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Monster Beverage Corp (MNST), The Coca-Cola Company (KO): Don’t Be Afraid of This Monster

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If you had bought Hansen’s Natural, a maker of natural juices, back in 2002, you would have gained more than 1,400% on your original investment! Ironically, Hansen’s biggest growth driver wasn’t anything natural — it was the sugary, highly caffeinated Monster energy drink that amped its returns. Hansen has since changed its name to Monster Beverage Corp (NASDAQ:MNST) to align the company with its flagship brand — of which it sells more than 5 million cans every day. Recently, though, Monster Beverage Corp (NASDAQ:MNST) has faced legal and regulatory challenges regarding the safety of its product. That has investors asking whether this Monster is still poised to ring up huge profits. 

Monster Beverage Corp (NASDAQ:MNST)Plenty of room to grow
Since it’s hit the shelves, Monster Beverage Corp (NASDAQ:MNST) has grabbed 37% of the domestic market, competing with the likes of Red Bull, Rockstar, and Amp, which own 42%, 11%, and 4% of the market, respectively. Last year, energy drinks generated almost $12.5 billion in sales; by 2017 sales are expected to skyrocket to $21.5 billion. If Monster merely maintains its current market share, it’s projected to reach $8 billion in sales by 2017, up from just more than $2 billion in 2012. 

The green beast has been aggressively expanding in Europe, as well as key emerging markets like India. Although older rival Red Bull is sold in more than 160 countries, Monster Beverage Corp (NASDAQ:MNST) should be able to leverage its key distribution agreements with The Coca-Cola Company (NYSE:KO) — sold in every country in the world except for Cuba and North Korea — and Anheuser-Busch InBev NV (ADR) (NYSE:BUD) to expand beyond the 90 countries in which it’s currently distributed.

Health concerns holding back stock
Tragically, Monster Beverage Corp (NASDAQ:MNST)’s energy drinks are the alleged cause of several deaths. A lawsuit was filed in October 2012 asserting that consuming two Monster drinks over two days resulted in the wrongful death of a 14-year-old girl in Maryland. Monster says it plans to “vigorously defend” the suit in court, saying the girl suffered from a preexisting heart condition and that no blood test was performed to confirm that the girl died of “caffeine toxicity.”

Monster Beverage Corp (NASDAQ:MNST) was hit with another lawsuit this June, claiming that the death of a 19-year-old man in California was caused by drinking two Monsters a day for three years straight. A spokesperson for Monster stated: “The lawsuit admits that Mr. Morris consumed Monster Energy Drinks for years without incident. Simply because Mr. Morris happened to have consumed a Monster Energy Drink or two on the day of his cardiac arrest does not establish any causal connection between the two.”

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