Monster warns US launch of Coke Energy will squeeze its shelf space and distract its bottlers
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The US launch of Coca-Cola Energy this month threatens to squeeze Monster Beverage’s shelf space and distract its bottlers.
„The coolers aren’t rubber. They can’t expand,“ Monster CEO Rodney Sacks told analysts on Thursday. „If you’re going to put Coke Energy in, what comes out?“
Monster relies on Coca-Cola bottlers to can its drinks, raising the risk they’ll concentrate on Coke’s new beverage and neglect Monster’s offerings.
However, Monster downplayed the impact of the new drink as Coke isn’t positioning it as a direct substitute, and retailers plan to stock it with carbonated soft drinks, not energy drinks.
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The US launch of Coca-Cola Energy this month threatens to squeeze Monster Beverage’s shelf space and distract its bottlers, the energy drinks giant told analysts at a meeting on Thursday.
Monster – which owns Monster Energy, Reign, and NOS – already jostles with rivals for space in convenience stores, supermarkets, and other retailers. The domestic rollout of Coke’s new energy drink threatens to intensify the battle.
„Everybody is fighting,“ Monster CEO Rodney Sacks said. „The coolers aren’t rubber. They can’t expand.“
„If you’re going to put Coke Energy in, what comes out?“ he continued. „Is it a reduction of Monster?“
„That’s the squeeze we have,“ Sacks added. „We have it overseas and it will be here as well.“
The comments highlight the more than year-long tension between Monster and Coke. Monster has accused Coke, a distribution partner and big investor in Monster, of violating a 2015 non-compete agreement, which according to the Wall Street Journal, „barred the soda giant from distributing competitive energy drinks but included an exception for products marketed under the Coca-Cola brand.“
Monster’s brands account for about 40% of US energy drink sales, according to Nielsen data for the 13 weeks to 28 December.
Monster’s stock has surged about 23% in the past year. It remains one of the best performers of the 21st century.
Monster’s bosses on Thursday highlighted another concern. Because the company relies on Coca-Cola bottlers to can its drinks, they worry about the risk that Coke will concentrate on Coca-Cola Energy and neglect Monster’s offerings.
„There will be issues with the bottlers, issues of focus,“ Monster CFO Hilton Schlosberg told the analysts.
Despite those challenges, Monster’s bosses don’t expect Coca-Cola Energy to harm their brand or market share, as Coca-Cola isn’t pitching it as a direct substitute.
„They want to see themselves positioned next to Red Bull and not next to Monster because they see the product as being incremental to the category and not something that will take space away and share away from Monster,“ Schlosberg said.
Red Bull makes up 34% of the US energy drinks market, according to Nielsen.
In fact, Monster expects the US market to be „somewhat easier“ because retailers including Walmart have mandated that Coca-Cola Energy be placed in the carbonated soft drinks section, not the energy section, Schlosberg said.
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