Coca-Cola takes a 16.7% stake in monster beverage corporation for $2.15 billion
By Sabin Dan Piso From Sabin Piso Blog
CokeQuenching its thirst for the energy-drink market, Coca-Cola Company agreed to a 16.7% stake in Monster Beverage Corp. for $2.15 Billion. By the close of the New York stock exchange, Monster rose 30% and Coca-Cola gained 1.7%.
Coke’s attempts to tap into the energy-drink market have fallen flat compared to its counterpart. Coke energy brands earned $330 million last year while Monster raked in a whopping $2 billion. The deal included the transfer of Coca-Cola’s lack luster energy drinks Full Throttle, NOS, Play, Mother and Burn to Monster. In turn, Monster will transfer its Hansen’s natural sodas and juices, Peace tea and Hubert’s lemonade to Coca-Cola.
Both companies will share marketing, production and distribution. Coca-Cola will expand its distribution of Monster globally to give the brand more exposure around the world. In effect, Coke could be transferring approximately another $1 billion on value to Monster.
80% of Monster’s sales come from the U.S. This leaves Coca-Cola with the opportunity to take advantage of an untapped market, internationally. Analyst, Bonnie Herzog, had this to say about Coke’s potential with the energy-drink, “Monster is relatively underpenetrated internationally… The partnership will significantly accelerate Monster’s international market share.”
In addition, Coca-Cola can increase its stake in Monster to 25 percent, but is prohibited from increasing its stake beyond that point for four years without Monster’s approval.
This isn’t Coke’s first deal this year. Back in January, Coke acquired 10% stake in coffee company, Keurig Green Mountain for approximately $1.25 billion and later increased its stake to 16%. According to John Sicher, editor of Beverage Digest, “What Coke is doing is both carefully and dramatically beginning to use deals to enhance its growth. It’s a smart and conservative way to branch out into these areas.”
For more on this story go to: http://www.sabinpiso.com/coca-cola-takes-a-16-7-stake-in-monster-beverage-corporation-for-2-15-billion/
