Illustration by Adam Vieyra
At a corner shop in North Park, energy drinks compete for space in the refrigerated cases like it's a game of Risk. Silver canisters of Red Bull have captured the prime eye-level real estate, leaving the 16-ounce Monster Energy and Rockstar cans to fight for dominance over the rest of the shelves.
“That's the only reason they come out with 20 different random flavors,” one-time wannabe energy-drink mogul Dan Fleyshman said in an e-mail interview. “They want to take up more space in the coolers so there is no space for anybody but them.”
Fleyshman's drink, Who's Your Daddy, is sidelined with the lesser-known products at the bottom of the most remote cooler. Only the sugar-free version of its cranberry-pineapple-flavored King of Energy drink is in stock. It's practically a collector's item.
Once hailed as ambitious and visionary young millionaires by Entrepreneur magazine for becoming history's youngest owners of a publicly traded corporation, Fleyshman and his partner Edon Moyal have watched their San Diego-based company succumb to debt and litigation and now find themselves tied to a high-level federal drug-trafficking case.
Both have resigned from leadership positions, and the company's investors are dumping the brand.
Between 2001 and 2006, the energy-drink industry exploded by 516 percent, according market research by Mintel International Group. Now, however, growth is finally slowing, and the firm predicts only 84 percent more growth by 2011.
In essence, after a decade of market anarchy, the fittest have survived and the weaker brands are collapsing. But even those who backed a winning product—such as Carlsbad-based sports consultant Scott “Hollywood” Sepkovic, who shilled for Monster Energy—have found themselves left in the recycling bin.
This month, Sepkovic's firm, Crown AMG, filed suit against Monster Energy's parent company, Hansen Beverage Company. He claims he single-handedly made Monster Energy synonymous with motorsports, but then the company cut him out of the picture.
Fleyshman said he's never met Sepkovic but acknowledged that “it's people like him that build brands.”
But had Fleyshman met him before, he might have had another piece of advice.
“It's not just a high-risk venture,” Fleyshman said; “I wouldn't recommend it to anybody.”
“The rest of the drinks did and still do taste like cough syrup, so we decided to stand out,” Fleyshman said, describing Who's Your Daddy's cranberry-pineapple flavor as “amazing.”
The point is perception; in the industry, brand trumps beverage every time. Hocking virtually identical products, energy-drink companies compete fiercely for name-recognition by sponsoring athletes and musicians, hosting events and distributing massive amounts of free samples. For Who's Your Daddy, that included buying a Who's Your Daddy hummer (now Fleyshman's), sponsoring the Utah State Fair and a NASCAR team and setting up a booth one year at the B.E.T. Awards.
Yet, the company's books weren't faring as well as the public brand. This year, the company has brought in only $160,000 in revenue and reported nearly $2 million in losses.
“We're fighting along and surviving, just like we've always had to,” Fleyshman said. “The legal and accounting bills are always six figures a year, which eats away at our profits so we're always playing catch-up.”
For an industry known for its hyperbole, that's an understatement.
Since 2004, the company twice has defaulted on settlements with a Florida company, Who's Ya Daddy Inc., over trademark infringement (including $100,000 in monthly installments it was supposed to begin paying in April). This summer, the property company that leased Who's Your Daddy's Carlsbad headquarters also filed suit for $420,000 in damages, and one of the company's investors filed for another $130,000 in U.S. bankruptcy court.
Fish & Richardson, the trademark-law firm that represented Who's Your Daddy, is also out of pocket to the tune of $350,000. The company currently is negotiating a transfer of the “Who's Your Daddy” name to Fish in exchange for debt forgiveness. Kelley Largey, chief marketing officer for Fish & Richardson, said that in this situation, the firm typically sells the trademark.
“We're still going to license the brand name from them for certain things, and when we want to buy it back, we just pay off the debt at a reduced price,” Fleyshman said.
Fleyshman stepped down as president in 2008, though he said he is still “considered” the co-founder and director of marketing.
Yet, the company is taking a different direction in his absence.
According to Who's Your Daddy's latest U.S. Securities and Exchange Commission filings, the company decided that the “Who's Your Daddy” and “King of Energy” trade names were “too offensive,” and its shareholders asked the company to come up with a new name and new marketing plan. The new “F.I.T. Energy with Resveratrol” shot will likely be marketed through infomercials and e-mail.
So, the paternal question of who will be the daddy of Who's Your Daddy is still up in the air—as is the company's involvement in a drug-trafficking operation that was busted in March.
As first reported by ShareSleuth.com, Edon Moyal has been accused of arranging for about 50 pounds of marijuana to be mailed from San Diego post offices. Moyal's attorney told ShareSteuth that Moyal has only temporarily stepped down from Who's Your Daddy until the case concludes. Drug Enforcement Agency officers in the case also seized about $30,000 in cash and a boat purportedly belonging to Fleyshman.
In an e-mail to CityBeat, Fleyshman denied ownership and says that a company he owned simply sold the boat to the suspect.
Though lawsuits may have brought his company down, Fleyshman doesn't have much confidence in Sepkovic's suit against Monster.
“There's lawsuits all the time amongst companies and ambitious people, and usually they are both right for a lot of reasons,” Fleyshman said. “I think he has an uphill battle fighting with Monster. They have zillions of dollars in the piggy bank and are a legal force to be reckoned with.”
Sepkovic describes himself as a lifelong motocross rider who helped form the sport as it's recognized today. When Hansen Beverage Company (HBC) wanted to re-brand its energy drink as “Monster Energy,” Sepkovic said he was the go-to guy. He claims he brokered deals with athletes and organizations and that HBC promised to put him in charge of a new marketing push in Europe—then stabbed him in the back.
“Adhering to its own motto—Unleash the Beast—HBC operated under the belief that it could simply bully its former allies into submission,” Sepkovic's attorneys write in the complaint filed in Superior Court in San Diego. “This lawsuit is intended to disabuse Hansen of that belief.”
Monster is indeed the most prevalent energy drink in the motorsports industry due to being the primary sponsor of several competitions, according to Motocross.com editor Chris Worden.
“I have no doubt that Scott played a very big role converting certain athletes to [Monster], but I don't think he had anything to do with the racing side,” Worden said.
At the heart of Sepkovic's gripe is a questionable double-dipping practice. When he hooked a client for a Monster sponsorship, HBC cut him a commission. Then, Sepkovic would collect another commission from the athlete or athletic organizer for finding them a sponsor.
Sepkovic accuses HBC of telling his clients to no longer pay that second commission. Worden suggests that Sepkovic probably shouldn't have asked for the cut in the first place.
“That is absolutely not a standard practice,” Worden said. “It's really a small industry, and we look to the outside world to keep us afloat. We rely on people like Monster, and it's a real bummer that we have people taking advantage of those relationships.”
Attorney Jason Wolf, who blogs about these issues at Sportsagentlawer.com, said this double-dipping isn't illegal.
“It's not common, but it's also not uncommon,” Wolf said. “It's not unethical, but it raises some questions as to whether the agent is in it for himself or has his clients' best interest in mind. It makes me raise maybe one eyebrow instead of two.”
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