Wyoming’s Admiral Beverage Sues PepsiCo Over Exclusivity Rights
Admiral Beverage, the Worland-based company that manufactures Pepsi products for a large portion of the Mountain West, is suing PepsiCo in federal court, claiming that the soft drink giant breached a contract in pulling Admiral's ability to exclusively manufacture an energy drink.
Specifically, the lawsuit claims that PepsiCo took away Admiral's exclusivity right to a market consisting of parts or all of Wyoming, Utah, Montana and Idaho after Admiral executives refused to sign an E-Commerce agreement which would authorize PepsiCo to sell its brand to online retailers like Amazon. Those online retailers would then be allowed to sell Pepsi brands to online consumers located in the bottlers' exclusive territories.
The agreement, the suit claims, would also rid Admiral of its ability to set prices for online sales within its exclusive markets.
Admiral is seeking a preliminary injunction in order to maintain its exclusivity rights.
According to the lawsuit, Admiral Beverage refused to sign that agreement and as a result, PepsiCo retaliated by improperly terminating Admiral's exclusive distribution agreement for Rockstar Energy drinks effective August 10.
"PepsiCo's termination comes on the heels of Admiral delivering a 27% sales increase of Rockstar in June 2020," the suit states. "PepsiCo's retaliation occurred after PepsiCo made repeated assurances to Admiral Beverage that it would honor Admiral Beverage's existing Rockstar distribution agreement through 2023 and after PepsiCo had already notified all of Admiral Beverage's customers that Admiral would continue to serve as the exclusive distributor of Rockstar products in its territories."
Admiral Beverage produces more than a million cases of Rockstar Energy products each year, according to the suit.
Further, the suit claims, Pepsi is attempting to "destroy" Admiral's longtime Rockstar business, which has enabled it to compete with Coca-Cola products in similar geographic markets.
The lawsuit claims PepsiCo is losing ground to its chief competitor, Coca-Cola and its foray into the online market is an attempt to make up that lost ground, which comes at Admiral Beverage's detriment.
In the late 1990s, the lawsuit says, PepsiCo executives developed a plan called "Project Bronco" which consisted of PepsiCo aggressively consolidating its existing U.S. bottling network.
But that consolidation strategy is harmful to interests of independent Pepsi bottlers like Admiral beverage and it jeopardizes their rights under exclusivity agreements, the lawsuit claims.
"Despite pursuing its consolidation strategy since the 1990s, in recent years, PepsiCo continues to lose handily to Coca-Cola in their longstanding competition for market share in the carbonated soft drink space," the lawsuit says. "For instance, in 2018, PepsiCo's revenue from beverage sales in North America fell $5.19 billion while Coca-Cola's leading 17.8% of market share for its flagship cola product remained unchanged."
In April 2020, PepsiCo reportedly issued slide presentations to its bottlers promoting new distribution agreements for the Bang and Rockstar energy drink lines along with the E-Commerce agreement. If bottlers could not sign one without signing the other, the lawsuit claims.
Further, Admiral has been a Rockstar distributor since 1997, though Pepsi only recently acquired the product this year. Rockstar has represented millions of dollars in profits each year to Admiral Beverage, the lawsuit states.
Admiral Beverage employs more than 2,000 people and sells roughly 65 different brands of bottled and canned beverages along with operating 35 facilities in the Mountain West.