Monster earnings receive jolt from ex-Coca-Cola energy drinks
- Monster Beverage Corporation posted a 9.1% increase in net sales during the first quarter, boosted by energy drinks previously owned by Coca-Cola, the company said in a statement.
- Sales reached $742.1 million in the first quarter, while net profit was up 8.6% compared to the same period last year, to $178 million. Monster’s Strategic Brands segment, which includes ex-Coca-Cola drinks like Full Throttle and Power Play, outperformed the rest of its business, with net sales up 16.4% to $68 million compared to the prior year period.
- Coca-Cola acquired a 16.7% share of Monster in 2015, and transferred ownership of its worldwide energy business to Monster. The Coca-Cola Company received ownership of Monster’s non-energy business, including Hansen’s Natural Sodas, Peace Tea, Hubert’s Lemonade and Hansen’s Juice Products.
The Coca-Cola Company finalized the $2.15 billion deal in June 2015, allowing the two firms to swap products and share distribution networks. Coca-Cola has become Monster’s global distribution partner, and it has taken on Coca-Cola’s energy drinks, including NOS, Full Throttle, Burn, Mother, BU, Gladiator, Samurai, Nalu, BPM, Play and Power Play, Ultra and Relentless.
The deal has revved up Monster’s sales, especially outside of the United States, where the company is able to take advantage of Coca-Cola’s vast global distribution network. Monster is also planning to launch further products in the coming months, and these are expected to increase future sales.
However, the company’s quarterly profits did not reach Wall Street’s target, which Monster blamed on a strong U.S. dollar, distributor terminations and shortages of two of its energy drinks.
Nielsen figures show that energy drink sales, including energy shots, were up 2.5% over the 13 weeks to April 22, said Monster Chairman and CEO Rodney Sacks during a conference call with investors on Thursday, while sales of Monster increased just 1.8%. The company experienced production capacity shortages during this period for its Java Monster coffee drink and Muscle Monster energy shake.
Wells Fargo analysts expressed caution about Monster in the short-term, noting the market is already pricing in growth in its international business and muted near-term expansion of its U.S. operations.
"We believe Monster’s proven track record of innovation and product extensions create a long runway of growth opportunities to continue to drive MNST’s premium valuation as it is able to leverage its brand-building strength in its own brands and KO’s energy brands of which it now has ownership," the analysts, lead by Bonnie Herzog, noted. "That said, while we have a favorable outlook in the long-term, over the near-term we have concerns given soft industry trends and limited near-term impact from new innovation as well as increasing expenses to support top-line growth."