Will Monster Reign with its new performance energy drink?
- Monster Beverage Corp. announced the upcoming launch of a new energy drink called Reign. The beverage line is set to debut in March with six zero-sugar and zero-calorie options, including flavors like Carnival Candy, Sour Apple, Razzle Berry and Peach Fizz.
- Marketed as a "total body fuel," Monster says Reign targets two markets: energy drinks and pre- or post- workout performance drinks. Along with a hefty dose of caffeine, Reign includes branched chain amino acids and Coenzyme Q10, common in performance-focused drinks.
- Monster also plans to launch more drinks in 2019. Rodney Cyril Sacks, chairman and CEO, told investors during a presentation that the company also plans to launch a Dragon Tea line, a new Ultra product and a line extension of its Java Monster beverage, Food Business News reported.
This new product joins a long and growing list of energy drinks from Monster, which experienced strong growth last year despite pressure on margins. Reign seems to be an attempt for the company to expand its customer base by tapping into the health-conscious consumer.
Reign is the first of Monster's energy drinks to position itself in the post-workout performance space. Demand for energy drinks and functional beverages is on the rise, though exactly what that market looks like remains uncertain and leaves room for growth. Market Research Hub reported that the market for energy drinks is expected to grow at an annual rate of 8.86% between 2017 and 2021. But at the same time, ready to drink, energy-enriched coffees and teas alongside functional waters have grown more popular, which could edge out more traditional performance and nutrition beverages.
Reign could toe the line and appeal to customers looking for health-conscious performance drinks. But there is competition as other products — like sugar-free Red Bull and the organic energy drink brand Hiball — have already captured consumers' attention. Bonnie Herzog, an analyst at Wells Fargo, told BevNet that Monster’s push into the performance energy segment could be "too little, too late" to be a leader in the category.
A focus on expansion and diversification has driven Monster’s growth strategy in the past year. In 2018, the company entered new international markets, but they delivered "very weak" gross sales, Herzog said.
The company has also seen other struggles with competition. In 2015, Coca-Cola acquired a 16.7% stake in Monster for $2.15 billion. The terms of that agreement prohibited Coke from entering the energy drink space and thus competing with Monster. But Coca-Cola tried anyway with a planned release of an energy drink for the better-for-you audience, which Monster claimed violated the terms of their agreement. Coca-Cola filed an arbitration, after which Monster saw its shares plummet immediately. The details of the arbitration were not made public.
It seems Monster may have taken a cue from that attempt to enter the health-forward energy drink space itself. But on top of international expansion and the Coca-Cola feud, the company has been struggling to maintain its gross margin. The company reported 59.8% gross profit in the third quarter of 2018, which was a decrease from 62.6% in 2017. But Monster isn't letting that slow innovation and development.
In addition to moving into the exercise market, Monster is also planning to expand its portfolio in coffee and tea this year. The company will be developing a new line of tea products and it will also be launching Swiss Chocolate as the newest flavor for its Java Monster brand in late February. Monster seems to be making a big bet that all this innovation will pay off in sales and make it the leader in the energy drink space.
- Food Business News It's time for Reign at Monster