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Monster Beverage Gains 19% YTD: Strategic Efforts on Track

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Monster Beverage Corporation’s (MNST - Free Report) consistent strategic endeavors to boost growth are impressive. The company has been experiencing continued strength in the energy drinks category, which is driving its top- and bottom-line performance. Additionally, its efforts toward product innovation and launches are added positives.
Monster Beverage is also progressing well with the transitioning of the Monster Energy brand to Coca-Cola KO bottlers across its various markets. Driven by these growth endeavors, shares of the leading energy drinks’ distributor have advanced 19% year to date, outpacing the industry’s 14.2% rally.

Delving Deeper

Monster Beverage offers a wide range of energy drink brands like Monster Energy, Java Monster, Cafe Monster, Espresso Monster and more. In third-quarter 2019, net sales at the Monster Energy Drinks segment rose 13.5%. Moreover, the company’s top line in the quarter rose 11.6% mainly fueled by growth of the Monster Energy brand’s energy drinks internationally and strength in its Reign Total Body Fuel energy drink. Moving ahead, management is optimistic about strength in the energy drinks category, with the Monster Energy brand growing significantly.

Meanwhile, the deal with Coca-Cola in 2015 (also referred to as the “TCCC Transaction”) has further strengthened Monster Beverage’s position in the global energy drinks market. This has been significantly fortifying the company’s international footprint as well. Notably, the company completed the strategic alignment with Coca-Cola system bottlers in the United States, with the allotment of the Kalil Bottling Group’s distribution territories (Southwestern United States). Additionally, Monster Beverage has transitioned the distribution of Monster Energy drinks from Big Geyser’s territory, which is located in the New York metro markets, to Liberty Coca-Cola.

Monster Beverage has also been expanding its international operations in various markets including China, India, EMEA, Africa and the Middle Eastern countries. Evidently, net sales to customers outside the United States rallied 34.2% in third-quarter 2019. This contributed about 34% to total sales, up from 28% in the year-ago quarter. Going forward, management expects to launch Monster Energy brand’s energy drinks in various international markets.

Product innovation plays a significant role in the company’s success. Consistent demand for tasty and healthy beverages propels Monster Beverage to regularly innovate products and their flavors. In the third quarter, management launched Predator, its affordable energy brand, in Botswana and Slovakia. Additionally, it plans to introduce Predator in selected markets in Eastern Europe and Africa in the fourth quarter.

Moreover, the company has completed the rollout of Monster Ultra Violet and Monster Mango in China. Furthermore, it continued rolling out Monster brand across India and initiated the launch of Ultra Violet in the third quarter.

Management plans to continue Ultra’s expansion in the fourth quarter, apart from rolling out Mango Loco to suit consumer taste in India. Moreover, the company is progressing well with the launch of Espresso Monster across EMEA and plans to rollout Salted Caramel Espresso variant in eight EMEA markets in the fourth quarter and 2020. Also, it expects to launch several products in Asia Pacific in the upcoming months, which includes the relaunch of Pipeline Punch in Japan in spring 2020. These efforts are likely to drive top-line growth and overall profits.

However, Monster Beverage is not completely immune to industry headwinds like intense competition, adverse impacts of foreign currency and higher costs. Increased operating costs along with unfavorable geographic and product sales mix have been exerting pressure on the company’s margins for a while.

Nevertheless, the aforesaid growth initiatives are likely to aid Monster Beverage sail through these headwinds and keep driving the stock’s performance. An expected long-term earnings growth rate of 14.3% with a Momentum Score of A further highlights this Zacks Rank #3 (Hold) stock’s potential.

2 Beverage Stocks You May Count on

The Boston Beer Company, Inc. SAM has an expected long-term earnings growth rate of 10% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Barfresh Food Group, Inc. BRFH has delivered a positive earnings surprise of 100% in the last reported quarter. It currently has a Zacks Rank #2 (Buy).

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