Guru divorces from Pepsi | The Press

Three years after concluding a 10-year agreement with Pepsi, Guru regains control of the distribution and marketing of its organic energy drinks.

The Montreal company announced Monday the termination of its agreement with the American giant and intends to expand its internal sales force and reestablish partnerships with distributors. Guru now has six months to reorganize and ensure the transition.

“Our growth prospects will be better this way,” says Guru CEO, Carl Goyette, in an interview.

The distribution agreement signed in 2021 with Pepsi was expected to “significantly” increase Guru’s distribution activities and reach in Canada.

The reality is that Guru’s annual turnover has stagnated at 30 million for three years.

Guru generated a net loss of 9.8 million in 2021, 17.5 million in 2022 and 12 million last year.

Analyst Martin Landry of the Stifel firm points out that the termination of the agreement with Pepsi comes shortly after the two companies were legally able to terminate the agreement without cause.

“It suggests that this partnership has not produced the expected benefits for both parties,” he says.

“Over time, there have been some execution errors in terms of merchandising which have resulted in lost sales for Guru,” says Martin Landry, in a note sent to his clients.

Carl Goyette maintains that Guru put a lot of energy into making his partnership with Pepsi work, but the reality is that it didn’t work to his liking.

There were conflicts given the high number of products Pepsi distributed, he said.

Pepsi owns the Rockstar energy drink brand and has a stake in Celsius, another energy drink brand, in addition to owning a host of other drink brands like Gatorade, Bubly, etc.

The context means that Guru must continually fight for attention, notes Carl Goyette.

“We had lost agility. We felt a little further away from our consumers,” he adds.

Martin Landry believes that Guru may not have received all the attention it deserved with the arrival of Celsius in Canada, distributed by Pepsi. “Therefore, regaining control of merchandising and customer relations should benefit it,” he says.

Martin Landry mentions that Guru’s revenues will increase as the company will sell directly to retailers instead of selling at lower prices than Pepsi to compensate for the distribution and merchandising services provided by Pepsi.

However, he expects sales and marketing costs to increase, as Guru will need to increase its staff to visit stores and organize promotional activities with retailers.

Carl Goyette recalls that the energy drink industry is worth 22 billion.

“We have 14% of this market in Quebec. The potential for Guru is enormous to be able to change the industry and replicate elsewhere what we did in Quebec,” he says.

“It is not true that in the future, people will continue to drink chemical energy drinks. One day, people will start drinking healthier drinks. A bit like what we observe in food. It’s as if the energy drink industry is behind the times, because it’s still chemical drinks that are sold primarily in the United States. »

At the time of signing the partnership in 2021, Guru had granted Pepsi warrants to acquire shares for a maximum of 3% of Guru. These options were never exercised since their exercise was conditional on the achievement of certain results.

It was not possible to obtain a comment from Pepsi.

Guru’s stock this month hit its lowest level since its listing four years ago.