In an industry that’s becoming increasingly competitive, I still like Monster Beverage Corp (NASDAQ:MNST) as the best pure-play in the fast-growing energy drink market. The stock has been underperforming due to regulatory concerns and lawsuits, but this could present a great buying opportunity.
Fast access to the growing energy drink market is hard to find, given that Monster is the only publicly traded energy drink company among the three leaders in the energy drink market. Moreover, Beverage Digest believes that Monster Beverage Corp (NASDAQ:MNST) has the top position in volume market share:
Source: Beverage Digest
Also, monster has a one of the leading positions when it comes to dollar value market share:
Source: Beverage Digest
Monster Beverage Corp (NASDAQ:MNST) saw revenue up 21% in 2012 driven by new product introductions and geographic expansion, including the launch of products in Peru and Chile. Additional geographical roll outs will be focused on Central and Eastern Europe. This is a big opportunity, given that international sales only account for just over 20% of revenues, leaving tons of room for growth.
Monster Beverage Corp (NASDAQ:MNST) also has industry tailwinds, with the Beverage Marketing Corp. expecting the U.S. liquid refreshment beverage market to grow 1% in 2012, reaching 29.8 billion gallons, after having grown 0.7% in 2011 and 2010. Although energy drinks make up a smaller portion of the total carbonated beverage business, in 2012, energy drink volume consumption was up more than any other category, growing 14.3%, with ready to drink coffee in second at 9.5%.
Earlier this month, Stifel Nichols said gross sales in both April and May were up 9% year over year. Stifel also believes that the negative publicity and regulatory overhang is over-done and the end-demand market will see little impact.
Other ways to invest
Major beverage companies PepsiCo, Inc. (NYSE:PEP) and Coca-Cola Enterprises Inc (NYSE:CCE) both own a small piece of the energy market. Pepsi, however, is not only a beverage company; it’s also a snack foods company. One of its largest segments is the domestic snack foods business, including the Fritos, Lay’s, Doritos and Quaker brands, makes up 20% of revenues. The company’s major segment is its beverage segment, though, making up 33% of revenues. This segment includes the Amp Energy product.
PepsiCo, Inc. (NYSE:PEP) sales in 2013 are expected to see modest 3% growth, with this revenue growth paling in comparison to what you will find in the energy drink market. However, on the positive side, Pepsi hopes to return some $6.4 billion to shareholders in the form of dividends and repurchases in 2013.
Some of Pepsi’s longer-term initiatives include exposure to the international markets, as well as a focus on health and wellness products. Other recent news is that PepsiCo, Inc. (NYSE:PEP) appointed Kristin Patrick, Playboy’s top marketer, as global chief. This is just one of Pepsi’s efforts to gain a better footing in the U.S. beverage market via increased marketing and advertising. Other big news is that the activist hedge fund Trian Fund might be looking to push Mondelez International Inc (NASDAQ:MDLZ) and Pepsi to merge.