And yet, parent PepsiCo has never been able to position Mountain Dew, now branded as Mtn Dew, effectively that way. So Pepsi decided it was time to bring in a Rockstar.
PepsiCo announced Wednesday it will pay $3.85 billion for the Rockstar energy drink company. And even according to Pepsi top brass, the reason the company is giving Rockstar its due is Dew.
“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,” PepsiCo chief executive Ramon Laguarta said in a statement. “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.”
AD
Pepsi has had a close association with Rockstar since 2009 when it wrested a distribution agreement away from the Coca-Cola Co.
Both of these archrivals have increasingly turned to energy drinks and other “functional” beverages over the past decade as soda consumption in the United States has continued to flag.
Caleb Bryant, associate director of food and drink reports for market research company Mintel, says this acquisition gives Pepsi a viable contender in the fast-growing energy drink market, with sales estimated at $12.4 billion in 2018. This is small compared with the more than $30 billion soda market, but it is growing, whereas soda had nominal growth, according to Bryant.
AD
“Juice and dairy milk have been in sharp decline, soda is nearly flat,” he said. “Energy drinks, water and nondairy milks are the areas of growth in the industry as a whole.”
PepsiCo generated more than $67 billion in net revenue in 2019, driven by a food and beverage portfolio that includes Frito-Lay, Gatorade, Pepsi-Cola, Quaker and Tropicana. Yet Mtn Dew sales have disappointed, with Laguarta recently telling an investor call: “MTN Dew is improving, but it’s not to the levels that we would like to see."
Boasting higher caffeine than most sodas, Mtn Dew was a proto energy drink before the category existed, says Bryant. But it has pushed the envelope with more overt connections to the energy drink category recently with mixed results.
AD
Pepsi shows how America loves to erase black women
“They’ve had Mountain Dew Game Fuel, their video gamer beverage with more caffeine than a regular soft drink but less than an energy drink, but said to increase your alertness,” Bryant says. “And they have Mountain Dew Kickstart with juice and caffeine. Then they had Mountain Dew Amp, which basically fizzled out entirely.”
In 2018, the brand spent $119.5 million on paid media, up from $89 million in 2017, according to Kantar media. Nearly 40 percent of its budget last year was devoted to targeting gamers.
The energy drink category is dominated by Red Bull and Monster, partly owned by Coca-Cola. Hoping to bolster its position, Coca-Cola launched Energy in January, the first energy drink under the Coca-Cola brand.
AD
Coca-Cola internal documents reveal efforts to sell to teens, despite obesity crisis
“It’s too early to tell how it’s doing, although it’s been in Europe a bit longer,” says Bryant, adding that while “people who don’t drink energy drinks say they don’t like the way they taste, Coke Energy has real Coke taste.”
Mountain Dew was invented in 1940 by Tennessee beverage bottlers Barney and Ally Hartman and has always been a heavy favorite with rural Americans in the heartland, Bryant says. He speculates that changing demographics might have something to do with Mtn Dew’s disappointing sales. According to the Pew Research Center, a shrinking percentage of Americans live in rural counties.
Comments
Post a Comment