Coke: Not Acquiring Monster

Beverage giant denies rumored plans to purchase energy drink maker

Published in CSP Daily News

ATLANTA -- The Coca-Cola Co. is denying media reports claiming that it is considering buying energy drink maker Monster Beverage Corp. In a statement, it said, "Coca-Cola has a distribution relationship with Monster in many markets, including the United States; therefore, we are always in contact with Monster to maximize the value of our commercial arrangements. At this time, we are not in discussions to acquire the Monster Beverage Corp. We continue to review the best ways to maximize the value of our relationship."

Monster Beverage shares soared on Monday following the reports of a possible acquisition, said the Associated Press. The Wall Street Journal cited unnamed sources in reporting that Coca-Cola was in talks to buy Monster. If a deal transpired, Monster--with a market capitalization of more than $11 billion--would be Coca-Cola's largest brand acquisition ever.

Monster declined to discuss the matter, citing company policy.

The deal didn't seem farfetched to investors because Coca-Cola is constantly looking beyond soda for growth and has seen some success in energy drinks, said the news agency. In its fiscal first quarter, for instance, it sold 4% more Coca-Cola around the world than a year earlier, while it sold 15% more bottled water and 25% more energy drinks.

Coca-Cola's energy drinks include Full Throttle, Fuze, burn and Gladiator.

Monster Beverage sells juices, sodas and other drinks under brands such as Monster Energy and Hansen's. Its net income rose 35% in its last fiscal year to $286.2 million.

Monster has been experiencing record growth, reporting fourth quarter gross sales last year increased 28% to $467.3 million, compared to the same period last year. Fourth-quarter net income increased 31% to $64.5 million. Monster had 2011 annual revenue of $1.7 billion, an increase of 31% from the year before. Analysts expect revenue to grow another 17% this year.

Formerly known as Hansen Natural Corp., the company released Monster Energy in 2002. The drink's popularity ultimately redefined the company, and it renamed itself Monster in January (see Related Coverage below for previous CSP Daily News coverage).

It said its energy drink sales are growing faster than the category as a whole, which includes Red Bull, Rockstar and other competitors. Monster now offers a variety of energy drinks around the globe. This year, it entered new markets including Poland and Japan.

Monster's stock was one of the top gainers on the Nasdaq early Monday on speculation about a possible acquisition. The Nasdaq paused the stock's trading three times by midday based on the activity, AP said.

Coca-Cola has its Full Throttle energy drink brand, but it hasn't performed as well as the Red Bull and Monster brands, said the Journal. Coca-Cola has been seeking to expand its portfolio of energy and "alternative" drinks for several years as sales of its core carbonated beverages slow down. In 2007, it bought Glaceau, the company behind Vitaminwater, for $4.2 billion.

Monster Beverage reached out to prospective buyers last year, including Coca-Cola, Pepsico Inc. and Asian companies, but the potential buyers decided against pursuing a deal because of the high price, people familiar with the matter told the newspaper.

The company revived efforts to sell itself more recently, they added. In recent months, Monster again reached out to potential buyers and Coca-Cola decided to take a serious look, conducting due diligence, people familiar with the matter said. It is unclear whether a deal will ultimately be struck between Coca-Cola and Monster and if so, when. It's also possible other suitors could re-emerge.

In a telephone interview in mid-April, Coca-Cola chairman and CEO Muhtar Kent said his company was looking at "bolt-on acquisitions'' but declined to comment specifically on whether it was interested in acquiring Monster.

Kent said that Coca-Cola was "very happy'' with its energy-drinks brands, which include Full Throttle and Fuze NOS in the United States and Burn in international markets. He said at the time that Coca-Cola has "a very close co-operation" with Monster, through its U.S. distribution deal.

Based in Corona, Calif., Monster Beverage is a marketer and distributor of energy drinks and alternative beverages. The company markets and distributes Monster Energy brand energy drinks, Monster Energy Extra Strength Nitrous Technology brand energy drinks, Java Monster brand noncarbonated coffee + energy drinks, X-Presso Monster brand noncarbonated espresso energy drinks, M-3 superconcentrated energy drinks, Monster Rehab noncoanrbonated rehydration energy drinks, Worx Energy shots and Peace Tea iced teas, as well as Hansen's natural sodas, apple juice and juice blends, multi-vitamin juices, Junior Juice beverages, Blue Sky beverages, Hubert's Lemonades, Vidration vitamin enhanced waters, and PRE Probiotic drinks.

Atlanta-based Coca-Cola Co. is the world's largest beverage company. Led by Coca-Cola, the world's most valuable brand, its portfolio features 15 billion-dollar brands including Diet Coke, Fanta, Sprite, Coca-Cola Zero, vitaminwater, Powerade, Minute Maid, Simply, Georgia and Del Valle. Globally, it is a leading provider of sparkling beverages, ready-to-drink coffees and juices and juice drinks.