Pepsi remains ‘Exclusive Distributor’ of Bang Energy Drinks

     Pepsi remains ‘Exclusive Distributor’ of Bang Energy Drinks

Author: Urfi Ansari, Rizvi Law College

Abstract

PEPSI CO. Stood undisputed distributor till the year 2023 of Bang Energy Drinks all over US holding more than 2,00,000 outlets in the United States. The agreement of distribution partnership was entered in the month of April 2020, for the supply of Bang energy drinks by PEPSI Co exclusively. But after a few months the whole deal came into jeopardy for some unknown reasons and the deal came under a dispute in the month of November, in the end Pepsi co stood on top saved the agreement between them.

Introduction:

BANG is an energy drink brand of American Origin; it is one of the market leaders throughout USA holding 3rd position in the highest selling drinks chasing behind Monster and Red Bull. Vital Pharmaceuticals is the parent company of the Bang, it mainly manufactures performance beverages and sports supplements under the brand name of VPX it also distribution of the same[1]. The company introduced a new product called BANG in the year 2012, an energy drink with low sugar count and much healthier than other alternatives available in the market with the object of making a highly nutritious drink with proven research. Being a market leader in highly competitive market marched forward with common goal with PEPSI CO. Pepsi co is a multinational brand dealing in food, beverages and snacks throughout the globe[2].

Agreement:

In the month of April 2020 Bang Energy of Vital Pharmaceuticals came into agreement of distribution-ship with Pepsi Co for exclusive distribution of Bang Energy including NooFuzion, Meltdown, Redline Cognitive Candy and Bang Shots till October 2023. During the time of global crisis and pandemic this agreement initiated with the plan to boost the overall growth of Bang. In the US energy drink is the highest performing nonalcoholic beverages since this agreement tend to increase the sale of Bang and Pepsi will gain some additional perks with being under this contract. It was barely nine months when this agreement was initiated with the hopes of making something big turns out didn’t go well. In mere span of time difference arose for which no explanation ever released in public[3]. The drink maker company in its press released made a public announcement that Pepsi Co is no longer exclusive Distributor of their product. The Pepsi Co didn’t realize where it came from but after this incident some news popped up claiming different allegations and rewards. Determining the distribution-ship, Pepsi co in conversation with incident described it as an “Disappointed” by the decision of Vital Pharmaceutical’s owner of Bang, “Especially given the rapid success we’ve had insignificantly expanding the presence of Bang Energy drinks”, with this Pepsi co claimed their partnership effectively efficient, and it would fulfill its commitment with dedication under this agreement. Pepsi co with this also made a statement of enforcing legal rights and remedies provided under this agreement.

Dispute:

On 23rd October 2020 Bang sent a notice of termination of exclusive Distribution-ship contract to Pepsi, explaining various issues, citing complications with regard to the working of the Pepsi Co and concerns with its performance. The CEO of Bang energy Jack Owoc stated that “We sincerely expected Pepsi Co to execute at an even higher level based on their enormous resources and promises. Unfortunately, we were wrong. Pepsi Co, you’re fired”. In just Nine months the relationship between them became bitter which was signed by the PepsiCo and Bang. After the termination notice and public appeal it went on next stage where Bang filed a lawsuit against Pepsi Co for gross misconduct stating that Pepsi Co was grossly involved and continuously engaged in misconduct with their deal of energy drink, with this claim the giant soda maker went for extreme measure by using intimidation tactics with major retailers and independent distributors by threatening lawsuits against anyone who shall not agree to purchase Bang Energy exclusively from Pepsi. Whereas Bang used strong press release and social media to present its scenario but Pepsi remained completely silent except few things about its commitment and fulfill of its term and also pointed out about its rights, duties, enforceability and defenses exclusively granted under the deal.

In the month of March Pepsi co. invested a huge fortune of $4 billion dollars in Rockstar Energy which is currently owned by the Soda Giant, this move made quite offensive to Bang in an effort to honor the agreement and prevent its comments in public attacking the giant[4]. In the time of desperate measures PepsiCo rushed for the emergency arbitrator as per the agreement for interim ruling fortunate for the Pepsi co to an early victory for the snacks and soda maker. The said decision by the arbitrator shall remain in effect until any order or award is made or issued which supersedes the previous order issued by the arbitration tribunal. As per the statistics of total sales some insight can be known about the reasons or such disputes in the first place. As the records Bangs sales were down by 4.3% in 3 months whereas the competitor was on the rise, Monster’s sales went up 7.7% and Red Bull went up to 20.4%.

One of the Morningstar analyst, Nick Johnson followed through the dispute to understand the said dispute with prime focus on what PepsiCo has on its mind with respect to distribution agreement, even Bang gained additional points or some higher grounds in terms of sale since the month of April when the partnership began. As per Nick “it’s a Forced marriage the most appropriate way to characterize” the whole relationship between Bang and PepsiCo” but for Pepsi co. this won’t change a thing but one fact is that Bang would get affected drastically with such changes from financial point of view[5].

Conclusion:

Energy Drink market of US is one of the highest and strongest performing sectors in the field of nonalcoholic beverages. The total value of energy drink market in the year of 2014 totaled $9.3 billion and with growing market it is projected more than double to $19.2 billion in 2024. Brands like Coca Cola who owns 18.5% stake in Monster, also Coca Cola launched its own line of energy drinks designed to acquire cola drinkers by appealing them towards energy drinks rather than cola. In such tight market of neck-to-neck competition with billions of dollars at stake it is plausible as to why Pepsi Co and Bang are read to pick up fight and defend their stronghold.

In unpredictable series of events New York Beverage company turned to Vital Pharmaceutical the maker of Bang energy drinks with high hopes for increase in sales and also acquire this market with effective and significant line of drinks turns complicated. The two giants combined to acquired supreme power which could have been registered in the books of beverage industry but commitment didn’t reach up to the mark and went into distress. Bang Energy is mainly focused and committed to providing and serving highly effective, zerocalorie, exceeding expectation and innovative to consumers. Introduced in the year 2012, bang energy marked its presence as one of the fastest growing energy drink brands within 1 year it made a recorded increase in sales by 130.5% as per the reports of research firm IRI in Chicago[6]. Bang Energy pioneered and thrived with its performance in this extreme competitive market attracted generations of energy drink consumers widely. Pepsi Co includes various brands such as Mountain Dew, Game Fuel, AMP and recently acquired Rockstar Energy provides its goal to take benefit of this alliance by making strategy to meet the rising demand of consumer enabling significantly by boosting sales and distribution.


References:

[1] https://bangenergy.com/about/

[2]https://www.pepsico.com/about/about-the-company

[3]https://www.just-drinks.com/news/pepsico-hails-arbitration-win-over-bang-energy-owner-vital-pharmaceuticals_id132472.aspx#:~:text=Andy%20Morton14%20December%202020,of%20Bang%20Energy%20until%202023.

[4]https://www.cnbc.com/2020/03/11/pepsico-to-acquire-energy-drink-maker-rockstar-energy-in-a-3point85-billion-deal.html.

[5] https://in.finance.yahoo.com/news/bang-energy-sues-pepsi-claiming-002300502.html.

[6] https://www.bevnet.com/news/2020/quick-reaction-pepsi-takes-on-bang/

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