3/11/2020
wsj.com
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.
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Buying Rockstar “gives us the ability to play in energy from soup to nuts,” PepsiCo Chief Financial Officer Hugh Johnston said in an interview.
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. |
