Coca-Cola Completes $2.15B Stake in Monster

ATLANTA — The Coca-Cola Co. sealed its partnership with Monster Beverage Corp. on June 12. Under the terms of the agreement, Coca-Cola is giving Monster $2.15 billion in cash in exchange for a 16.7-percent equity stake in Monster and Monster's non-energy brands. In exchange, Monster is gaining access to Coca-Cola's global distribution network and its portfolio of energy brands.

Atlanta-based Coca-Cola will transfer ownership of its worldwide energy business, including NOS, Full Throttle, Burn, Mother, Play and Power Play, and Relentless, to Monster. In turn, Corona, Calif.-based Monster will transfer its non-energy business, including Hansen's Natural Sodas, Peace Tea, Hubert's Lemonade and Hansen's Juice Products, to Coca-Cola, as CSNews Online previously reported.  

As for distribution, the two companies will amend their current agreement in the United States and Canada by expanding into additional territories and entering into long-term agreements. Coca-Cola will become Monster's preferred distribution partner globally and Monster will become Coca-Cola's exclusive energy play.

"We continue to think this transaction is a huge win for both companies as it capitalizes on the respective strengths of each," said Bonnie Herzog, managing director of beverage, tobacco and convenience store research at Wells Fargo Securities LLC. "As such, we remain very encouraged by Monster's long-term growth prospects, particularly in international markets."

However, Herzog added that Monster's second-quarter results could be negatively impacted by distribution issues as it transitions to Coca-Cola's system.

"Based on our Beverage Buzz survey results, we believe there were still disruptions and service issues for Monster deliveries over the past few months with reports of 'out-of-stocks,' 'low inventory levels,' 'frustrated drivers,' and 'disruptions in service,'" Herzog explained.

She added, "It appears issues are being addressed and broadly improving. In fact, relative to our survey conducted in December 2014, retailers reported higher frequency of delivery and fewer out-of-stocks of Monster."

In addition, Monster is expected to debut new innovation in the fourth quarter of this year.