April 28

Monster Article


Threats to Monster Beverage Corporation

What are the top Threats to Monster Beverage Corporation From Other Beverage Companies?

DESCRIPTION: Threats to Monster Beverage Corporation (MNST) from other energy drinks and beverage companies including large existing companies as well as start-ups.

Monster Energy Drink has been a darling of Wall Street for a long time. It spearheaded the energy drink fever in the US and has not stopped ever since. Learn what the institutional investors know!  These are the top 4 questions I get from Hedge Funds, Mutual Funds and other institutional investors reviewing Monster Beverage Corporation (MNST).

What new energy drink can Steal Market Share from Monster Beverage Corporation?

I don’t think threats come from other energy drinks, most of the newer upstarts are now out of business. I’ve seen a consolidation of energy drinks in the past 3 years and most of the energy drinks you see in the stores are distributed by Coke, Pepsi, Miller-Coors, and Dr. Pepper Snapple.  Miller-Coors and Budweiser still have a few smaller energy drinks.  For example, you might see these Coca-Cola products in a store: NOS, Burn and Full Throttle plus Monster, distributed by Coke.

What is the cost to launch a new energy drink?

The barrier of entry for a new energy drink or a new beverage is not cost.  Cost of beverage development is less than $50,000 and production starts at only $20,000. The real barrier of entry for an energy drink is distribution and consumer adoption. I’ve developed and launched 6 energy drinks and advised at least a dozen; even exported several of them to Mexico. In one example we opened over 2,000 stores but could not get customer adoption, and so the product failed.

How are energy drinks distributed?

Monster is distributed by Coca-Cola and Rockstar is distributed by Pepsi-Cola, Red-Bull is distributed by large franchised independent beer distributors like Miller-Coors and Budweiser. Monster and Rockstar started with beer distributors as well, it’s the way you start selling in the USA if you’re a new player.  This adds to the problem for new energy drinks, you have to go city by city and close and support distributors one-by-one. You need a lot of people, time and money to do this.

What are the real threats to Monster Beverage Corporation? The real threats don’t come from other energy drinks, they come from 5-Hour Energy shot and from the new generation of consumers.  You see, most energy drink consumers are young males ages 16 to 34 that buy at convenience stores like 7-Eleven.  As they come of age they usually leave the large 16 ounce drink for Red-Bull or 5-Hour Energy.  The new generations of energy drinkers turning of age are educated to drink natural products low in sugar and high in health.  The younger they are, the healthier they’ll drink. A new threat is arising from new natural drinks that provide a boost of energy. This is why we’ve seen a rise of tea sales all across the country.


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