Analysis - Monster Beverage on the move home and abroad
Monster has opened a plant in Japan
The fight for global dominance in the energy drinks market looks to be heating up as Monster Beverage Corp makes good on its pledge to expand internationally.
The company has started production in Japan, and facilities in other key countries South Africa and India are planned. In Q1 results released last week, Monster's non-US sales were up 10%, in line with those in its domestic market and far ahead of the flat growth analysts at CLSA had foreseen.
The problem for Monster abroad, however, is making money. CLSA said international operations remain unprofitable, while fellow analysts Stifel puts them at less than 5% of EBIT for 2013, despite accounting for 21% of sales. Monster CEO Rodney Sacks has addressed those problems, and in a call with analysts after the Q1 results, said he is cutting back on overseas expenses, with gains already made in Europe.
For now, though, the US continues to be Monster's main focus. And new figures suggest its leading position in a competitive market remains solid.
In IRI data, Monster’s sales grew 8.4% in the 12-weeks to 20 April, ahead of Red Bull’s 4.8% rise. This, according to CLSA, continues a trend that has seen Monster take share from Red Bull in IRI-tracked channels going back to March last year.
The analyst even suggested a reason for this. In a survey of energy products bought from retail stores, Monster proved to be cheaper, and contain more caffeine, than its Red Bull rival.
What the IRI data also showed, however was a clearly discernible slowdown in the US energy drinks market. This was enough for most analysts to trim their share price estimates for Monster, though still retain faith in its future.
As Stifel said: “We believe the company continues to gain meaningful share of a favourably growing global energy drink category, and we continue to estimate high single to low double-digit sales growth for Monster over the next several years.”
Just as other countries would love to have China's GDP expansion despite it experiencing a slowdown, so would a few soft drinks categories be happy to be shackled with energy's so-called growth problem.
Sectors: Soft drinks
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