Bang owner files suit against PepsiCo over distribution of new hard seltzer beverage

Dive Brief:

• Quash Seltzer said PepsiCo is causing “incalculable and irreparable harm” to the company’s efforts to establish a distribution network for its soon-to-be-sold Mixx hard seltzer, the upstart said in a court filing with the U.S. District Court for the Southern District of Florida. Quash has “common ownership” with Vital Pharmaceuticals, the owner of Bang Energy.
• In its Jan. 25 filing seeking a court order to bar PepsiCo from communicating with prospective wholesale distributors on account of Mixx, Quash said PepsiCo has had a “chilling effect on Quash’s ability to execute its business strategy for Mixx” by inaccurately claiming it had distribution rights, which scared off prospective distributors. “As Pepsi continues its tortious actions and until this court enters an order preliminarily enjoining it, Quash has incurred, and will continue to incur, substantial economic harm that very well could be in the billions of dollars and is otherwise incurring irreparable damage to its goodwill and reputation.” PepsiCo did not respond to a request for comment.
• Quash said PepsiCo’s actions are a response “to gain leverage in the pending legal disputes between PepsiCo and VPX regarding the Bang energy drinks.” PepsiCo and Bang signed an exclusive distribution deal last March, but the energy drink company gave notice on Oct. 23 it was ending the deal, “citing multiple issues and concerns regarding PepsiCo’s performance.” An emergency arbitrator ruled in December that PepsiCo remains the exclusive distributor of Bang Energy drinks until October 2023, and PepsiCo has a pending motion to dismiss a federal court case Bang owner Vital Pharmaceuticals brought against the company.

Dive Insight:

The latest attack in the hostile battle over distribution of Bang Energy drinks involves a product that hasn’t even reached the market yet.

Quash said it will soon be launching its Mixx hard seltzer beverages and has been working since December to develop a distribution network for them — efforts it said have been thwarted by PepsiCo. In the court filing, it said distributors in at least seven states have declined or curtailed efforts to enter into distribution agreements for Mixx over fears of being sued by PepsiCo.

The claim that PepsiCo is pressuring potential distributors is similar to the tussle over Bang Energy. Vital Pharmaceuticals, which owns the brand, and its CEO Jack Owoc said on Dec. 1 that PepsiCo has “resorted to intimidation tactics with independent distributors and major retailers like Walmart threatening lawsuits against anyone who fails to purchase Bang Energy exclusively from Pepsi.” After the emergency arbitrator ruled in PepsiCo’s favor, the company said it “upholds the importance and enforceability of distributor agreements and reaffirms the high standard of integrity to which we hold ourselves and expect of our partners.” 

As hard seltzer has surged in popularity, dozens of companies have entered the space, including major beer makers AB InBev and Molson Coors as well as soda giant Coca-Cola. Nielsen reported in June that off-premise sales for the 52 weeks ended June 13 were up 127%. The hard seltzer category continues to be dominated by two players: Mark Anthony Brands’ White Claw and Truly, owned by Boston Beer. These two brands have a combined market share of more than 75%, the data analytics company found.

But their dominance hasn’t stopped other companies from entering the space. Quash Seltzer predicted its hard seltzer product line “will have a meteoric rise in sales and popularity.” If the company’s claims about Mixx are correct, any effort to curtail or prevent the new brand from having a meaningful distribution network in place when it’s launched will only make its efforts to grow and compete with other more established players even more difficult.

As the battle between the beverage giant and feisty energy drink maker rages on, it’s unlikely this is the last time the courts will called on to act.