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Monster Beverage Idea Proposal

Monster Beverage Idea Proposal
 

Will Monster Beverage continue to rise or will it be felled by a slowing energy drink category?

Report Available: September 8, 2016

 

Blueshift’s initial research found MNST continuing its dominance of the energy drink industry, with plenty of potential growth given its partnership with KO for bottling, distribution, and international expansion. However, there are signs the overall category is slowing down as competitors lag, including Red Bull, and there are further calls for restrictions on energy drinks given health concerns associated with their high sugar and caffeine levels.

 

Observations

  1. MNST reported Q2 net sales of $823 million, a 19% increase year to year, beating expectations. Earnings per share came in below consensus, but still managed to be 25% higher than a year ago because of a lower tax rate and strong revenue. MNST’s Energy Drinks segment showed a 14% increase in sales from the year prior to $744 million. International sales grew 30% in the quarter and now make up 29% of MNST revenue.
  2. KO has played a major role in MNST’s international success of late. KO took an approximate 16.7% ownership stake in MNST in 2015, transferring its energy drinks including NOS, Full Throttle, and Burn to MNST in exchange for MNST’s non-energy business including Hansen’s sodas. The deal also moved MNST’s bottling and distribution to KO bottlers with corresponding market share gains in Europe and its sights set on growth in China with an upcoming product launch.
  3. MNST is slated to introduce two new drinks in the second half of the year. Mutant, a caffeinated 20-ounce refreshment soda aimed at competitor Mountain Dew, will be released in the third quarter, while Hydro, a non-carbonated energy hydration drink breaking ground on a new category, is expected to be released in the fourth quarter.
  4. NLSN’s market data for the four weeks ending July 16, 2016 showed possible warnings signs and a potential slowdown for the energy drink industry. MNST dollar sales grew 6.5% but came in below historical long-term averages. The overall category grew 5.2% but was pulled down by softness for Red Bull, which only grew 2%. MNST’s CEO said on its Q2 earnings call that Nielsen data for the 13 weeks ending July 23, 2016 showed a 4.3% year-to-year increase in dollar sales for the energy drink category, with Monster up 7.2%, but a decrease in other MNST properties with NOS down 0.4% and Full Throttle declining 8.8%.
  5. Energy drinks have been surrounded by controversy over health concerns because of the caffeine, sugar, and other ingredients. A recent study published in the Journal of Addiction Medicine said the high level of caffeine in energy drinks can lead to abnormal heart rhythm. A report published by the Food Research Collaboration recommended a ban on the sale of energy drinks to children under 16 because of health complications, also citing an association with binge drinking and drug use.
  6. Blueshift’s March Trends Tracker consumer survey said energy drink consumption had slowed slightly in the last 12 months, with Red Bull taking the biggest hit. MNST, Mountain Dew’s Kickstart, SBUX’s Doubleshot had more responses of consumers drinking more than a year ago compared to those saying they were drinking less. 5-hour Energy and Rockstar had more responses of consumers drinking less than a year ago compared to those saying they were drinking more.

 

What is the state of the energy drink market? How is MNST doing in the market and against competitors? What is the effect of the KO partnership on MNST? What are the prospects for MNST’s Mutant and Hydro? How is MNST performing with teenage drinkers? How is MNST performing with adults? To gain insight into MNST and the energy drink market, Blueshift will gather data and issue a market research report from independent sources in the following areas: Buyers at convenience and grocery stores, Distributors, Supply chain, Retail store personnel, and Industry specialists.

 

Companies: Monster Beverage (MNST), Coca Cola (KO), PepsiCo (PEP), Starbucks (SBUX)

 

Research Begins: August 22, 2016