VPX Sports, the maker of Bang Energy, is seeking an injunction against PepsiCo to stop it from making threats to its customers and wholesale distributors, as the two companies’ dispute over a long-term distribution contract moves into the legal phase.
The lawsuit, filed last week in the United States District Court Southern District of Florida, comes just over a month after Bang moved to terminate its exclusive distribution partnership with PepsiCo on October 23, citing poor performance and accusing the soda giant of ignoring or minimizing Bang sales. Bang publicly announced the move on November 17, declaring that PepsiCo was “no longer the exclusive distributor” of Bang, prompting PepsiCo to reassert that the contract would be upheld for its full three-year term. News of the lawsuit filing was first published in Beverage Business Insights.
According to the lawsuit, Bang claims that despite promises from PepsiCo that it would “advance the [Bang] brand beyond VPX’s current high functioning [distribution] network,” the brand’s sales began to decline following the transition this spring. Instead, the lawsuit claims PepsiCo used the popularity of Bang to “push other failed PepsiCo energy products” such as Rockstar.
Since beginning the partnership in April, the suit claims that Bang has lost market share, with some Florida retailers reporting that “their shelves were frequently barren or otherwise lacking in any meaningful product selection.” Some chains, such as QuikTrip, reportedly said unit sales of Bang had fallen due to frequent out of stocks. The suit also alleges that PepsiCo threatened to withhold other brands, such as Gatorade, from the retailer if it attempted to buy Bang from other distributors.
According to market research firm Nielsen, Bang dollar sales declined 2.8% for the four-week period ending November 14, and were up 3% for the 52-week period. Unit sales were up just 0.5% in the four-week period and 4.4% for the year. The slump comes after nearly a full year of sustained triple-digit growth throughout much of 2019 and into the early months of 2020.
Bang signed the exclusive agreement with PepsiCo in April; as a precursor to the deal the month prior, the conglomerate purchased Rockstar for $3.85 billion, voiding a previous exclusive distribution agreement with the brand. According to Nielsen, dollar sales from PepsiCo’s energy drinks (which also includes MTN Dew), are down 24.5% to $1.05 billion in the four-week period and down 10.8% for the last 52-weeks.
Bang claims it sought to end the agreement in “good faith,” offering a buyout that was refused. Since October 23, PepsiCo has allegedly scaled back its focus on Bang and has threatened VPX’s past distribution partners into refusing to do business with the brand.
“PepsiCo’s actions have caused incalculable and irreparable harm, and will continue to cause such harm to VPX, the VPX brand, and the VPX distribution network worth billions of dollars, if PepsiCo’s actions are not enjoined,” the complaint states.
The complaint seeks to bar PepsiCo from communicating or representing, either directly or indirectly, to VPX’s customers and independent wholesale distributors that it has exclusive distribution rights for Bang. VPX is also asking the court to enjoin Pepsi from discouraging or deterring those customers and distributors from purchasing its products. The company is seeking general or punitive damages.
VPX did not immediately respond to a request for comment.
Reached by BevNET, PepsiCo referred to its November 17 statement, claiming it will remain the exclusive distributor of Bang Energy drinks in the U.S. through October 2023.
“We will continue to fulfill our obligations under our agreement, which does not include any minimum purchase commitment,” the company stated. “Serving our customers remains our top priority, while also defending and enforcing our exclusive rights granted in the agreement.”
At the time of the Bang’s attempted termination of PepsiCo last month, Nik Modi of RBC Capital Markets wrote in a research note that the termination may be “a precursor to a partnership with another beverage company,” potentially one in beer that can “acquire the assets rather than just distribute them.”
A version of this story first appeared on BevNet.