Analysis - Monster's problems have peaked
Monster has come through the worst of its problems, according to CLSA
The worst is over for Monster Beverage, which should post double-digit sales growth in the US over the next 12 months as it gains share from rival Red Bull, according to an analyst.
The energy drinks producer yesterday (8 August) reported an 8.4% fall in net profits, despite a rise in first-half sales. But in a note today, CLSA analyst Caroline Levy argued the group's fortunes will bounce back as the US economy recovers and Monster's losses “shrink” in newer international markets.
She added: “Monster is again gaining share from Red Bull in its largest markets and many others.” Levy also pointed to the launches of a new Java Monster flavour, another Rehab flavour and Muscle Monster as a reason for the group's US business to deliver “double-digit sales gains again for the next 12 months, and 8% growth longer term”.
Monster is still facing the threat of regulation over health concerns around energy drinks. But Levy said regulatory risks may has reached their height. “We believe the risk has likely peaked and is well understood,” the note said. “We believe it will be hard for regulators to win major changes in distribution of Monster products as coffee is so widely consumed and has similar characteristics.”
The group is also still fighting a lawsuit from the family of a 14-year-old girl who died after allegedly drinking two 24oz cans of Monster. Levy admitted: “Monster could have high legal costs for some time to come.”
To read just-drinks' coverage of a conference call held with Monster's CEO yesterday, click here
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