PepsiCo Nears Deal to Buy Energy-Drink Maker -- Update
March 11 2020 - 8:07AM
Dow Jones News
By Cara Lombardo
PepsiCo Inc. on Wednesday agreed to buy Rockstar Energy
Beverages, in a move that would expand the beverage giant's
presence in the fast-growing energy-drink category.
PepsiCo is to pay $3.85 billion for Rockstar. The Wall Street
Journal first reported earlier Wednesday that the two companies
were nearing a deal.
PepsiCo and rivals including Coca-Cola Co. have been working for
years to shift their beverage sales away from sugary sodas and
toward lower-calorie offerings including water and tea as well as
coffee drink
Energy drinks are a weak spot for both Coca-Cola and PepsiCo,
and neither owns a major brand in the category. Coke, which owns a
stake in Monster Beverage Corp. and distributes its products,
recently launched an energy drink in the U.S. over Monster's
objections.
Rockstar, which PepsiCo already distributes, is one of a handful
of major energy-drink brands. The entrepreneur Russell Weiner
founded the company in 2001, when Rockstar was the first energy
drink to come in now-ubiquitous 16-ounce cans. The number of
energy-drink offerings has since exploded and begun edging out
sodas for space in store coolers. Austria-based Red Bull GmbH and
Monster Beverage dominate the market, which in addition to Rockstar
counts another brand, Bang, as a significant player.
Rockstar, beyond traditional energy drinks with loud labels and
flavors including Killer Black Cherry, makes several sugar-free and
low-calorie energy drinks as well as an organic version and other
drinks made with fruit juice.
Should a deal come together, it would mark the first big move
since Ramon Laguarta took over as PepsiCo's chief executive from
Indra Nooyi in 2018. The Purchase, N.Y., company's last
multibillion-dollar acquisition was the purchase of SodaStream, the
seltzer-machine maker. Mr. Laguarta was deeply involved in that
deal, which came in the final months of Ms. Nooyi's tenure.
While PepsiCo has distributed Rockstar drinks in North America
since 2009, the existing agreement limits what it can do with other
external brands and with those it sells under its own Mountain Dew
label.
Once the deal closes, PepsiCo could do more with its Mountain
Dew brands, including Kickstart and Game Fuel, and potentially
distribute other energy-drink brands. It would also be able to
expand distribution and product offerings under the Rockstar
brand.
That should enable the company to sidestep any legal tussle like
the one that ensnared Coca-Cola. PepsiCo's rival has for years held
a significant stake in Monster Beverage. Coca-Cola last year won an
arbitration claim that allows it to expand sales of its own
Coke-branded energy drinks after Monster tried to stop the
rollout.
When Mr. Laguarta was asked about PepsiCo's energy-drink
strategy on its earnings call last month, he pointed to success in
a partnership with Starbucks Corp. that allows PepsiCo to sell
ready-to-drink coffee beverages and said it plans to do "a better
job with Rockstar," without further elaborating.
Write to Cara Lombardo at cara.lombardo@wsj.com
(END) Dow Jones Newswires
March 11, 2020 07:52 ET (11:52 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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