PepsiCo, Inc., the renowned American multinational snack, food and beverage company, has reportedly announced that it has entered a $3.85 billion agreement to acquire Las Vegas based energy drink manufacturer Rockstar Energy.
Through this acquisition, PepsiCo is doubling down upon the energy drinks sector with focus on turning around its Mountain Dew brand, which is struggling at the moment. Pepsi has held a North America distribution agreement with Rockstar since 2009.
According to Pepsi CFO, Hugh Johnston, this distribution agreement with Rockstar prevented it from partnering with other energy drink makers or bringing innovation to the field of energy drinks. However, if the proposed acquisition is successful, Pepsi would be able to partner with other energy drink makers.
Sources familiar to the matter state that Pepsi has shown interest in the signing of a distribution deal with VPX, the company behind performance energy drink, Bang. Apart from Rockstar, PepsiCo’s energy drink portfolio relies majorly upon Mountain Dew’s brand recognition through its Mountain Dew-branded Kickstart, AMP and GameFuel.
Meanwhile, the food and beverage corporation stated that the company does not expect the proposed Rockstar acquisition to make a material effect on its earnings per share or its revenue in fiscal year 2020. The deal, if approved by regulators, is expected to reach completion by the end of the second quarter Q2 of 2020.
The proposed takeover comes at a time where PepsiCo and its rival Coca-Cola are pushing into the energy drinks segment to compensate for the declining soda consumption across the U.S. Despite these two giants working towards establishing their presence in the sector, Monster Energy still leads the market segment by a large margin.
PepsiCo CEO and Chairman, Ramon Laguarta, stated that as the company works towards being more consumer-oriented and capitalize on increasing demand across the functional beverage space, the strategic takeover will allow it to leverage its capabilities to expedite Rockstar’s performance and further unlock its ability to foray into the category through existing brands like Mountain Dew.