PepsiCo will be acquiring Rockstar Energy for a whopping $3.85 billion to boost its energy drink segment. The deal was made on Wednesday and is by far the biggest bet made by the beverage giant in the energy drink segment. Pepsi already has a broad energy drink segment but has struggled on that front.
Moreover, the company's decision to acquire Rockstar Energy comes at a time when most beverage companies across the world are increasingly shifting focus from sugary and carbonated drinks to energy drinks. One of the biggest reasons behind this shift is the changing taste and habits of consumers who are becoming health conscious and shunning sugary and carbonated drinks.
PepsiCo takes the big leap
PepsiCo's deal to acquire Rockstar Energy is in a bid to strength its energy drink segment and turn around its struggling Mountain Dew brand. The Mountain Dew brand has been struggling for quite some time now. At the same time the deal is also an indication towards PepsiCo shifting focus towards energy drinks and reducing dependence on sugary carbonated drinks and salty snacks.
Pepsi since 2009 has a distribution network with Rockstar Energy in North America. However, the company's chief financial officer Hugh Johnston said that the distribution contract with Rockstar Energy restricted it from making innovations in energy drinks or getting into partnership with other companies. If the deal gets finalized, PepsiCo, according to Johnston, will be able to enter into partnerships with other brands.
Rockstar Energy which was founded in 2001, on the other hand, was one of the rivals of Rivals of Red Bull. The company launched a host of flavors in cans that were double in size that of Red Bull. However, it is still far behind Red Bull, which along with Monster accounted for over a third of the global energy drink market in 2019.
PepsiCo heats up the race
An increasing number of consumers are becoming health conscious. This has made beverage companies across the globe shift focus from sugary carbonated drinks to energy drinks. PepsiCo distributes Rockstar Energy products in some markets but has a small presence in the energy drink segment and primarily banks on its Mountain Dew Kickstart and Mountain Dew Game Fuel brands.
In July, PepsiCo announced the acquisition of South African brand Pioneer Food Group. The acquisition of the cereal and fruit juice brand came a few months after few months after it made a $3.2 billion buyout of carbonated drink-machine maker SodaStream. Naturally, the latest acquisition is in a bid to heat up the race with its biggest rival Coca-Cola.
Two months ago, Coca-Cola Company came up a Coke-branded energy drink line in the United States after a successful launch in the European Product. However, Monster Beverage, where Coca-Cola has a stake, is still the market leader in the energy drink segment.