How The Coca-Cola Company (KO)’s Deal With Monster Beverage Corp (MNST) is Going to Affect the Beverage Industry

The Coca-Cola Company (NYSE:KO) recently acquired a 16% stake in Monster Beverage Corp (NASDAQ:MNST), with a total value of over $2 billion. On Monday, CNBC‘s  ‘Nightly Business Report’ (NBR) has presented some insight on the deal between The Coca-Cola Company (NYSE:KO) and Monster Beverage Corp (NASDAQ:MNST) and discussed how it is going to affect competitors.

“Pepsi has a partnership with Rockstar, which has been a distant, distant number three player to Redbull and Monster Beverage Corp (NASDAQ:MNST) and so there wasn’t really much they could do to catch up other than to continue to support that or try other things like Mello Yello or another kind of quasi energy drinks. So, I am not really sure that Pepsi will react that much to this one as they would for other type of announcements,” William Chappell, analyst at Suntrust Robinson Humphrey, said.

As soon as the news of the deal was out Monster Beverage Corp (NASDAQ:MNST)’s shares rocketed above $90 from the $70 levels they were trading a day before. The Coca-Cola Company (NYSE:KO) is hoping to spur its growth with the Monster Beverage Corp (NASDAQ:MNST) deal as the company is witnessing a continuous decline in soft drinks, which make up 70% of its business. Monster Beverage Corp (NASDAQ:MNST) will also get a significant advantage from the deal as it will take the ‘Monster’ brand of energy drinks to Russia and China, where it doesn’t have a presence.

The Coca-Cola Company (NYSE:KO) would be paying Monster Beverage Corp (NASDAQ:MNST) $2.15 billion in cash for the stake in the company. With this deal, The Coca-Cola Company (NYSE:KO) gets access to $27 billion a year energy drinks market, which is growing much faster than its conventional soda business.

“This deal, expected to close by early 2015 does have its risks. Most notably, increased energy drinks regulations as The Coca-Cola Company (NYSE:KO) faces lawsuits tied to its advertising practices and injuries allegedly caused by its products,” Morgan Brennan, CNBC correspondent, said.

Disclosure: None