y is acquiring a 16.7% stake in international energy drinks producer Monster Beverage Corporation for $2.15 billion as part of a long-term strategic partnership designed to accelerate growth for both companies. The agreement is expected to close at the end of 2014 or the beginning of 2015 following regulatory approvals.To align product portfolios and enable those portfolios to benefit from each company’s respective strengths, The Coca-Cola Company will transfer ownership of its worldwide energy business, including NOS, Full Throttle, Burn, Mother, Play and Power Play, and Relentless, to Monster; and Monster will transfer its non-energy business, including Hansen’s Natural Sodas, Peace Tea, Hubert’s Lemonade and Hansen’s Juice Products, to The Coca-Cola Company.
The Coca-Cola Company and Monster will amend their current distribution agreement in the USA and Canada by expanding into additional territories and entering into long-term agreements. The Coca-Cola Company will become Monster’s preferred distribution partner globally, and Monster will become The Coca-Cola Company’s exclusive energy play. These agreements are expected to deliver sustainable value to The Coca-Cola Company’s global system and accelerate Monster’s opportunity to grow internationally.
“The Coca-Cola Company continues to identify innovative approaches to partnerships that enable us to stay at the forefront of consumer trends in the beverage industry,” says Muhtar Kent, chairman and chief executive of The Coca-Cola Company. “Our equity investment in Monster is a capital-efficient way to bolster our participation in the fast-growing and attractive global energy drinks category. This long-term partnership aligns us with a leading energy player globally, brings financial benefit to our company and our bottling partners, and supports broader commercial strategies with our customers to bring total beverage growth opportunities that will also benefit our core business.”
According to Euromonitor International, Red Bull is the leader in the energy drinks market globally with 30.7% share in 2013, but Monster is number two with a 14.5% share.
Jonas Feliciano, Senior Beverages Analyst at Euromonitor International comments: “Coke’s 17% acquisition of Monster and the swapping of energy and non-energy brands could have major ramifications internationally. Monster has been expanding internationally for some time now but with Coke’s global distribution network they will have an easier time penetrating key markets. This is especially important because of the rapid changes occurring in the energy drink category.”
Jonas Feliciano continues: “As we’ve seen in the US in the last few years, Monster has been a leader in flavor and formulation innovation. Most recently, their high profile success with their Ultra Zero brand underscores the importance of having influential distributors, as product life-cycles continue to shorten and retailers demand new product offerings. The ability to distribute these new products into international markets through Coke’s network will help Monster identify the right products for the right consumers.”
Coca-Cola gains a share of profits from one of the world’s fastest growing energy brands and establishes an official relationship with Monster’s highly coveted new product development team.
“As demonstrated with the partnership with Green Mountain earlier this year, as well as the acquisitions of Glaceau and Honest years ago, Coke has been looking outside Atlanta for fresh soft drink ideas. While the acquisition of Monster’s non-energy brands is less exciting, it adds many new products to Coke’s ever-expanding portfolio – a key to their future success in the ever fragmenting soft drinks industry,” says Jonas Feliciano.
