Alcohol distributors are dubious regarding Bang Energy’s ability to rebound from its messy, still-unfurling divorce with PepsiCo, according to a survey by Goldman Sachs Equity Research.
The surveyed group represents approximately 50 distributors serving roughly 145,000 retail outlets that sell alcohol.
As a quick reminder, Bang agreed in April to a multi-year pact with PepsiCo to distribute its energy drinks, which have emerged in recent years as a rising challenger to category leaders Monster Energy and Red Bull. Yet after months of declining sales, Bang CEO Jack Owoc unilaterally announced the deal had been “terminated” and began courting independent distributors to service the product. Despite Owoc’s claims that the marriage is over, PepsiCo has maintained that it remains in effect, and the disagreement has moved into the courts. Last week, an independent arbitrator reaffirmed in a ruling that the energy drink maker is tied to the deal through October 2023.
Nearly half of the survey’s respondents expressed surprise that Bang chose to terminate its agreement with PepsiCo, with “many,” according to the report, characterizing it as a poor strategic decision that is unlikely to help the brand arrest its declining momentum in the near-term. Some took a more cynical view, noting that Bang may be using the “termination” as a means to incentive Pepsi to prioritize the brand within its network; in his public statements slamming the soda giant, Bang CEO Jack Owoc has accused the company of intentionally underperforming with his product in order to prop up Rock Star, which it purchased for $3.86 billion in June.
Looking further ahead, distributors were split over what Bang’s distribution system post-Pepsi might look like. Some noted that the brand may struggle to rebuild its relationships with jilted prior distributors, while others expressed that the process would be relatively seamless, in particular with Anheuser-Busch InBev partners. Overall, 46% of respondents said A-B will distribute Bang after the agreement ends.
Bang’s much-rumored forthcoming launch into alcohol with a hard seltzer product may open further routes to market. Around 47% of distributors said A-B will be its most likely partner, with Molson Coors the next likeliest at 14%. There’s also the possibility, as some believe, that the brand could tap into a spirits distribution network for the line.
Regardless of how it is distributed, though, survey respondents shared concerns about its prospect for success. Given the scale of products in the category already, along with scheduled launches from powers like AriZona and Coca-Cola (Topo Chico), many believe a Bang hard seltzer will be difficult to scale, according to the report. Moving from its primary home in chain outlets to independent stores may be challenging, as the extension into an alcoholic hard seltzer product may not prove to be necessarily relevant to Bang’s core energy consumers. Even those who are interested, some distributors believe, will eventually move to a more premium brand within the space.
To be fair, those surveyed were also broadly downbeat about a hard seltzer from Bang’s chief rival, Monster Energy. Though the company has hinted at spiked sparkling as its next move, it hasn’t yet confirmed the launch — a sign distributors took as meaning that introducing a potential item by mid-2021 is unlikely. Further challenges cited by those surveyed were the ability to transfer Monster’s brand credibility into the alcoholic space, its ability to build a robust distribution network with the category, and the uncertain level of demand for such a product from Monster’s core audience. Much like with Bang, Monster’s relationship with its prior A-B distributors is likely to be a factor — the energy drink brand departed that system for Coca-Cola in 2014.
Overall, 15% of distributors surveyed believe a Monster hard seltzer product would be successful, down from 21% in Goldman Sachs’ August survey, while 40% now believe it would be unsuccessful, compared to 26% in August.