After skyrocketing into a market-leading position in the energy drink category hitting $1.3bn in revenue in 2019, surpassing PepsiCo's RockStar Energy as the No. 3 energy drink brand and landing a distribution contract with PepsiCo, Bang Energy was on an upward climb that coupled with founder Jack Owac's larger-than-life personality attracted both the attention and ire of its competitors, according to Schall.
But it appears the soaring brand may have flown too close to the sun with the news - announced Monday - that the VPX is seeking Chapter 11 bankruptcy protection.
According to VPX, the 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."
'It’s hard to separate Bang Energy from its founder'
So how did things get to this point?
"My speculation is this financial trouble arose from the lack of growth that happened between 2020 and 2022 mixed with business model choices at Bang Energy," Schall noted in his recent YouTube video outlining the rise and fall of Bang Energy.
"By choosing to vertically integrate themselves vs. an asset-light model, like say Monster, and deciding to add capacity fast and furious-style based on earlier aggressive growth models, you end up with this oil and water business problem. You have costs that outweigh current revenue levels and the only way to fix that is through cost-cutting measures which is a publicity nightmare."
And then came the public breakup between Bang Energy and PepsiCo in June 2022, in which Bang announced it would be exiting the beverage giant's distribution model.
In its statement, VPX Sports said it intended to recapture the 3.4% market share it lost under PepsiCo's distribution network with more than 269 distributors.
"While Bang Energy is essentially going back to a distribution model that produced a lot of great results pre-Pepsi with a lot of the same DSD partners it comes with a slew of execution risks along with the fact that they won’t have the same market momentum and exclusivity on those trucks," said Schall.
There's also the matter of the brand's polarizing founder Jack Owac, who became more and more of a caricature and spectacle as Bang Energy gained market attention.
"It’s hard to separate Bang Energy from its founder. The product itself and the brand built around it is hardly enough to create such an emotional response," noted Schall.
"Aspects of his personality have been sensationalized, arguably probably purposefully to cut through some of the noise. That sensationalism rubs a lot of people the wrong way especially when you’re talking about competitors. Mix that with a level of new mainstream success that few ever will reach in their lives, and that puts a huge target on Bang Energy’s back."
Energy drink category alive and well
In terms of the energy drink market overall, Howard Telford, head of soft drinks research at Euromonitor, said the category is alive and well with plenty of other players outside of Bang Energy driving the market forward.
"I don’t think the unique circumstances with Bang are indicative of weakness with the energy category at all. I think we’ve seen other brands (Celsius or C4 in the performance space, Ghost in terms of flavor-forward innovation, something Bang also has done very well) demonstrating the consistent and expanding appeal of the category, which is highly priced premium even in inflationary times," Telford told FoodNavigator-USA.
Tough road ahead
But the real roadblock is the amount of debt Bang Energy will have to dig its way out of, according to Schall.
Bang Energy currently owes Monster Energy more than $500m from an earlier false-advertising lawsuit it lost against the brand on top of more than $340m owed to existing secured lenders and another $110m owed to PepsiCo, according to court documents.
Under a Chapter 11 Bankruptcy, Bang Energy does have a lifeline and window of opportunity to turn things around with $100m in additional financing from existing lenders (vs. Chapter 7 Bankruptcy which is a total liquidation of assets), explained Schall.
"At least in the short term, Bang Energy will not be going out of business. It will also not be changing hands if Jack Owac is able to find a way to refinance its almost $1bn in debt. If that doesn’t happen in the next 3.5 months Bang Energy will be up for sale," he predicted.
And the road ahead is full of steep challenges including the general distraction bankruptcy proceedings create for the company's leadership team, added Schall.
"While the bankruptcy decision likely won’t lead to the death of Bang Energy at least in the near term it does severely handcuff growth and I predict ultimately will speed up the changing of the guard that’s already been in process in the energy drinks market," he said.
"Bang Energy will also need to contend with the market interpreting the bankruptcy as the business is closing. While that might be untrue, consumer perception becomes reality and that causes lost sales."