Vital Pharmaceuticals (VPX), the maker of Bang Energy, has filed for Chapter 11 bankruptcy protection.
Business operations will continue, the Florida-based company said in a press release today, as it moves ahead with efforts to rebuild the Bang distribution network – now up to 269 DSD houses around the country – following the termination of the brand’s agreement with PepsiCo earlier this year. VPX has also received $100 million in loans from a syndicate of lenders to ensure operations are not interrupted during the Chapter 11 restructuring process.
“We are excited about our future, and particularly the new distribution system that we have spent the better part of this year assembling,” VPX founder and CEO Jack Owoc said in the release. “Utilizing our new state-of-the-art decentralized direct store distribution (DSD) will allow Bang Energy to get back to our pre-Pepsi meteoric annual success of several hundred percent year over year growth. We are coming like a freight train and cannot be stopped.”
The filing comes in the wake of a federal court ruling last month ordering VPX to pay $293 million in damages to Monster Energy Co. after a jury found that the company had violated the Lanham Act by falsely marketing its “Super Creatine” supplement as a functional ingredient in Bang that is superior to standard creatine. Those damages could be potentially tripled in a post-trial hearing, though VPX may appeal the decision.
During the trial, VPX’s attorney David P. Muth warned that a decision favoring Monster could potentially push the company into bankruptcy.
The legal blow came just months after VPX lost a separate trademark dispute with Monster and family-owned beverage brand Orange Bang, in which VPX was ordered to pay $175 million as well as a 5% royalty fee for every can of Bang sold.
Besides Monster, VPX has recently faced a spate of breach of contract lawsuits from PepsiCo, prior to a mutually agreed upon termination of its distribution deal this summer. It is also engaged in a trademark infringement lawsuit with Sony Music Entertainment, which alleged the beverage brand improperly used its music in social media advertisements. Last month, a Miami federal judge sided with Sony in a pretrial decision, following a similar decision in a lawsuit against VPX from Universal Music Group last year.
VPX acknowledged in the release that the lawsuits played a role in the decision to file for bankruptcy protection, noting that the cases “impacted the Company’s short-term outlook,” while the need to rebuild its DSD network led to a summer revenue gap. The company said it intends to use the Chapter 11 process to “recapitalize and emerge from bankruptcy well-positioned to continue its rapid growth in the beverage market.”
Though Bang has commanded a strong position in the U.S. energy drink category as the No. 3 brand behind Monster and Red Bull – reporting over $1.1 billion in annual retail revenue – it has faced consistent and steep sales declines over recent months. According to NielsenIQ, retail dollar sales fell -21.3% in the two-week period ending September 24 and volume declined by -25%. Over the 52-week period, sales dropped by -8.3% and volume was down -9.7%.
But in the release, Owoc projected a positive outlook, vowing that the brand would one day see a return to the triple-digit growth numbers it experienced in 2019 when it first emerged as a significant national brand eager to unseat Monster as the largest energy drink in the country.
“This company was founded on determination and a relentless passion for giving our customers and consumers what they want – and we will continue [to] do so,” Owoc said in the release. “I know we will successfully emerge from this process as a stronger company.”