Simply put, there’s a reason that ad spending in the United States is expected to top $240 billion in 2019 (up 31.5% from the $183 billion spent in 2015, according to Statista) – Image matters.
And nowhere is this more apparent than in the highly competitive beverage industry.
Unleash The Beast – Monster Gains for MNST Stock
When Hansen Natural Corporation first began doing business in the 1930s, the company was known for its healthy drinks (whether high-sugar beverages can ever be called “healthy” is open to debate), including preservative-free natural sodas and low-carb peach smoothies. But it was the launch of the Monster energy line in 2002 that took the company to new heights.
Hansen saw its sales more than double during Monster’s first year on store shelves. According to Bloomberg Businessweek, Hansen earned $20 million on sales of $180 million in 2002 — up from $3 million and $80 million, respectively, in 2001 — helping Hansen rank 26th on Businessweek’s annual list of Hot Growth Companies that year.
Meanwhile, the stock, which lost 21.4% in equity value from 1999-2002, surged by 8,296% over the next five years.
Known as the Monster Beverage Corporation (NASDAQ: MNST) since 2012, the company has increased its gross sales for 26 consecutive years and MNST stock has appreciated by an average of 70 percent per annum since 2003, with only three down years during that period.
Yearly Stock Price Gains
And ever since the two South African businessmen — presiding chairman/CEO Rodney C. Sacks and current president/CFO Hilton H. Schlosberg — bought the company in 1992, Monster has been well aware of the power of marketing.
First, of course, there’s the name. While sales of Monster Energy and Lost Energy were “exceeding expectations,” Hansen’s® Energy drinks were trending lower and were eventually discontinued in 2004. It makes sense. Who wants an energy drink that brings the song “MMMBop” to mind when one can “unleash the beast” with a Monster?
Then there is the packaging. In his 2012 letter to shareholders, Sacks specifically referenced the “unique textured ink finish” still seen on cans of Zero Ultra today — a product that Sacks claims was “arguably our most successful individual line extension ever.”
Plus, let’s not forget that Monster initially gained traction against the industry leader, Red Bull, by offering more for less and through guerrilla marketing. In the early days, teams of Monster “ambassadors” gave out free samples of the company’s products at various events and sponsored a number of extreme sports competitions. A practice that continues to this day.
Future of Monster With Health Conscious Consumers
Although Monster has a track record of success and has proven to be adaptable in the past, there are new challenges on the horizon, specifically from companies like Bang Energy, which was established in 1993 and offers a unique line of products infused with well-known sports supplements like creatine and branched-chain amino acids (BCAAs).
What’s more, due to the inordinate amount of caffeine and sugar in some energy drinks, local and federal governments across the globe are taking a closer, more jaded look at the industry. Recently, England moved to ban the sale of energy drinks to children (age to be determined) — something celebrity chef and healthy food advocate Jamie Oliver welcomes wholeheartedly.
“Too many children are regularly using them to replace breakfast,” Oliver told The Guardian, adding that “teachers from across the country have told me how their lessons are disrupted because of these drinks, packed with stimulants.”
Monster officials recognize these threats and, not surprisingly, believe better marketing offers the best solution.
“We believe that one of the keys to success in the beverage industry is differentiation, making our brands and products visually appealing and distinctive from other beverages on the shelves of retailers,” the company says. “We review our products and packaging on an ongoing basis and, where practical, endeavor to make them different and unique.”
So, grow out that mullet, put on an old pair of JNCO jeans, and enjoy a refreshing Monster energy drink. But for the sake of the neighbours, please turn the volume down when you play “MMMBop”.
The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Grizzle hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.