PepsiCo to Buy Rockstar Energy Drinks for $3.85 Billion

Beverage giant continues its push into energy category

Pepsi products on store shelf.
PepsiCo expects the deal to close in the first half of 2020. PepsiCo

Key insight:

In a deal worth $3.85 billion, PepsiCo has agreed to acquire Las Vegas-based Rockstar Energy Beverages.

The privately held energy drink maker, whose products come in more than 30 flavors and are sold in over 30 countries, has had a distribution partnership with PepsiCo in North America since 2009.

PepsiCo chairman and CEO Ramon Laguarta noted the acquisition would help advance his company’s expansion into the category alongside its existing brands, such as Mountain Dew. “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,” Laguarta said in a statement.

As a category, energy drinks are anything but tired. Between 2013 and 2018, U.S. sales of both energy drinks and energy shots increased nearly 30%, hitting about $13.5 billion last year, according to CNBC.

Last month, Monster Beverage Corp., a leader in the energy space that’s partially owned by Pepsi rival Coca-Cola, revealed that 2019 net sales rose 10% to $4.20 billion.

Caleb Bryant, associate director of food and drink at the market research firm Mintel, noted that “PepsiCo’s acquisition is logical, given the fast-growing nature of the market—but it is not without its challenges.” Bryant pointed out that 42% of consumers who don’t buy energy drinks say it’s because the beverages are too high in caffeine, while 39% don’t like how their taste.

The acquisition comes on the heels of Coca-Cola’s U.S. debut of Coca-Cola Energy in January, which Bryant said may appeal to some non-energy drink consumers because it has the Coke flavor, whereas Rockstar doesn’t currently cater to non-energy drink consumers.

“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,” said Russ Weiner, who founded Rockstar in 2001, in a statement. “PepsiCo shares our competitive spirit and will invest in growing our brand even further.”

If regulators approve the transaction, PepsiCo expects the deal to close in the first half of 2020.

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@hiebertpaul Paul Hiebert is a CPG reporter at Adweek, where he focuses on data-driven stories that help illustrate changes in consumer behavior and sentiment.
Publish date: March 11, 2020 © 2020 Adweek, LLC. - All Rights Reserved and NOT FOR REPRINT