Keurig Dr Pepper (KDP) is in discussions to acquire Bang Energy from Vital Pharmaceuticals Inc. (VPX), according to reports this week, with sources placing potential valuations between $2 to $3 billion or more.
Bloomberg yesterday, citing “people with knowledge of the matter,” said talks are still in the early stages. Neither company has publicly commented on the matter.
The talks arrive just two months after Bang and PepsiCo ended an exclusive distribution agreement originally signed in April 2020. The turbulent relationship between the two companies was marked by legal disputes and public feuding as Bang’s transition from its established DSD network to blue trucks led to declining sales and loss of market share.
According to IRI, retail dollar sales of Bang have fallen -11.8% year-to-date with ACV at 95.4%. The brand’s market share has also fallen from a height of nearly 10% in 2019 to around 6.2% in the four-week period ending August 7.
Bang is now in the process of rebuilding its distribution network through new and old DSD partners, but reports have indicated the brand is facing some challenges in restoring its old network as an influx of new competitors in the performance energy space have gained traction including Nutrabolt/C4, Alani Nu and Ghost Energy.
In June, Bang CEO Jack Owoc said that Bang has “roughly 185 contracts” with beverage alcohol distributors and the company has a short-term goal of gaining 15% market share in the energy space.
An analysis by Evercore ISI noted that despite recent declines, largely attributable to the shift in distribution, Bang is “a strong and proven brand, with KDP likely believing it can improve trends as an owner or strategic partner through a JV structure or distribution agreement.” As well, KDP could help Bang to lower costs “with opportunities for savings on material procurement.”
With roughly $1.4 billion in sales in 2021, Bang would immediately make up around 10% of KDP’s overall sales, Evercore ISI added.
In October 2021, KDP’s then-CEO Bob Gamgort said during an Investors Day webcast that the company has reserved up to $20 billion for potential M&A activity intended to “fill white space” in its portfolio, but until now has not let on any inclination of possible acquisition targets.
If successful, Bang would accompany competing fitness energy brand A SHOC in the KDP portfolio. Co-founded by entrepreneur Lance Collins in 2019, A SHOC – which is distributed but not owned by KDP – has been slow to gain traction in the market since its launch. According to IRI, the brand has just 0.3% retail market share in the energy drink category in the four-week period. Although it closed a $29 million funding round earlier this year, that has yet to translate into growth as dollar sales have fallen -19.3% since January 1.
The news also arrives in light of PepsiCo’s $550 million investment and exclusive distribution deal with Celsius Holdings Inc., announced this month. CELSIUS sales were up 200.8% in 2021 and the brand has risen to become the number four player in the energy category, behind Bang, with 4.5% market share in the four-week period ending August 7, per IRI.
More unclear, however, is the impact that Bang’s ongoing legal disputes with Monster Energy Corp. may have on a potential deal. Last month, Bang was ordered to pay a $175 million arbitration award to Monster and family-owned beverage brand Orange Bang, as well as a 5% royalty on all future net sales of Bang-branded products. However, the company had a smaller victory this month after a court ruled it did not have to pay Monster $6 million in attorney’s fees in its trade dress infringement suit regarding the Reign Total Body Fuel brand.