US/BRAZIL: Monster signs Brazil distribution deal with AmBev

Monster has signed a distribution deal with AmBev to distribute its energy drinks in Brazil. 

The California-based group, which confirmed the link-up during its annual investor meeting yesterday (11 December), said it also expects to extend the agreement to include Uruguay, Paraguay, Bolivia, and the Dominican Republic in the future.

Analyst Mark Astrachan, of Stifel Nicolaus, was positive about the move. “Overall we view the announcement favourably given AmBev’s distribution is superior to current distribution in many LatAm markets, including Brazil, where the company has 69% beer market share and 20% CSD market share,” he said in a note.

“We anticipate new distribution will expand the company’s current distribution footprint in Brazil into new channels, such as small stores, and smaller cities, with the greatest upside coming from growing the energy category.” 

Astrachan said Monster's overal sales trends remain “solid”. Low double-digit sales growth over the next three to five years “driven by continued US share gains, innovation, and international expansion” is expected, the analyst said. Stifel Nicolaus maintained its “Buy” rating for the group's stock. 

During the investor presentation, Monster's CEO Rodney Sacks launched a fresh defence of the company's products in the light of recent health scares. “Our products are safe,” he said. “We believe that consumers are justified in having safety in our products based on our long track record and the scientific evidence supporting this.” 

He also said the firm has been “communicating with the US Food & Drug Administration (FDA) to share information and data, including third party scientific literature documents”. 

Last month, the FDA partly rejected health concerns raised by two senators over energy drinks, saying there is no evidence to suggest taurine and guarana are dangerous.

Sacks said: “Monster welcomes the conclusions of the FDA to date.” 

"The current frenzy of attacks is not supported by the science or the facts."

Monster's share price is today up by 1.66% at US$55.82.