PepsiCo to Buy Rockstar Energy in $3.85B Deal

The beverage giant has distributed Rockstar since 2009.
Lauren MuskettMarch 11, 2020

PepsiCo has reached a deal to buy Rockstar Energy Beverages for $3.85 billion, the companies announced.

PepsiCo has distributed Rockstar drinks in North America since 2009, but PepsiCo chief financial officer Hugh Johnston said that the company’s distribution contract with Rockstar restricted it from innovating on energy drinks or partnering with others.

Once the deal closes, the food and beverage giant will be able to form partnerships with other energy drink makers and expand its presence in the $53 billion energy drink market. Pepsi already has a presence through its ownership of Mountain Dew brand’s Kickstart, GameFuel, and AMP.

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“As we work to be more consumer-centric and capitalize on rising demand in the functional beverage space, this highly strategic acquisition will enable us to leverage PepsiCo’s capabilities,” PepsiCo chairman and chief executive officer Ramon Laguarta said in a statement. “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.”

In a note to clients, Stifel analyst Mark Astrachan wrote that he heard that Pepsi is interested in setting up a distribution agreement with VPX, the company that owns performance energy drink Bang.

Allied Market Research said the global energy drink market could grow to $86 billion by 2026. Mintel said the market was $13.5 billion in the United States last year and grew nearly 30% between 2013 and 2018.

Vivien Azer, an analyst at Cowen, said the deal could complement PepsiCo’s small presence in the market.

“Given the weakness that both Pepsi’s energy offering and Rockstar have demonstrated recently, we will be watching scanner data for a reversal in trend, consistent with Pepsi’s recent commitments to increase marketing spend for its energy brands,” Azer said.

The deal is expected to close in the first half of this year. PepsiCo said it is not expected to materially affect its revenue or earnings per share this year.