Comment - Can Monster Escape the Media Grip?
Monster has faced a barrage of negative press this week
Will Monster be able to ride out the latest controversy it faces?
The media storm the California-based energy drinks firm has faced this week is bigger than any of its previous setbacks. The company refers to its drinks as a "killer energy brew".
That's quite an unfortunate turn of phrase.
Evidence released by the US Food and Drug Administration (FDA) shows that its drinks have been "associated" with five deaths since 2007 (The FDA is keen to point out, however, that there is "no causal link" between the fatalities and the drinks). This comes off the back of news that Monster is being sued in the US by the mother of a 14-year-old girl over allegations that her daughter's consumption of two 24-ounce cans of its energy drinks contributed to her death (Incidentally, the firm representing the girl's family appear to be specialists in the "energy drink lawsuits" area. Make of that what you will).
As well as the wealth of bad headlines this has created for Monster, the group's share price has plunged. On Monday, its stock fell around 14% and yesterday it fell another 10%.
The company's apparent initial relutance to engage with media also didn't help its position. A statement was only issued late yesterday after the media fire had got out of control.
Meanwhile, analysts who follow the company have predictably had their brows furrowed. Citigroup analyst Wendy Nicholson was reported as saying that Monster's "fundamental outlook has weakened considerably". Nicholson also suggested that the company is losing market share to its rival Red Bull as Monster is facing execution problems in international markets.
The idea of a larger company, like the Coca-Cola Co, making a move for Monster has also "evaporated", Nicholson was reported as saying.
Goldman Sachs, meanwhile, downgraded Monster from its "conviction buy list" to a "buy" rating, pointing to "increased headline and regulatory risk over the near-term". But, the company's fundamentals are "still intact while significant risk levels are already reflected in the stock," it was reported. The investment firm may have changed its mind after the stock's performance yesterday.
At the same time as this latest furore, Monster is also facing the wrath of New York's attorney general over the marketing of its products, while two Illinois senators are pushing for wider action against the energy drinks market.
The group may still be able to navigate its way out of these problems. It could settle with Anais Fornier's family out-of-court, which it can do without admitting liability. But, this may invite more lawsuits.
Me? I'm leaving my crystal ball in the cupboard on this one, it looks a bit cloudy.
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