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Monster Beverage, a leader in the energy drink segment

Fair Value | 43.00 USD
Market Cap | 55.25B USD

Monster Beverage continues to show steady growth and impressive profitability twenty years after its revolutionary debut in the US energy drink market. Despite its heavy reliance on the famous Monster brand, which seems limited to the energy category, the company is poised for further expansion by broadening the beverage consumption opportunities. This strategic maneuver is expected to sustain the company’s steady growth in the long term.

The power of partnership Coca‑Cola and Monster

Monster Beverage has established a key partnership with Coca-Cola, providing unprecedented advantages in distribution, merchandising, and negotiations with retailers. The integration of Monster’s entire US territory into Coca-Cola’s system enhances strategic and logistical planning, facilitating rapid scaling, especially in international markets, where about 35% of sales are realized. Despite the challenges in satisfying different local tastes, Monster’s geographic diversity should strengthen its market position.

Overcoming difficulties: Coke Energy and the competitive environment

Although the launch of Coke Energy products after negotiations between the companies was a significant event, it did not pose a threat to existence, gaining a small market share before recently ceasing sales in the US. Regardless of Coca-Cola’s future plans in the energy category, it is expected that Monster will maintain its strong position, especially among core consumers who have been loyal to the brand for many years. 

In addition to the dynamics of its relationship with Coca-Cola, Monster faces a competitive environment where Red Bull is a formidable competitor, as well as a number of established and new firms seeking to make a name for themselves in the energy sector. However, structural advantages and experienced leadership should enable the company to successfully navigate the changing competitive landscape.

Bull’s opinion

– Monster is the leading representative in the rapidly growing segment of beverages, which is growing at a significantly higher rate than the industry average (low single digits).

– The strategic partnership with Coca-Cola ensures better shelf placement in stores and efficient merchandising.

– International expansion through Coca-Cola’s bottling system provides substantial growth opportunities.

Bear’s opinion

– The presence of outsourcing results in a relatively smaller operational leverage in the company’s business model.

– The potential negative impact on the partnership with Monster, which the company relies on to a greater extent, could occur due to additional steps taken by Coca-Cola in the energy category.

– The lack of product portfolio diversification in Monster can pose a problem, particularly as the popularity of the energy drinks category decreases.

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