Dive Brief:

• PepsiCo has entered into an agreement to distribute Bang Energy in the U.S. after entering into a partnership deal with its manufacturer Vital Pharmaceuticals, the companies said in a statement. Terms of the deal were not disclosed.
• “In the ultra-competitive energy category, Bang Energy has thrived, pioneering the performance energy segment and attracting the next-generation of energy consumers,” said Kirk Tanner, CEO of PepsiCo Beverages North America. “This alliance plays a central role in PepsiCo’s overall energy-beverage strategy and enables us to significantly accelerate the distribution of Bang Energy to meet rising consumer demand.”
• The Bang partnership comes as the company closed the deal announced in March to buy Rockstar Energy for $3.85 billion. PepsiCo had a distribution agreement with the energy drink producer in North America since 2009. 

Dive Insight:

For years, PepsiCo and its archrival Coca-Cola had small presences in the fast-growing energy space while companies such as Monster Energy and Red Bull exploded in popularity with consumers. Coca-Cola owns a stake in Monster and PepsiCo used its Mountain Dew platform to brand energy drinks such as Kickstart, GameFuel and AMP. 

But this year has seen the soda giants double down on energy drinks in a bid to capture more of a beverage for which sales remain on an upward climb and to further help them diversify their drink portfolios away from the sugar-laden sodas for which they are known. Coca-Cola started selling its Coke-branded energy drinks in the U.S. in January. 

PepsiCo has moved aggressively in recent weeks to capitalize on demand for functional beverages. While PepsiCo had a distribution agreement with Rockstar since 2009, it spent nearly $4 billion in March for the energy drink player that has recently lagged behind some of its competitors in the space.

On the same day it closed the Rockstar transaction, the beverage and snack manufacturer is further entrenching itself in energy drinks with this deal with Bang. Introduced in 2012, Bang is the third-largest brand in the energy category, according to the company. It is carried in more than 200,000 outlets in the U.S. This new deal is similar to the one PepsiCo had in place for a decade with Rockstar.

PepsiCo now has a three-pronged approach to energy drinks with Rockstar, Bang and Mountain Dew. It remains to be seen how its energy strategy will unfold, but the company needs to diversify how it markets each brand to certain customers or target different parts of the day. If this wasn't the case, PepsiCo wouldn't have announced the deal with Bang so soon after Rockstar. Mountain Dew, for example, could be targeted toward the average consumer aware of the soda brand, while the Bang platform could target fitness and exercise aficionados.

U.S. sales of energy drinks could total about $16.9 billion by 2022, according to Market Research Hub​. Total energy drink and energy shot sales in the U.S. rose 29.8% from 2013 to 2018, CNBC reported, citing data from Mintel. Sales last year totaled about $13.5 billion.​ The segment has grown so popular that even Amazon last spring launched its own private-label energy drinks.

For Bang, the chance to work with PepsiCo and benefit from its vast distribution network will help the Florida-based company compete with sector juggernauts like Monster and Red Bull. According to Statista, Red Bull was the leading brand of energy drink in the United States in 2019, with sales of nearly $3 billion, followed by Monster with revenue of just under $1.8 billion.

While Bang is growing quickly, it likely is becoming harder to snag sales on a broader level from Monster and Red Bull without the distribution resources of a company like PepsiCo. To really make a name for itself and give it a fighting chance to grab more share from bigger players, it needs to be in more locations to increase consumer loyalty and brand awareness.

As recent deals in the energy drink space show, it's a sector that big beverage companies are eager to be in. It remains to be seen whether Coca-Cola is content to have its own energy drink and a partnership with Monster or if it may need to deepen in presence in the space to further compete with PepsiCo. As more deals take place, there are fewer players left not named Red Bull or Monster with which to partner.