- PepsiCo remains the exclusive distributor of Bang Energy drinks until October 2023, an emergency arbitrator said in a ruling issued Monday. The interim order came after PepsiCo asked for an arbitration decision on Nov. 23, a week after Bang Energy announced it was terminating its exclusive distribution partnership with the beverage giant.
- In his 21-page decision, emergency arbitrator David Singer largely ruled in PepsiCo's favor and said Bang owner Vital Pharmaceuticals and its CEO Jack Owoc must honor the terms of the agreement reached by the two companies on March 6. These include preventing Bang, its representatives and its CEO from posting comments about the agreement on social media without PepsiCo's approval, saying PepsiCo no longer has distribution rights to Bang's products or releasing "disparaging statements" on the soda giant or its performance in the deal. The emergency arbitrator denied PepsiCo's request that Bang post a bond within 14 business days equal to the estimated buyout fee it calculated on Nov. 20.
- In a statement, PepsiCo said it was "pleased with the arbitrator’s emergency order" and said it "upholds the importance and enforceability of distributor agreements and reaffirms the high standard of integrity to which we hold ourselves and expect of our partners." Bang did not respond to a request for comment.
In just nine months since PepsiCo and Bang signed their exclusive distribution deal, the partnership between the two parties has quickly turned bitter. Last month, Bang said it gave PepsiCo notice of termination as its exclusive distributor on Oct. 23, "citing multiple issues and concerns regarding PepsiCo’s performance."
Then, last week Bang Energy filed a lawsuit saying PepsiCo "has engaged and continues to engage in gross misconduct" under their energy drink deal, claiming the soda maker "resorted to intimidation tactics with independent distributors and major retailers like Walmart threatening lawsuits against anyone who fails to purchase Bang Energy exclusively from Pepsi."
While Bang and its outspoken CEO used pointed press releases and tweets to state its case, PepsiCo remained largely silent except to say it remains the exclusive distributor of Bang Energy drinks. The beverage giant also said it would fulfill its commitment under the deal "while also defending and enforcing our exclusive rights granted in the agreement."
Bang Energy has terminated the distribution contract with PepsiCo effective immediately. Cognitive dissonance and fake news cannot alter reality. https://t.co/96AJSxt1Dk— Jack Owoc (@BangEnergyCEO) November 17, 2020
Now, it appears PepsiCo — which also owns its own portfolio of energy drinks, including Rockstar Energy that it purchased for nearly $4 billion in March — was quietly on the offensive in an effort to get Bang to honor the agreement and stop its public comments attacking the New York-based company.
For PepsiCo, the interim ruling by the emergency arbitrator amounts to an early victory for the beverage and snack maker. The arbitrator said his decision remains in effect until a superseding order or award is issued by an arbitration tribunal.
Little is known beyond public comments as to why Bang has suddenly turned on PepsiCo. Nielsen data may offer some insight. In Nielsen data from Sept. 5, the firm said Bang sales were down 4.3% in the previous 12 weeks, while Monster's rose 7.7% and Red Bull's rose 20.4%.
Nick Johnson, a Morningstar analyst, said his understanding is PepsiCo has followed through on its distribution agreement, and Bang has gained additional points of sale since the April partnership began. "Forced marriage is the most appropriate way to characterize" the relationship between Bang and PepsiCo, he said. "For Pepsi ... nothing is going to change. The fact is [Bang is] not super meaningful from a financial standpoint."
The U.S. energy drink sector is one of the strongest performers in the nonalcoholic space. Sales totaled $9.3 billion in 2014 and are projected to more than double to $19.2 billion in 2024, according to Mintel. In addition to PepsiCo, Coca-Cola, which owns an 18.5% stake in Monster, launched its new Coca-Cola Energy line designed to appeal to cola drinkers rather energy drink consumers in January.
With billions of dollars at stake in the ultra-competitive energy drink sector, it's no wonder why Bang and PepsiCo are eager to dig in and defend their positions.