Monster Beverage – Will It Bring Smiles To Investors In 2015

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Jan 30, 2015
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One of the biggest gainers in the 2014 stock market was Monster Beverage (MNST, Financial). This is probably one of the few companies in the world that reports consistent profits every year and remains the darling of its investors. It always found a place in the list of top ten stocks in the market. Till the first half of 2014, the growth of Monster Beverage was small yet consistent. However post August 2014, since Coca Cola (KO, Financial) bought some stake in Monster Beverage, stocks of the latter has soared to a great extent. Share prices grew by a whopping 60% and there has been no looking back ever since. Is this is the best growth that Monster Beverage can attain? Has it reached its saturation point or is it going to offer more for its investors? Read on to know more.

Share price shoot up in 2014

The following chart is self-explanatory. It explains the mammoth jump that Monster Beverage’s share prices enjoyed during the latter half of 2014.

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Though the share prices were relatively stable till August 2014, the slow growth had started to create some worry in the minds of investors. Investors had their own doubts about the financial health of the company in spite of the top management of Monster Beverage trying their best to instil confidence in them. Due to wide spread hesitation among shareholders and investors, share prices refused to go up beyond a point. It was then that Coca Cola happened.

The Coke Effect

During August 2014, Coca Cola acquired a 16.7% stake in Monster Beverage for a deal that was worth around $2.15billion. This resulted in a mutually beneficial situation for both the companies. Until then, Coca Cola was struggling in the energy drinks segment at the backdrop of the side effects that its soft drinks had on one’s health. Its stake in Monster Beverage sent a clear message to the world that it was dwelling into something healthy and hygienic.

Monster Beverage, on the other hand, was exposed to the phenomenal distribution network of Coca Cola that it never knew existed. Coca Cola gave Monster the reach that it would not have expected even in its wildest dreams. This helped Monster set foot in the global arena as well and put a tough fight for its competitor, Red Bull that had so far dominated the energy drinks industry. The day that Coca Cola announced its stake in Monster witnessed the share prices of the latter go up by a whopping 30%. There has been no looking back ever since for Monster Beverage’s share prices. Monster Beverage also sold off its non-core non-energy drink brands like the Natural and Blue Sky sodas from Hansen’s and Peace Tea to Coca Cola in order to be recognised as a core energy drink manufacturer in the future. This helped the company to benefit hugely from the energy drinks market and cement its position strongly here.

Future Plans for Monster

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Monster Beverage’s growth in the international markets has been phenomenal in the last few years. In five years that lasted between 2008 and 2013, Monster’s presence in the global markets grew beyond 20%. This figure was lesser than 8% before 2008. Keeping up with this impressive growth, Monster will look to launch new energy drinks and other new products during this year and capture emerging markets like China and Japan right in the budding stage, so that they can develop a huge customer base in these countries.

Conclusion

The overall beverage market might pose some challenges for Monster Beverage in the form of taxes for sugar based drinks and minimal support for energy drinks. However, Monster enjoys a great reputation and market share in this segment, especially among youngsters. Hence it is expected that the company will ward off all these challenges successfully and present its investors another good year for 2015. Share prices might not see as much as a surge that they saw in 2014; nevertheless, they are all set to look stable and successful for this year.