Who has been the strongest bull stock in the US stock market since the 21st century? Some might guess streaming giant Netflix or smartphone giant Apple. From January 1, 2000, to April 18, 2019, among the most broadly representative S&P 500 index constituents, Netflix ranked second with a gain of 30,018.81%, while Apple rose 5,451.93%, ranking seventh. Topping the list is Monster Beverage Corp. Since the turn of the century, the stock has risen 61,340%. If not for the nearly 20% pullback in Monster Beverage's stock since March, this "century record" would be even more impressive. On April 18, the stock closed at $55.20. Monster Beverage focuses on energy drinks, which are designed to regulate bodily functions by altering the natural nutrient composition and proportions in the beverage. Originally, Monster Beverage was thriving in this field, but as other giants have successively launched energy drink products, the market worries that Monster's leading position will face challenges, and this century's bull stock has recently stalled.
Monster's Claw 01 On April 18, at New York's Times Square, Monster Beverage promoted its new energy drink REIGN Total Body Fuel, which contains natural caffeine, branched-chain amino acids (BCAAs), and electrolytes, with no sugar, artificial flavors, or colors. It is ideal for providing energy before and after workouts and comes in six flavors. Several well-known entertainment figures served as REIGN brand ambassadors, interacting with fans, and the atmosphere was very lively. Monster Beverage, originally named Hansen Beverage, primarily sold juices and sodas in the 1990s, targeting mainly women and children. At the beginning of this century, Hansen Beverage began to enter the energy drink market, launching products under the Monster brand, aiming to attract young men as the core consumer group and build a "bold, edgy, and cool" brand image. Before launching Monster drinks, the company was a tiny firm with revenue under $100 million, profits of only a few million dollars, and a market cap of less than $50 million. After Monster drinks were introduced, they achieved great success in a short time, and Hansen Beverage's revenue, profits, stock price, and market cap "soared to new heights." In 2012, Hansen Beverage officially changed its name to Monster Beverage. During Monster Beverage's successful transformation, consumers were deeply impressed by its "claw" logo. Marketing experts say the claw logo, consistent with the brand name Monster, gives consumers a sense of strength, danger, and mystery. The logo does not create a concrete "monster" image but cleverly uses three claw marks to spark consumers' imagination about monsters, enhancing their curiosity about the brand to some extent. In terms of marketing strategy, Monster Beverage primarily sponsors extreme sports and sports stars to target sports audiences, while also hiring brand ambassadors to appear at concerts and sporting events and distributing free samples. For example, golf legend Tiger Woods has long been sponsored by Monster Beverage. His recent Masters victory, his first in 14 years, excited Monster Beverage executives and boosted the stock price.
Feud with Coca-Cola 02 Red Bull, from Europe, was the originator of energy drinks. In the late 1990s, Red Bull introduced energy drinks to the US market. Initially, energy drinks were a niche product, typically seen at college campus sports and professional sporting events. However, since the beginning of the 21st century, the US energy drink market has experienced explosive growth, maintaining double-digit growth rates for a long time, and its share of soft drink industry sales has now risen to about 10%. For consumers, the appeal of traditional carbonated drinks is declining, as they become more health-conscious and want to reduce sugar intake. Since energy drinks often contain a small amount of caffeine to refresh, and have a taste similar to carbonated drinks, they are suitable for sports. In American society, which promotes a sports culture, energy drinks have undoubtedly become a new favorite among consumers. Coca-Cola, the industry giant focused on carbonated drinks, has long eyed the energy drink market. In the second quarter of 2015, Coca-Cola acquired 102 million shares of Monster Beverage, representing nearly 17% of its total shares, becoming the largest shareholder. That year, Coca-Cola also proposed an "all-beverage" development strategy, aiming to enter non-carbonated drinks to diversify business risks. A year later, Coca-Cola increased its stake again, now holding 18.8% of Monster Beverage's total shares. In the 2015 acquisition and cooperation agreement, both parties stipulated that Coca-Cola has the distribution rights for Monster Beverage products in different regions, but Coca-Cola cannot launch energy drinks that directly compete with Monster to grab market share, unless they are products directly under the Coca-Cola product family. In the second half of 2018, Coca-Cola announced that it would launch its energy drinks in the European market in the first half of 2019: "Coca-Cola Energy" and "Coca-Cola Energy No Sugar." Coca-Cola believes that the new drinks are members of its cola family and that their selling points and target consumers differ from Monster's, so they will not affect Monster's consumer base. However, Monster Beverage disagrees and has applied for industry arbitration, with no progress so far. But Monster's stock price has been affected, entering a range-bound consolidation after hitting an all-time high at the end of January 2018, with multiple upward attempts failing. Wall Street insiders believe that for years, the industry has speculated that Coca-Cola would fully acquire Monster Beverage, and this speculation has been a major driver of Monster's stock price rise. But now, that possibility seems increasingly unlikely.
Intensifying Market Competition 03 Coca-Cola is not the only giant eyeing the energy drink market. Recently, an energy drink called "Solimo" appeared in the US market, owned by Amazon's retail arm. Retailers developing private labels and entering the food and beverage sector is becoming a common trend. "Solimo" recently launched Solimo Red Energy Drink and Solimo Silver Energy Drink, both well received by consumers. US private company Vital Pharma's energy drink Bang has shown impressive growth recently, and the performance of old giant Red Bull is also aggressive, further fueling concerns about Monster's prospects. According to data from channel supplier IRI, in March, Monster's market share in the energy drink category was 35.4%, down 3.5% year-over-year. Red Bull's share fell less than one percentage point to 38.2%, while Vital Pharma's share jumped from just over 1% to 8.3%. Analysts at Wells Fargo Securities believe that competitive pressure in the energy drink industry has increased significantly, and Bang could become a "real threat" to Monster. They also note that Red Bull's first surge since 2017 is worth attention. "The latest industry data amplifies our concerns about Monster's competitive threats," the firm said, lowering its price target for Monster. Citigroup, Morgan Stanley, and others have also removed Monster from their watch lists, citing "limited potential upside." On March 4, Monster's stock price began a significant correction after hitting a year-to-date high of $65.02, and on April 3, it fell to $52.59. More concerning for long investors is the recent surge in short interest in Monster. Bloomberg data shows that as of the end of March, short interest in Monster stood at 12.08 million shares, the highest since mid-August 2016, representing about 3% of the company's float. Despite its impressive "century gain" and a large lead over the second-place stock, it is foreseeable that Monster's peaceful days are gone, and its troubles will not end soon. Source: China Securities Journal -END-