Bang Energy's explosive fall-out with PepsiCo throws the spotlight on coffee versus energy

There's a certain lop-sidedness to the announcement of distribution deals. When signed, they're accompanied by bold statements and fulsome praise. Less fanfare is produced for their termination, a process that often takes place quietly and behind closed doors.

This makes the statement from Vital Pharmaceuticals (VPX), the owner of Bang Energy drinks, all the more interesting. In a terse, yet strongly-worded, press release that announced the end of their US distribution partnership, Bang Energy owner Jack Owoc accused PepsiCo of abject underperformance. 

PepsiCo had only been distributing Bang for six months, but, according to Owoc, this was the end of the line. "PepsiCo, you're fired," Owoc said, possibly channelling another businessman famed for his distaste for bad deals.

Exact details on why Bang Energy, which makes a range of zero-sugar, high-caffeine drinks, turned sour on PepsiCo after such a short time were not forthcoming. Sure enough, neither of the companies responded to requests for further comment. However, the falling apart of this relationship, which seemed beneficial for both sides, may point to wider trends within energy drinks.

As with most things today, the trends are connected to the coronavirus, and specifically where consumers will choose to get their caffeine hit going forward – through energy drinks or coffee.

The answer to that question is unclear, as it involves a number of moving parts. The pandemic has closed coffee shops all over the world, hammering out-of-home consumption. At the same time, traditional energy drinks channels such as convenience stores have also been massively disrupted.

Meanwhile, there's the question of whether the on-the-go appeal of energy drinks will dissipate as consumers spend more time at home with access to relatively cheaper coffee options. 

When asked after the release of third-quarter results this month, what all this might mean for Monster Beverage Corp, CEO Rodney Sacks said it was still too early to tell. "We're in an area of uncertainty," he said. However, Sacks also said the coronavirus had led to a lot of "channel-switching", namely a move away from the convenience channel to larger packages and take-home formats.

Did this disruption catch PepsiCo on the hop with Bang as consumers changed their consumption habits? Retailers around the world have moved to streamline product offerings, and Bang, a relatively small player in the energy category, may have been elbowed out by bigger rivals.

Longer-term, this is more of a problem for Bang than PepsiCo, which may not be too bothered by the distribution split. In March, the snacks and drinks group paid almost $4bn for the much bigger Rockstar, a pure-play energy drinks producer that plugs neatly into the category's mainstream.

However, the fitness-focused Bang was seen as a potential rival to Monster's Reign, which according to Nielsen data cited by Monster, is growing well ahead of Monster's other brands. VPX is currently engaged in a lawsuit with Reign claiming, among other things, copyright infringement.

But Bang is making inroads elsewhere. At the end of June, the company announced a distribution deal in Germany through the Oettinger Group in what Bang called a "massive" expansion for its portfolio. Let's see if this one sticks.