage company,” potentially one in beer that can “acquire the assets rather than just distribute them.”
A request for comment from Bang was not immediately returned. In the release, the company directed all inquiries to its legal department.