Keurig Dr Pepper (KDP) has entered a strategic partnership with C4 Energy producer Nutrabolt and will invest $863 million for a 30% ownership stake in the brand, along with distribution rights, the company announced today.
Based in Texas, Nutrabolt produces a variety of fitness and workout powders and supplements, including C4 Pre-Workout and post-workout recovery brand XTEND. C4’s ready-to-drink energy line, introduced in 2018, has become its fastest growing product – with retail dollar sales up 140.4% to $299.2 million in the 52-weeks ending November 19, according to NielsenIQ.
According to a press release, the deal is expected to “meaningfully increase retail availability and household penetration” for C4 as KDP onboards the energy drink for mainstream retail distribution. The transition will begin next year.
Nutrabolt will continue to distribute C4 both directly and through its existing distributors for the specialty, health club and fitness channels, as well as continuing to work with some of its existing beverage distribution partners in select markets.
“This partnership represents a win-win transaction between our two companies,” KDP CEO Bob Gamgort said in a statement. “KDP gains significant presence in the rapidly growing performance energy drink market and Nutrabolt gains access to a strategic investor with extensive sales and distribution capabilities to further accelerate its growth. We believe that bringing together the resources, talent and expertise of both companies will accelerate innovation and growth and drive significant value creation over time.”
KDP’s cash investment is expected to close by the end of the year and will reflect approximately $740 million net of anticipated cash tax benefits. The conglomerate will receive preferred equity with 5% annual coupon paid in cash or in-kind and its 30% ownership stake will make it the second largest investor in Nutrabolt, behind founder, chairman and CEO Doss Cunningham.
The investment “represents a multiple below 4x estimated 2023 net sales” of C4, which are expected to surpass $650 million, the release noted.
KDP will also have the opportunity to “earn additional equity tied to in-market execution” and will gain seats on Nutrabolt’s board of directors. KDP also will have the ability to increase its ownership stake in the future “under various capital raising scenarios.”
“We are extremely proud of this business and the team members who built it from the ground up and, with the assets and experience that KDP brings to the table, we are more confident than ever about the direction of the company and our vision for the future,” Cunningham said in the release.
“This strategic partnership will supercharge C4 Energy’s current growth trajectory by accelerating household penetration, enhancing distribution and strengthening our overall commercial capabilities. We will also be partnering with a talented and ambitious leadership team who shares our values, our competitive spirit and has a similar philosophy of disciplined growth and maximizing overall value creation.”
The deal marks another major shift in the performance energy space, following PepsiCo’s breakup with Bang Energy and its subsequent $550 million investment and exclusive distribution agreement with CELSIUS this summer. It may also be another blow to independent beer distribution houses who have been subjected to major flux over the past several months as CELSIUS exists and Bang has worked to rebuild its independent network.
It wasn’t immediately clear what the role of influential New York DSD house Big Geyser may be for C4 in the future. While Nutrabolt said it intends to retain select distribution partners for C4, no specific companies were named. Big Geyser previously secured an exception to CELSIUS’ PepsiCo partnership in order to continue distributing the brand.
Among the top selling brands in the new generation of better-for-you and performance energy, C4 was one of the few without a strategic partner. As the space has accelerated, corporations like Anheuser-Busch (GHOST) and Molson Coors (ZOA) have aligned with independent brands.
C4 is not the only performance energy brand in KDP’s portfolio either; the company previously partnered with entrepreneur Lance Collins to launch A Shoc in 2019 and serves as the brand’s national distributor. While A Shoc closed a $29 million Series B funding round earlier this year, the brand has often struggled to break out within the crowded energy category. According to IRI, A Shoc sales were down -18.9% to $51.5 million in the 52-weeks ending October 2.
The announcement comes over a year after KDP said it intended to increase M&A activity and improve its distribution network, during an Investor’s Day webcast in October 2021. The company previously acquired Canadian non-alc canned cocktail brand Atypique in June.
An August report that KDP was in talks to acquire Bang Energy at a $2 to $3 billion valuation was swiftly denied by the company.
Ahead of the partnership, Nutrabolt boosted its leadership team; in November the company announced a new CMO, veteran marketer Robert Zajac, and new EVP & Chief Growth Officer Sabba Naserian.
More information about the partnership will be discussed during KDP’s upcoming fireside chat with BofA Securities equity analyst Bryan Spillane on December 15 at 2:30 p.m. ET.