Announcement • Apr 22
GURU Organic Energy Corp. Files $15 Million Lawsuit Against Pepsi for Breach of Distribution Agreement & Misuse of Confidential Product Information
GURU Organic Energy Corp. is announcing that it has filed a Statement of Claim in the Ontario Superior Court of Justice seeking damages of $15,000,000 for breach of contract and breach of the contractual duty of good faith, recovery of Pepsi’s profits derived from the “Rockstar Island Bliss” product, payment of $164,753 in outstanding receivables, and further relief as the Court may deem just. Pepsi also filed a Statement of Claim in the same Court seeking approximately $4.4 million for post-termination payables. GURU intends to fully contest Pepsi's claim. In addition, even if any amounts were awarded to Pepsi, amounts covered by this claim are already reflected in GURU’s October 31, 2025 annual financial statements. On June 14, 2021, GURU and Pepsi entered into an exclusive distribution agreement under which Pepsi became GURU’s sole distributor in Canada for an initial ten-year term (the “Distribution Agreement”). On November 22, 2024, Pepsi delivered a without-cause notice of termination of the Distribution Agreement, effective May 22, 2025. On May 23, 2025, GURU successfully transitioned to a direct distribution model in Canada. GURU’s Statement of Claim sets out a series of breaches by Pepsi of the Distribution Agreement and of the duty of good faith and honest contractual performance. The principal allegations include: Failure to provide “Fair Share” of Shelf. Pepsi, a dominant direct-store-delivery distributor in Canada, leveraged GURU’s market share and trade spend contributions to expand its own shelf entitlements, then allocated that space disproportionately to Pepsi-owned and Pepsi-affiliated competing brands in direct breach of the “Fair Share of Shelf” covenants in Schedule 2.5 of the Distribution Agreement. This conduct caused Pepsi to repeatedly fall short of the volume growth targets set out in the annual Joint Business Plans agreed with GURU throughout the term of the Agreement. Withholding of GURU inventory during the transition period. Following the notice of termination, Pepsi repeatedly represented that distribution would continue on a “business-as-usual” basis. Despite those assurances, Pepsi removed GURU product from designated shelves in certain stores, ceased delivery of GURU products to others, and generated significant out-of-stock conditions, while simultaneously requiring GURU to commit to repurchasing the inventory that Pepsi itself was withholding. Breach of confidence — “Island Breeze” /“Island Bliss”. Under the Distribution Agreement’s product-approval process, GURU disclosed to Pepsi, on a confidential basis, the full specifications of its new “Island Breeze” product. Weeks before GURU’s launch, Pepsi’s Rockstar brand released a competing product called “Island Bliss” that GURU alleges shares substantially similar attributes to its Island Breeze product. Pepsi did not warn GURU of the competing launch. GURU is seeking damages of $15,000,000, recovery of Pepsi’s profits from the Island Bliss product, recovery of the $164,753 in unpaid receivables, pre- and post-judgment interest, and costs. In addition to the civil proceedings, GURU is preparing an application to the Canadian Competition Tribunal under the Competition Act, requesting an inquiry into Pepsi’s conduct as a dominant distributor in the Canadian non-alcoholic beverage market, including the alleged use of shelf allocation to disadvantage an independent competing brand in favour of Pepsi-owned and Pepsi-affiliated products. GURU believes that the conduct described in its Statement of Claim raises issues of broader public interest warranting regulatory review. Pepsi has also filed a Statement of Claim against GURU in the Ontario Superior Court of Justice seeking approximately $4.4 million, comprising post-termination advertising, marketing and trade spend reconciliations, inventory repurchase amounts, and equipment storage charges alleged to arise under the Distribution Agreement and a related Equipment Services Agreement. GURU disputes the quantum of several of these amounts and will assert its contractual right to deduct any amounts owed to it by Pepsi under the Distribution Agreement against any repurchase-price amounts claimed by Pepsi. The commencement of Pepsi’s claim does not create any new liability and does not give rise to any additional expense beyond amounts already recorded on GURU’s balance sheet. Any eventual settlement or judgment within, or below, would be neutral or favourable to GURU’s reported results. GURU expects to fund the litigation from existing cash on hand. GURU is not revising its previously communicated financial priorities, capital allocation, or any element of its outlook. The litigation process could extend over multiple fiscal years and cash recovery is not expected in fiscal 2026.
