Is Monster Beverage Corp (MNST) A Monstrosity?

Page 1 of 2

Monster Beverage Corp (NASDAQ:MNST) saw its stock pop 9% after announcing it would change the wording on its energy drinks. The move was due to pressure relief related to issues surrounding health concerns and energy drinks. So is this a sign that the regulatory concerns that have kept the stock under pressure be over exaggerated?

Monster Beverage Corp (NASDAQ:MNST)The stock has fallen from its mid-2012 high of nearly $80, to now trade around $50 per share. This comes after the company was hit with concerns over slowing growth, and shares took a huge hit in October 2012 when news broke of a potential lawsuit against the company for the death of a teenager.

There is still overhang on the stock, related to the FDA’s investigation on whether energy drinks can be dangerous to teens and people with heart problems, but I feel the pressure has been done (read about why Monster is a takeover target). Monster recently announced plans that will involve using federal guidelines for its products, which involves listing “nutrition facts” instead of “supplement facts” on their projects. Although this does not mean the company is ‘home-free,’ it is a step in the right direction and should help protect the company against future lawsuits.

Monster’s energy drinks is the company’s top segment and accounts for over 90% of revenues. The energy market is rather robust, where total U.S. sales of alternative beverages is estimated to be $32 billion, according to Beverage Marketing Corporation. As far as market share is concerned, in dollars, Red Bull is the leader, but in volume Monster is the leader. The market share shapes up as follows:

In dollars…

  • Red Bull 34%
  • Monster 29.5%
  • 5-Hour Energy 13%
  • Rockstar 10%
  • Coke brands 5%
  • Pepsi brands 4.5%

In volume…

  • Monster 38%
  • Red Bull 25%
  • Rockstar14.4%
  • Coke brands 6.7%
  • Pepsi brands 6.4%
  • 5-Hour 1.5%

Monster has a solid position near the top of the energy drink industry, but how does the competition stack up? Other major competitors in the beverage industry includes PepsiCo, Inc. (NYSE:PEP), The Coca-Cola Company (NYSE:KO), Starbucks Corporation (NASDAQ:SBUX) and Dr. Pepper Snapple Group Inc. (NYSE:DPS). While Red Bull and Rockstar are both private brands, major beverage companies Pepsi and Coke have a hand in the energy drink market. Pepsi has its AMP drink and Coke has Full Throttle.

Pepsi recently announced 4Q results that showed EPS of $1.09 that was in line with management’s target, but down 5% from the same quarter a year ago. As far as caveats for Pepsi investors, the company has seen slowing North American sales, this despite increased marketing focused in the area. Coca-Cola is the leader in the U.S., as far as market share for carbonated drinks, and posted 4Q results that included EPS of $0.45, up 15% from the same quarter last year. However, opportunities could be afoot for Pepsi, given Coca-Cola has been lowering its advertising spending. Ad spending as a percent of sales has been in decline since 2006.

Dr. Pepper is also in the energy drink market, although having only a small presence with its Venom drink. Dr. Pepper posted 4Q results that included EPS of $0.82, which was a decline of 2.4% year-over-year. Dr. Pepper’s problems lie in the fact that the company operates in the U.S., Canada and Mexico, with little to no international exposure, putting Dr. Pepper at a disadvantage to other beverage companies. Even with a sole focus on North America, Dr. Pepper still does not stack up to Pepsi and Coca-Cola, which together make up over 60% of the U.S. liquid beverages market in terms of volume.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!