The Coca-Cola Company and Monster Beverage Corporation made headlines this week by announcing a long-term strategic partnership. The agreement, which will give Coca-Cola an approximately 16.7 percent minority ownership interest in Monster and initially two director spots on Monster’s Board, is designed to accelerate growth for both companies in the fast-growing global energy drink category. Read the full press release.
Here are three reasons driving the innovative transaction, which is expected to close at the end of 2014 or the beginning of 2015 following regulatory approvals:
1. An Aligned Portfolio: Through the agreement, Coca-Cola will transfer ownership of its worldwide energy business -- including the NOS, Full Throttle, Burn, Mother, Play and Power Play and Relentless brands, to Monster -- giving the Corona, Calif.-based company multiple energy product offerings in most geographies, plus access to vending channels and specialty customer accounts.
Monster, meanwhile, will transfer its non-energy brands -- including Hansen’s Natural Sodas, Peace Tea, Hubert’s Lemonade and Hansen’s Juice Products, to The Coca-Cola Company -- positioning Monster as an exclusive energy beverage company and expanding Coke’s already-strong portfolio to give consumers even more drink choices. These transfers will enable both companies to leverage their respective brand marketing, production and distribution strengths and optimize capital and resource allocation, driving profitable growth in categories where their expertise lies and enhancing shareowner value.
2. Combined Strengths: The transaction will combine the two companies’ complementary resources and assets. Monster will benefit from Coke’s global distribution footprint and operational expertise. Coke’s global energy brands, meanwhile, will benefit from Monster’s expertise as a leading energy player. Monster’s brand portfolio is anchored by Monster Energy, the No. 2 energy drink brand globally.
“Energy drinks continue to offer growth opportunities across both developed and emerging markets, and Monster’s performance in terms of innovation and the ability to create new consumption occasions has been very impressive,” Coca-Cola Chairman and CEO Muhtar Kent told reporters Thursday during a conference call. “We feel there is great opportunity, as Monster is growing internationally, to increase the trajectory of that growth and also ensure that we can generate mutual value for our shareholders. We feel this is the right time for this partnership to commence.”
3. Expanded Distribution: Coca-Cola has distributed Monster beverages in North America since 2008. The new partnership will amend the current distribution agreement in the U.S. and Canada by expanding into additional territories and entering into long-term agreements. Coca-Cola will also become Monster’s preferred distribution partner globally. This is expected to create synergies, deliver value to Coke’s bottling partners around the world and accelerate Monster’s opportunity to grow internationally.
“International has been an important focus for us, so being able to leverage the strength of The Coca-Cola Company’s distribution network, as well as its bottling operations, we believe will provide accelerated growth moving forward,” said Monster Vice Chairman and President Hilton Schlosberg.
Kent said the partnership with Monster -- which follows Coke’s February announcement to purchase a minority equity stake in Keurig Green Mountain -- is in line with the company’s 2020 Vision.
“The Coca-Cola Company continues to identify innovative approaches to partnerships that enable us to stay at the forefront of consumer trends in the beverage industry,” Kent said. “Our equity investment in Monster is a capital-efficient way to bolster our participation in the fast-growing and attractive global energy drinks category.”
The Coca-Cola Company Forward Looking Statements
This summary may contain statements, estimates or projections that constitute “forward-looking statements” as defined under U.S. federal securities laws. Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “will” and similar expressions identify forward-looking statements, which generally are not historical in nature. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from The Coca-Cola Company’s historical experience and our present expectations or projections. These risks include, but are not limited to, whether and when the transactions with Monster Beverage Corporation are completed, and results expected therefrom; obesity concerns; water scarcity and poor quality; evolving consumer preferences; increased competition and capabilities in the market place; product safety and quality concerns; increased demand for food products and decreased agricultural productivity; changes in the retail landscape or the loss of key retail or foodservice customers; an inability to expand operations in emerging and developing markets; fluctuations in foreign currency exchange rates; interest rate increases; an inability to maintain good relationships with our bottling partners; a deterioration in our bottling partners’ financial condition; increases in income tax rates, changes in income tax laws or unfavorable resolution of tax matters; increased or new indirect taxes in the United States or in other major markets; increased cost, disruption of supply or shortage of energy or fuels; increased cost, disruption of supply or shortage of ingredients, other raw materials or packaging materials; changes in laws and regulations relating to beverage containers and packaging; significant additional labeling or warning requirements or limitations on the availability of our products; an inability to protect our information systems against service interruption, misappropriation of data or breaches of security; unfavorable general economic conditions in the United States; unfavorable economic and political conditions in international markets; litigation or legal proceedings; adverse weather conditions; climate change; damage to our brand image and corporate reputation from negative publicity, even if unwarranted, related to product safety or quality, human and workplace rights, obesity or other issues, even if unwarranted; changes in, or failure to comply with, the laws and regulations applicable to our products or our business operations; changes in accounting standards; an inability to achieve our overall long-term growth objectives; deterioration of global credit market conditions; one or more of our counterparty financial institutions default on their obligations to us or fail; an inability to realize additional benefits targeted by our productivity and reinvestment program; an inability to renew collective bargaining agreements on satisfactory terms, or we or our bottling partners experience strikes, work stoppages or labor unrest; future impairment charges; multi-employer plan withdrawal liabilities in the future; an inability to successfully integrate and manage our Company-owned or -controlled bottling operations; global or regional catastrophic events; and other risks discussed in our Company’s filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K for the year ended December 31, 2013, which filing is available from the SEC. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. The Coca-Cola Company undertakes no obligation to publicly update or revise any forward-looking statements.
Monster Forward Looking Statements
Certain statements made in this summary may constitute “forward-looking statements” within the meaning of the U.S. federal securities laws, regarding the expectations of management with respect to Monster’s future operating results and other future events including revenues and profitability. Monster cautions that these statements are based on management’s current knowledge and expectations and are subject to certain risks and uncertainties, many of which are outside of the control of Monster, that could cause actual results and events to differ materially from the statements made herein. Such risks and uncertainties include, but are not limited to, the following: whether and when the transactions with The Coca-Cola Company are completed, and results expected from them; unanticipated litigation concerning Monster’s products; the current uncertainty and volatility in the national and global economy; changes in consumer preferences; changes in demand due to both domestic and international economic conditions; activities and strategies of competitors, including the introduction of new products and competitive pricing and/or marketing of similar products; actual performance of the parties under the new distribution agreements; potential disruptions arising out of the transition of certain territories to new distributors; changes in sales levels by existing distributors; unanticipated costs incurred in connection with the termination of existing distribution agreements or the transition to new distributors; changes in the price and/or availability of raw materials; other supply issues, including the availability of products and/or suitable production facilities; product distribution and placement decisions by retailers; changes in governmental regulation; the imposition of new and/or increased excise and/or sales or other taxes on our products; criticism of energy drinks and/or the energy drink market generally; the impact of proposals to limit or restrict the sale of energy drinks to minors and/or persons below a specified age and/or restrict the venues and/or the size of containers in which energy drinks can be sold; political, legislative or other governmental actions or events, including the outcome of any state attorney general and/or government or quasi-government agency inquiries, in one or more regions in which we operate. For a more detailed discussion of these and other risks that could affect our operating results, see Monster’s reports filed with the SEC. Monster’s actual results could differ materially from those contained in the forward-looking statements. Monster assumes no obligation to update any forward- looking statements, whether as a result of new information, future events or otherwise.
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. This communication is not a substitute for any prospectus or any other document which may be filed with the SEC in connection with the proposed transaction. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ ANY RELEVANT DOCUMENTS THAT MAY BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security holders will be able to obtain free copies of any documents filed with the SEC through the web site maintained by the SEC at www.sec.gov.
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