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Pepsi Deal Will Rock The Energy Drink Aisle

Thursday, 19 Feb 2009 | 3:23 PM ET

The competition among energy drinks is about to get a burst of adrenaline.

PepsiCo agreed to become the exclusive distributor of Rockstar energy drinks across the bulk of the U.S. and Canadian market. This deal gives Pepsi some much needed muscle in the energy drink category and has the potential to shift the dynamics among the leading energy drink brands.

"We believe the news is a positive for Pepsi Bottling Group and PepsiAmericas and a negative for Coca-Cola Enterprises , who currently distributes Rockstar," says Mark Swartzberg, an analyst at Stifel Nicolaus, in a research note.

Rockstar is the number three energy drink in the U.S., after Monster and Red Bull.

Energy drinks remain a small slice of the total U.S. beverage business, but it's a growing and profitable piece. That makes it a rare positive industry story as cola sales continue to slump.

With the Rockstar distribution deal, Pepsi Bottling will now have a 22 percent share of the market. That figure combines Rockstar, and PepsiCo's Amp and No Fear. But the brands still trail behind category leader Red Bull and Hansen's Monster, so there's still room to run.

Rockstar's been losing market share to Monster, which has been distributed by a combination of Anheuser-Busch distributors, Coke bottlers and independent bottlers. (The Coke system has about 40 percent of Monster's U.S. volume, according to Swartzberg.)

So look for the pressure build.

More from Consumer Nation:

Questions? Comments? Email us at consumernation@cnbc.com

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