PepsiCo to acquire Rockstar Energy Beverages in US$3.85bn deal

12 Mar 2020 --- Expanding within the fast growing energy category, PepsiCo has entered into an agreement to acquire Rockstar Energy Beverages (“Rockstar”), a sugar-free and low sugar energy drink maker, for US$3.85 billion. The energy drinks sphere is pegged by PepsiCo executives as “highly profitable,” which presents further opportunities for the beverage heavyweight to explore. In addition to Rockstar, PepsiCo’s energy portfolio currently includes Mountain Dew’s Kickstart, GameFuel and AMP. 

“We work to be more consumer-centric and capitalize on rising demand in the functional beverage space. This highly strategic acquisition will enable us to leverage PepsiCo's capabilities to both accelerate Rockstar’s performance and unlock our ability to expand in the category with existing brands such as Mountain Dew,” says PepsiCo Chairman and CEO, Ramon Laguarta. 

“Over time, we expect to capture our fair share of this fast-growing, highly profitable category and create meaningful new partnerships in the energy space,” he emphasizes.

Rockstar, founded in 2001, produces beverages that are designed for active consumers seeking convenient energy. The brand’s products are currently available in more than 30 flavors at convenience and grocery outlets in over 30 countries. PepsiCo has had a distribution agreement with Rockstar in North America since 2009. 

“We have had a strong partnership with PepsiCo for the last decade and I’m happy to take that to the next level and join forces as one company,” says Russ Weiner, Rockstar's Founder and Creator of what is marketed as the “world’s first 16 oz energy drink.” 

“PepsiCo shares our competitive spirit and will invest in growing our brand even further. I’m proud of what we built and how we've changed the game in the energy space,” he adds.

PepsiCo has also entered into an agreement, which will provide approximately US$0.7 billion of payments related to future tax benefits associated with the transaction, payable over up to 15 years. 

The company does not expect the transaction to be material to its revenue or earnings per share in 2020. The transaction is subject to customary closing conditions, including regulatory approval, and is expected to close in the first half of this year.

Race to innovate
In moves toward energy portfolio expansion, PepsiCo’s biggest competitior Coca-Cola unveiled its first ever branded energy drink last April, which contains caffeine from naturally-derived sources, guarana extracts, B vitamins and no taurine. Underscoring the evolution of the dynamic energy drinks category, the beverage giant now targets offering beverages that fit a widening variety of lifestyle and functionality demands, alongside becoming a “total beverage company.”

Meanwhile, the rise in cold brewed coffee is taking the beverages sector by storm as a replacement for traditional energy drinks. According to Innova Market Insights data, there has been a 65 percent growth in new iced coffee launches tracked with a “cold brew” claim. (Global, CAGR 2014 to 2018). 

In this space, Ocean Spray Cranberries recently launched Ocean Spray Brew, a first-of-its kind hybrid drink made with real fruit juice and cold brew coffee. Similarly, Coca-Cola’s Honest Tea company expanded last September into the cold brew coffee market with its own line of ready-to-drink (RTD) varieties, which includes three flavors: Unsweet Black, Just a Tad Sweet Cubano and Just a Tad Sweet Mocha.

A team of technical experts is now helping Coca-Cola North America expand its portfolio with “breakthrough beverages” in emerging categories – including cold-brew coffees, next to kombuchas with less sugar, cultured ciders and keto-friendly smoothies – in “record time.” The company aims to achieve speed-to-market through leveraging an “agile, test-and-learn launch model.”

Over the past ten to 20 years, the ripples of change in the global soft drinks market have risen to become “tidal waves of innovation,” with new categories emerging constantly and genuine novelty flooding the shelves. This is according to new market analysis from Innova Market Insights, which underscores rapid growth in alternative categories.

By Benjamin Ferrer

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