US bottler Refresco is seeking $67.7m from energy drinks producer Prime Hydration and its owner Congo Brands over an alleged breach of a master supply agreement.
According to a court filing submitted in Delaware on Friday (2 August), Refresco said it entered a production agreement with Prime in 2023 but that following the bottler’s investment into its production facility to accommodate the deal no orders were sent.
Go deeper with GlobalData
Refresco argued that it had informed Prime that to fulfill the contract it would have to set-up a production line at its Truesdale, Missouri bottling facility that would be dedicated to making Prime’s custom bottle. The bottler said this action required “large upfront expenditures” and time.
“Defendants agreed to a production fee and a three-year minimum purchase volume commitment,” Refresco said in its lawsuit.
This agreement tasked Refresco with producing 55.5 million cases of Prime over three years. If Prime failed to buy “at least 90%” of the produced volumes each year they would have to pay a shortfall fee for each unpurchased case.
Prime energy drinks were launched by internet celebrities Logan Paul and KSI in 2022 and quickly went viral, with bottle prices soaring.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataWhile initial sales of Prime were high, Refresco claims that by 2024 sales had fallen below Prime’s expectations.
“Drivers of those declining sales included seasonal declines in demand for sports drinks that Defendants had failed to predict and, even more problematically for Prime, the fading of the social media buzz that had powered the rapid initial increase of Prime Hydration sales in 2022 and early 2023,” Refresco argued.
The US bottler said it had completed the dedicated line for Prime products in 2024 and was due for final testing in March. To conduct the test run, Refresco required materials and ingredients from Prime, as well as some of Prime’s employees.
Prime allegedly “refused” to submit initial orders and then “repudiated” its Truesdale production agreement. Refresco claimed that Prime committed no volume numbers or orders and indicated they were moving away from any production at the Truesdale facility.
The bottler stated that Prime’s position and response on the matter is that it never agreed upon or executed a master supply agreement, which it said was binding from 3 April 2023.
The contract packager is seeking $67.7m in compensation for a dedicated line upgrade – which includes its development of molds for Prime bottles – and for lost sales.
Just Drinks has reached out to Prime and Congo Brands for comment.
The case taken in Delaware courts joins a slew of legal action and criticism against Prime.
In April, the brand’s co-owner Logan Paul, denied claims the drinks contained harmful so-called “forever chemicals”.
A US consumer class action lawsuit filed in a California US District court claimed the brand’s grape flavour contains dangerous synthetic chemicals that have harmed people.
In a video response to the allegations, Paul said: “This ain’t a rinky dink operation, we use the top bottle manufacturers in the United States.” He added they used the same bottler producers as brands including Coca-Cola, Pepsi and Tropicana.
Last year, Paul defended the caffeine levels found in Prime energy drinks.
“It has 200 milligrams of caffeine and that’s nothing revolutionary or out of the ordinary. It’s the same amount as Gatorade Fast Twitch, which is the same amount as Celsius, and 100 milligrams less than Bang Energy,” Paul told Fox Business at the time.
“What we’re doing is comparable to every other competitor in the market,” Paul told the media group.
Last year, Denmark’s food watchdog hit out at the illegal sales of the energy drink in domestically and banned five companies from marketing the product due to health concerns.
