Dive Brief:
- Speculation continues that Coca-Cola should up its current minority stake in Monster energy drinks to full ownership, according to TheStreet.
- Since Coca-Cola acquired that stake, Monster's stock has steadily risen. If an acquisition is on the table, the longer Coca-Cola waits, the more expensive Monster becomes.
- Monster has learned more about how a major carbonated beverage company runs on a larger scale and has been able to free up time to focus on what it does best: product innovation and marketing.
Dive Insight:
"Well, we made an initial investment in a partnership and we are very happy with it," Coca-Cola COO James Quincey told TheStreet. "The Monster portfolio has been expanded internationally, and I think it's a very strong story and we are both doing very well out of it."
Monster is currently operating at double-digit sales growth, with operating margins of nearly 50% in the U.S., and expanding margins in international markets. The company fits many of the typical requirements for an acquisition target's due diligence as it stands now, including the help of 16.7% stake owner Coca-Cola.
Coca-Cola has also shown interest in categories outside of soda. IRI named energy drinks as one of the fastest-growing categories last year with an 8.1% sales bump. It's unclear whether Coca-Cola would be interested in the category alongside its efforts to expand into RTD tea, sports drinks, functional milk and aloe water, per recent investments and acquisitions within its Venturing and Emerging Brands unit.
Monster may also become another competitor in the carbonated beverage space with its launch of Mutant, which it has positioned to challenge Coca-Cola's Sprite and PepsiCo's Mtn Dew. The longer Coca-Cola waits, the more its own minority stake could cannibalize sales numbers for its already ailing soda brands.