Monster shares plunge as Coke plans energy-drink
Coca-Cola wants to make a Coke-branded energy drink — and the idea isn’t sitting well with Monster Beverage.
Shares of Monster — whose biggest investor is Coke — tumbled as much as 11 percent Thursday after Monster Chief Executive Rodney Sacks revealed in a late-Wednesday earnings call that Coke planned to launch two new energy drinks of its own.
Sacks argues that the move violates a 2015 partnership struck between the companies, in which Coke took a 17-percent stake in Monster and agreed to distribute the company’s energy drinks worldwide.
Coke reportedly plans to launch “Coca-Cola Energy” and a diet version called “Coca-Cola Energy No Sugar,” which would contain caffeine from naturally derived sources and guarana extract.
Monster contends that while the companies’ partnership allows Coke to modify the ingredients of its products by adding vitamins or increasing their caffeine content, it doesn’t allow the Coke brand to launch products “positioned as an energy drink,” Sacks told analysts.
The CEO added that Coke agreed to delay the launch of Monster’s potential rivals until April 2019, while both companies await the results of arbitration proceedings that began a week ago.
“Nothing has changed in the relationship, and the manner in which this situation will be dealt with will be conducted from both parties on a civil basis,” Sacks said during the call.
A Coke spokesman confirmed that Coke and Monster have a “difference in interpretation” of their agreement and that they’re submitting their case to arbitration.
Analysts on Thursday were divided over whether the dustup was a signal that Coke might eventually acquire Monster — a scenario that has long been the subject of investor speculation.
“We believe a move [by Coke] into the category with their flagship brand makes a takeover less likely at this stage,” JPMorgan wrote in an update.
Guggenheim disagreed on grounds that Coke’s new products demonstrate how keen the beverage king is on the high-growth energy category.
“Ultimately, we think this adds credence to our thesis that Coca-Cola will eventually acquire Monster Beverage, although not likely before the end of 2019,” Guggenheim said.
Monster shares, down 16 percent year-to-date, finished Thursday off 3.2 percent, at $54.14.
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