Vital Pharmaceuticals (VPX), the parent company of Bang Energy, has filed for Chapter 11 protection. According to a statement by the company published today “this filing is a restorative action to help the company recover from recent challenges, including multiple lawsuits that impacted the Company’s short-term outlook and the cost impact of reconstituting the company’s national distribution network that resulted in a summer revenue gap. VPX intends to use the Chapter 11 process to recapitalize and emerge from bankruptcy well-positioned to continue its rapid growth in the beverage market.”
Bang Energy was introduced in 2012. The brand with the promise to give full taste with zero calories, has risen to become the third-largest energy drink brand, and in 2019, was the single-largest contributor to overall growth in the liquid refreshment beverage market.
In April 2020, just one month after PepsiCo acquired energy drink maker Rockstar for USD 3.85 billion, the American multinational food, snack, and beverage corporation also entered into an exclusive alliance with Vital Pharmaceuticals Inc. to distribute the portfolio of Bang Energy beverages in the United States. (inside.beer, 28.4.2020)
Just eight months after the two companies signed their exclusive distribution deal, Bang announced it was terminating its partnership and filed a lawsuit against PepsiCo accusing its partner of “gross misconduct”. However, Pepsi insisted on fulfilling the exclusive distribution rights until October 2023, which was ultimately confirmed by an arbitrator.
Finally, in June 2022, Jack Owoc, CEO and Founder of VPX and Bang Energy announced “that all disputes with PepsiCo had been fully settled and resolved” and “both parties will enthusiastically and strategically cooperate in a nationwide joint effort to transition from PepsiCo distribution to Bang Energy’s new DSD [direct store distribution] partners.”
While it was not made public, if the recent agreement also involved settlement payments, Vital Pharmaceutical lost one and a half weeks ago another lawsuit filed by Monster Energy Co and was sentenced to pay its rival USD 293 million in damages for falsely advertising the ingredients and health benefits of its drinks.
As it seems, this was the straw that broke the camel's back and forced Vital Pharmaceuticals to file “voluntary petitions for protection under Chapter 11 of the Bankruptcy Code in the Southern District of Florida.”
“All business operations will continue, with improved product delivery and service to retailers through VPX/Bang Energy’s newly constituted legacy distribution network consisting of more than 269 best-in-class distributors,” the company said in the statement today. “VPX’s Chapter 11 efforts are being supported by USD 100 million of additional financing from VPX’s esteemed syndicate lenders to help ensure operations continue uninterrupted during the restructuring process,” the statement continues.
VPX/Bang Energy intends to reclaim the market share that dwindled while Pepsi was the national distributor of Bang energy drink products. Immediately prior to VPX/Bang Energy switching to Pepsi in early 2020, Bang’s share of the energy drink market was roughly 9.7%. Under Pepsi’s distribution, roughly 3.4% of that market share was lost. At USD 200 million per share point, that equates to USD 680 million in today’s energy drink market. Bang Energy’s newly orchestrated and soon-to-launch direct store distribution network currently covers nearly 95% of the entire United States market.
“We are excited about our future, and particularly the new distribution system that we have spent the better part of this year assembling, said Jack Owoc. “Utilizing our new state-of-the-art decentralized direct store distribution (DSD) will allow Bang Energy to get back to our pre-Pepsi meteoric annual success of several hundred percent year over year growth. We are coming like a freight train and cannot be stopped.”
A group of banks to which the company already owes more than USD 350m has agrred on a new USD 100m credit line to help pay its bills. While the company seeks a more permanent solution, the new loan is to be seen as “a restorative action to help the company recover from recent challenges.”
However, lawyers of Monster Energy, that won a false-advertising lawsuit against Bang and is entitled to USD 293m in damages say that the new loan bumps Monster’s claim to that of a lower-ranking creditor with a less likely chance to collect the funds.