PepsiCo to Acquire Energy Drink Maker Rockstar for $3.85 Billion

PepsiCo announced that it has agreed to acquire Rockstar Energy Beverages, the popular energy drink maker, for $3.85 billion.

Rockstar, founded in 2001, produces beverages that are designed for those who lead active lifestyles from athletes to rock stars. Rockstar products are available in over 30 flavors at convenience and grocery outlets in over 30 countries.

PepsiCo has had a distribution agreement with Rockstar in North America since 2009. In addition to Rockstar, PepsiCo’s energy portfolio includes Mountain Dew’s Kickstart, GameFuel, and AMP. 

According to CNBC, the company’s distribution contract with Rockstar restricted it from innovating in energy drinks or partnering with others.

“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 to both accelerate Rockstar’s performance and unlock our ability to expand in the category with existing brands such as Mountain Dew,” said PepsiCo Chairman and CEO, Ramon Laguarta.

“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,” added Laguarta.

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Pepsi and rival Coca-Cola have been pushing into energy drinks as soda consumption declines in the U.S. Still, Monster Energy is by far the market leader for energy drinks.

“We have had a strong partnership with PepsiCo for the last decade, and I’m happy to take that to the next level and join forces as one company,” said Russ Weiner, Rockstar’s founder and creator of the world’s first 16oz energy drink.

The food and beverage giant has also entered into an agreement, which will provide approximately $700 million of payments related to future tax benefits associated with the transaction, payable over up to 15 years. The company does not expect the transaction to be material to its revenue or earnings per share in 2020.

The deal is subject to customary closing conditions, including regulatory approval, and is expected to close in the first half of 2020.

Total energy drink and energy shot sales in the United States grew by 29.8% from 2013 to 2018, reaching an estimated $13.5 billion in sales last year, according to Mintel data.