Lisa Olivo, Associate Editor08.19.14
In a $2.15 billion deal, the Coca-Cola Company has purchased a 16.7% share of Monster Beverage Corp. Coca-Cola gains two seats on Monster’s Board of Directors, and the companies agreed to trade several brands to better align product portfolios and worldwide distribution.
Coke will transfer ownership of its own energy drink lines such as NOS, Full Throttle, Burn, Mother, Play, Relentless and Power Play to Monster, while Monster will hand over its non-energy drink based offerings—including Hansen’s Natural Sodas, Peace Tea, Hubert’s Lemonade and Hansen’s Juice Products—to Coca-Cola. Monster Beverage Corp. will also issue Coca-Cola shares of its common stock, and enter into expanded distribution arrangements.
In a joint press release from Coke and Monster, Muhtar Kent, chairman and CEO of Coca-Cola, praised the deal, saying it was a way to “stay at the forefront of consumer trends in the beverage industry.” He added, “Our equity investment in Monster is a capital efficient way to bolster our participation in the fast-growing and attractive global energy drinks category. This long-term partnership aligns us with a leading energy player globally, brings financial benefit to our company and our bottling partners, and supports broader commercial strategies with our customers to bring total beverage growth opportunities that will also benefit our core business.”
Monster’s vice chairman and president Hilton H. Schlosberg, said the strategic partnership will help the company expand its reach internationally. “Our agreement enables us to focus on our core energy business, while leveraging the strength of the Coca-Cola Company’s powerful distribution and bottling system on a worldwide scale. The goals of both companies’ management teams are further aligned, with a great enhancement to Monster’s position as one of the world’s leading energy beverage companies. We expect the transaction to significantly accelerate our growth and results of operations internationally, and we plan to review all options available to return a substantial amount of cash to our shareholders.”
Industry Impact
Market research experts at Euromonitor International, Chicago, IL, predicted the merger could significantly impact the surging energy drink category in the U.S. and abroad.
"Coke's 17% acquisition of Monster and the swapping of energy and non-energy brands could have major ramifications internationally,” speculated Jonas Feliciano, senior beverages analyst at Euromonitor International. “Monster has been expanding internationally for some time now but with Coke's global distribution network they will have an easier time penetrating key markets. This is especially important because of the rapid changes occurring in the energy drink category.”
Referencing the success of Monster’s Ultra Zero brand in recent years, Mr. Feliciano stressed the benefits of having an influential distributor like Coke, particularly as “product life-cycles continue to shorten and retailers demand new product offerings.” He further noted that, “The ability to distribute these new products into international markets through Coke's network will help Monster identify the right products for the right consumers.”
Coke also wins in this partnership, as it gains access to the second most successful energy drink brand in the global market (Red Bull possessed 30.7% of the market, while Monster has a 14.5% share). “Not only that, they now have an official relationship with Monster's highly coveted new product development team,” said. Mr. Feliciano. “As demonstrated with the partnership with Green Mountain earlier this year, as well as the acquisitions of Glaceau and Honest years ago, Coke has been looking outside Atlanta for fresh soft drink ideas. While the acquisition of Monster's non-energy brands is less exciting, it adds many new products to Coke's ever-expanding portfolio—a key to their future success in the ever fragmenting soft drinks industry.”
Coke will transfer ownership of its own energy drink lines such as NOS, Full Throttle, Burn, Mother, Play, Relentless and Power Play to Monster, while Monster will hand over its non-energy drink based offerings—including Hansen’s Natural Sodas, Peace Tea, Hubert’s Lemonade and Hansen’s Juice Products—to Coca-Cola. Monster Beverage Corp. will also issue Coca-Cola shares of its common stock, and enter into expanded distribution arrangements.
In a joint press release from Coke and Monster, Muhtar Kent, chairman and CEO of Coca-Cola, praised the deal, saying it was a way to “stay at the forefront of consumer trends in the beverage industry.” He added, “Our equity investment in Monster is a capital efficient way to bolster our participation in the fast-growing and attractive global energy drinks category. This long-term partnership aligns us with a leading energy player globally, brings financial benefit to our company and our bottling partners, and supports broader commercial strategies with our customers to bring total beverage growth opportunities that will also benefit our core business.”
Monster’s vice chairman and president Hilton H. Schlosberg, said the strategic partnership will help the company expand its reach internationally. “Our agreement enables us to focus on our core energy business, while leveraging the strength of the Coca-Cola Company’s powerful distribution and bottling system on a worldwide scale. The goals of both companies’ management teams are further aligned, with a great enhancement to Monster’s position as one of the world’s leading energy beverage companies. We expect the transaction to significantly accelerate our growth and results of operations internationally, and we plan to review all options available to return a substantial amount of cash to our shareholders.”
Industry Impact
Market research experts at Euromonitor International, Chicago, IL, predicted the merger could significantly impact the surging energy drink category in the U.S. and abroad.
"Coke's 17% acquisition of Monster and the swapping of energy and non-energy brands could have major ramifications internationally,” speculated Jonas Feliciano, senior beverages analyst at Euromonitor International. “Monster has been expanding internationally for some time now but with Coke's global distribution network they will have an easier time penetrating key markets. This is especially important because of the rapid changes occurring in the energy drink category.”
Referencing the success of Monster’s Ultra Zero brand in recent years, Mr. Feliciano stressed the benefits of having an influential distributor like Coke, particularly as “product life-cycles continue to shorten and retailers demand new product offerings.” He further noted that, “The ability to distribute these new products into international markets through Coke's network will help Monster identify the right products for the right consumers.”
Coke also wins in this partnership, as it gains access to the second most successful energy drink brand in the global market (Red Bull possessed 30.7% of the market, while Monster has a 14.5% share). “Not only that, they now have an official relationship with Monster's highly coveted new product development team,” said. Mr. Feliciano. “As demonstrated with the partnership with Green Mountain earlier this year, as well as the acquisitions of Glaceau and Honest years ago, Coke has been looking outside Atlanta for fresh soft drink ideas. While the acquisition of Monster's non-energy brands is less exciting, it adds many new products to Coke's ever-expanding portfolio—a key to their future success in the ever fragmenting soft drinks industry.”
