US: Hansen Natural sees US$120m charge after distribution tie-up

Hansen Natural has warned that it will take a hefty charge following this week's announcement that it has secured a distribution deal with The Coca-Cola Co. and Coca-Cola Enterprises.

The US-based soft drinks company said earlier this week that Coca-Cola Co. and CCE will handle the distribution of Hansen's Monster Energy brand in six Western European countries as well as in Canada and selected territories in the US. The agreement has been designed to complement Hansen's current distribution relationship with Anheuser-Busch in the US on-trade.

Consequently, Hansen said yesterday (7 October) that it will "transition certain of its existing distribution arrangements to newly appointed distributors". In connection with the transition, Hansen said it will make termination payments in the region of US$120m. The payments are expected to be made in the fourth quarter of this year.

The company noted, however, that it will receive non-refundable contributions from newly appointed distributors, "covering a significant portion of the costs of terminating the affected distributors".

Among the distributors expecting to lose their distribution of Monster Energy in the US is Dr Pepper Snapple Group. The company said yesterday that it will record a one-time gain related to the contract termination when terms are finalised.

"Monster energy drinks are in less than one-third of our company-owned footprint," said DPSG's president and CEO, Larry Young. "The successful launch of Venom, Dr Pepper Snapple's own energy drink brand, as well as expanded distribution of Hydrive, an enhanced energy drink in which DPS has an equity stake, together with our integrated business model give us confidence that we will be able to build a broader and even stronger energy portfolio and continue to participate in the long-term growth of this category."

Hansen's agreement with Coca-Cola and CCE will take effect beginning in November in the US and parts of Western Europe, and in early 2009 in Canada.