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Monster Energy

Monster Beverage Corp

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Independent drinks company Hansen Natural bowed to public taste in 2012 and renamed itself Monster Beverage after its biggest brand, which has been one of the world's fastest-growing soft drinks since its launch in 2002. Key to that success since 2008 was a pact with the Coca-Cola bottling system. In 2014, Coke acquired what is currently an 18% stake in the business for a total consideration of $4.2bn, transferring responsibility for its own energy brands - including Nos, Burn, Mother and Relentless - to the smaller company. It has also gradually assumed all distribution rights to the combined portfolio.

Competitors

See Soft Drinks Sector for other companies

Advertising

Who handles advertising? Click here for Agency Account Assignments. Marketing is mainly focused on promotions, sports sponsorship and sampling rather than traditional advertising. The company declared advertising & promotional expenses of $324m in 2017.

Brands & Activities

The Monster brand is sold in numerous different flavours and variants, all offering extra energy. Controversially, one variant, Monster Extra Strength Nitrous is even enhanced with injected nitrous oxide. There are now five brand families: the original Monster Energy, lighter-tasting and zero-calorie Monster Energy Ultra, glucose-enriched Monster Hydro, tea-based Monster Rehab and juice-based Juice Monster. In the US, there are around 20 different variants; rather fewer in most international markets. The newest launches are coffee-based Caffe Monster, protein-enriched Muscle Monster shakes; and low-cost Mutant for emerging markets.

Combined sales make it the #2 energy drink globally behind Red Bull. Worldwide, Monster has around 16% of the energy drink market, but a much higher share in the US. IRI estimated US sales of $4.5bn for the Monster portfolio in 2017 (ye May), equivalent to 40.5% share by value of the energy drinks market. Other brands in the Monster portfolio, led by NOS, added added around another 5%; however Red Bull held the lead with just over 50% share. The company claimed total volumes of 360m 192-ounce cases in 2017, up 12% on the year before.

The Monster brand is now marketed in around 156 countries worldwide. In the US, Cocke originally shared distribution with AB InBev, and there were also arrangements with other companies around the world, including Asahi in Japan and Australia, and Lotte in Korea. Since 2015, though, Monster has gradually bought out its various local partners and consolidated distribution with Coca-Cola.

Like its Austrian rival Red Bull, Monster has crystalised its reputation as an energy drink through sponsorship of extreme sports activities in motocross, stunt biking and drag racing, and sponsors a sizeable collection of individual competitors. In 2016, it agreed to become title sponsor of NASCAR racing in the US for $20m per season; it also became the brand sponsor of Tiger Woods' golf bag.

Other products in the company's traditional portfolio included its original flagship, Hansen's Natural, first introduced in the 1970s, as well as Blue Sky, Peace Tea, Junior Juice and other drinks. Beverage Digest estimated a combined overall 1.7% share by volume of the US carbonated market in 2014, ahead of Red Bull.

Speculation had been rampant for several years that Monster would fall prey to a takeover bid from a larger drinks marketer. Distribution partner Coca-Cola took the first step towards a more binding partnership with Monster in 2014. It agreed to acquire a 16.7% stake in the business for $2.15bn, and transferred control of its own portfolio of energy drinks - including NOS, Burn, Full Throttle, Relentless and others - to Monster, from June 2015. At the same time, Coca-Cola absorbed the company's non-energy products, including Hansen's and Peace, into its own collection. It has also gradually assumed global distribution duties for the Monster brand.

Concerns remain over the high level of caffeine found in energy drinks, such as Monster. In 2012, the US FDA confirmed that it had received five reports of deaths resulting from consumption of Monster since 2004. Monster strongly denies any connection, pointing out that a single can of Monster contains around half the amount of caffeine contained in an equivalent-sized Starbucks coffee. The company still regularly faces down lawsuits from customers claiming to have experienced adverse health effects from the drink, including four suits filed in early 2016. In a separate legal battle, Monster was obliged to pay $668k in legal fees to the rap group Beastie Boys in 2015, for using five of their songs without authorisation.

The group took a step in a slightly unexpected direction in 2016 by acquiring one of its main trade suppliers, American Fruits & Flavors, for $690m.

Financials

Though part-owned by Coca-Cola Company, Monster Beverage Corp is publicly quoted in its own right. Net sales for 2017 rose almost 11% to $3.37bn (or $3.9bn gross before promotional deductions). Net income was up 3% to $547m. Despite its collection of other products, the Monster Energy brand alone accounted for almost 90% of the company's net revenues, or $3.0bn. Strategic brands - the Coke energy portfolio - contributed $300m, while the old Hansen portfolio added $22m. Net income jumped 15% to $821m.

Although US sales continue to grow, the biggest increase has been from international markets, where gross sales have almost quadrupled since 2010 to $909m in 2017.

Background

The current business has evolved from Hansen's Juices, a small fruit juice company founded in California in the 1930s by Hubert Hansen. For the next 60 or so years the company specialised in fresh non-pasteurised juices, latterly as The Fresh Juice Company. Tim Hansen, one of Hubert's grandsons, set up a separate business in the late 1970s to launch a line of shelf-stable beverage under the name Hansen's Naturals. These used as their selling point the fact that they were made entirely from natural ingredients. Rights to the various Hansen brands were acquired in the 1980s by California CoPackers Corporation, which then adopted the name Hansen Natural Corporation.

In 1992, two South African businessmen, Rodney Sacks and Hilton Schlosberg, acquired the Hansen Natural Corporation through a publicly traded shell company. The purchase price was just $14.5m, slightly less than Hansen's sales at the time of just $17m. For the next few years the group continued to market its existing range of products. Having noticed the considerable success of Red Bull in Europe, Sacks and Schlosberg decided to jump into the energy market in 1997, the same year that the Austrian brand launched in the US. Their first product was a vitamin and caffeine-enhanced version of Hansen's Naturals, marketed under the Hansen's Energy banner. The Monster brand was launched for the first time in 2002, as the label for a new energy drink packaged in a "monster-sized" 16-ounce can, twice the size of Red Bull.

Last full revision 6th April 2018

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