Monster NPD set to do battle with PepsiCo's Mountain Dew - Analysis
Monster is set to release two new products in Q3 - Hydro and Mutant
Analysts and shareholders got more than the usual refreshments at Monster's AGM & analyst meeting earlier this week.
The energy drinks company took the opportunity to unveil its latest new product development: Mutant and Hydro. In a note that followed the event, SIG analyst Pablo Zuanic says the duo are a "concerted effort to compete directly with PepsiCo's Mountain Dew brand".
Mutant, he says, is branded as a 'super-soda' and is a collaboration with The Coca-Cola Co.
Coca-Cola completed the purchase of a minority stake in Monster last June. The purchase of a 16.7% holding for US$2.15bn saw Coca-Cola transfer ownership of its worldwide energy business, including NOS, Full Throttle, Burn, Mother, BU, Gladiator, Samurai, Nalu, BPM, Play and Power Play, Ultra and Relentless, to Monster. In turn, Monster transferred its non-energy business, including Hansen's Natural Sodas, Peace Tea, Hubert's Lemonade and Hansen's Juice Products, to Coca-Cola.
However, Mutant is covered under a separate agreement and sees Monster enter the carbonated soft drinks space, according to Zuanic. "At a US$1.99 price point, it enters in the realm of a premium CSD, and is aimed at taking away share from Mountain Dew," he says, citing the PepsiCo brand's Code Red as a specific target.
When it comes to cons, Zuanic says Mountain Dew drinkers aren't compelled to switch - and the product may even attract Monster fans. But on the flip side, Mutant could take share away from Mountain Dew and correct positioning could ensure existing Monster lines aren't impacted, he says.
Meanwhile, Hydro could open an under-developed revenue stream for Monster, according to one analyst. Wells Fargo's Bonnie Herzog says the drink "could perform very well with the female demographic, in which Monster is under-indexed".
Zuanic says Hydro is positioned towards active consumers and is "targeted specifically to take on Mountain Dew's Kickstart line". He also believes there's a danger of cannibalisation here, too, if consumers of Monster's flagship brand opt for the new line.
Herzog is a little more positive, overall, saying the "opportunity should not be underestimated" when it comes to the new products. She believes neither brand will directly compete with any of Coca-Cola's existing portfolio. "We think Mutant and Hydro will gain mostly incremental cooler space outside energy shelves, and importantly will expand into new households and consumers."
We won't have to wait long to find out whether they steal share from PepsiCo or their own companies' products: launch is expected in Q3.
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