Bang Energy, PepsiCo ‘meteoric partnership’ flames out in litigation

TAGS: Beverages
Bang Energy
Editorial credit: LunaseeStudios / Shutterstock.com
A partnership between PepsiCo and the manufacturer of Bang Energy has burst into flames.

Just eight months ago, the CEO of Bang Energy, Jack Owoc, boasted an alliance with PepsiCo would fuel a “meteoric partnership, one for the beverage history books.”

The agreement granted PepsiCo the rights to exclusively distribute Bang Energy beverages in the U.S.

The partnership has burst into flames. In October, the manufacturer of Bang Energy—Vital Pharmaceuticals Inc., doing business as VPX Sports—notified PepsiCo that it was terminating the distribution agreement.

Relations between VPX and PepsiCo have further deteriorated. On Nov. 25, VPX sought a preliminary injunction in Federal District Court in Florida against PepsiCo.

“Unfortunately, we were blindsided and bamboozled,” Owoc stated in a press release announcing the lawsuit.

PepsiCo hadn’t responded to the complaint as of Dec. 2, but it’s plausible the beverage behemoth will argue the dispute between the entities shouldn’t be settled in the judiciary. PepsiCo recently filed for arbitration with the American Arbitration Association, VPX disclosed in its complaint accompanying the motion.

The complaint alleged breach of the distribution agreement, as well as tortious interference with business relationships. Although several paragraphs of VPX’s complaint are focused on the distribution agreement, including one related to PepsiCo’s obligations, many portions have been redacted in the public court filing due to confidentiality.

VPX is seeking a preliminary injunction that would bar PepsiCo from stating in communications with VPX’s customers or independent wholesale distributors that PepsiCo is the exclusive distributor of the licensed products. VPX also wants the Federal District Court to enjoin PepsiCo from discouraging or deterring VPX’s customers or independent wholesale distributors from buying the licensed products from VPX or its independent distributors.

“Pepsi’s actions have caused incalculable and irreparable harm, and unless enjoined, will continue to cause such harm to VPX, the Bang Brand and the VPX distribution network and other operations worth billions of dollars,” VPX, based in Weston, Fla., proclaimed in its motion for a preliminary injunction.

Relations between VPX and PepsiCo soured after PepsiCo secured the rights to distribute Bang Energy. According to VPX’s complaint, its distribution partner failed to properly service VPX’s territories and customers.

“Far from using commercially reasonable efforts, PepsiCo’s distribution strategy has resulted in lost market share for the licensed products,” VPX alleged in the complaint. “In Florida, for example, VPX soon learned that, instead of stocking Bang-branded coolers with the licensed products, PepsiCo had supplanted them with other brands in its portfolio, including its core soft drink brands.

“Other Florida retailers reported that, despite 26 core flavors of the licensed products, their shelves were frequently barren or otherwise lacking in any meaningful product selection,” the complaint continued. “Prior to PepsiCo’s appointment as distributor, these shelves were fully stocked.”

VPX also claimed evidence suggested PepsiCo curtained shelf space for the licensed products and instead promoted its portfolio of Rockstar energy drinks. PepsiCo acquired Rockstar in April in a multibillion-dollar deal.

On April 28 in its first-quarter results, PepsiCo said its arrangement with VPX “complements the strategic rationale behind its acquisition of Rockstar: to create meaningful new partnerships in the energy space—a high growth, highly profitable category; accelerate Rockstar’s performance; and unlock PepsiCo’s ability to expand in the category with existing brands such as Mountain Dew.”

But VPX alleged one of its largest retail customers, QuikTrip, noticed significantly lower unit sales of the licensed products after PepsiCo assumed distribution rights.

“[QuikTrip] attributed the downward sales trend to frequent out-of-stock situations at many of its locations throughout the southwestern United States, a result that was squarely due to PepsiCo’s failure to service the market,” VPX stated in the complaint.

PepsiCo, the complaint further alleged, has interfered with VPX’s ability to transfer distribution rights to other entities, including threatening legal action against future partners and issuing a press release that it remains the exclusive distributor of Bang Energy products in the United States.

“These and other threats have caused confusion in the marketplace and have had a chilling effect on VPX’s ability to execute its distribution succession plan,” VPX stated in the complaint. “For example, 7-Eleven, one of the nation’s largest convenience store chains, adapted PepsiCo’s November 17, 2020 letter into its own press release and disseminated the very same misrepresentations to its retail network.”

PepsiCo and 7-Eleven did not immediately respond to requests for comment for this article, and QuikTrip declined comment.

The complaint and motion for a preliminary injunction, Vital Pharmaceuticals Inc., d/b/a VPX Sports v. PepsiCo Inc., case No. 20-cv-62415, are pending in the U.S. District Court for the Southern District of Florida. 

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