As consumers’ thirst for carbonated beverages continues its decline, Pepsico, the maker of Pepsi and Mountain Dew, is moving to fortify its beverage portfolio with a major energy drink brand.
The food and beverage giant has announced the acquisition of Rockstar Energy Beverages for $3.85 billion.
"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.
Pepsico already has a relationship with Rockstar because it distributes it to retailers along with the company’s other beverages. The acquisition improves Pepsico’s energy beverage position in relation to Coca-Cola, which owns a major stake in Monster Beverages.
"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," Laguarta said.
Active lifestyle consumers
Rockstar has been around since its founding in 2001, marketing its product as a beverage for consumers who lead an active lifestyle, such as athletes. The company says its products come in over 30 flavors and are sold at convenience and grocery stores worldwide.
With the addition of Rockstar, PepsiCo's energy drink portfolio will include Mountain Dew's Kickstart, GameFuel, and AMP. Russ Weiner, Rockstar's founder, says the acquisition is the continuation of what he says has been a strong partnership since 2009.
"PepsiCo shares our competitive spirit and will invest in growing our brand even further,” he said. “I'm proud of what we built and how we've changed the game in the energy space."
Energy beverages are formulated to increase mental alertness and physical performances for consumers by stepping up caffeine content, along with other additives like vitamins and herbal supplements. Energy drinks are especially popular among young consumers, making them attractive to legacy beverage manufacturers looking for long-term growth.
The products have been the subject of concern by health officials as they’ve grown in popularity. A 2019 study by researchers at the American Heart Association cautioned consumers to use the products in moderation.
The study found that drinking 32 ounces of an energy drink can affect the heart’s normal functioning and also dramatically shift consumers’ blood pressure.
“Energy drinks are readily accessible and commonly consumed by a large number of teens and young adults, including college students,” researcher Kate O’Dell said when the study was released. “Understanding how these drinks affect the heart is extremely important.”