Monster might have bought a round of beer today, but it’s still got seltzer in mind, its leaders said today.
The energy drink company continues to have ambitions to produce spiked seltzer brands of its own, said co-founder Hilton Schlosberg on an analyst call that addressed its quarterly earnings and today’s announced purchase of the CANarchy collective of craft beer brands.
“We will continue to develop a strategy in the natural category, and in the hard, alcoholic side,” Schlosberg said.
While Monster had been looking into the beverage alcohol category for a while, noted Monster’s chairman, Rodney Sacks, during today’s quarterly update, CANarchy as a set of brands offered the company not just a strong initial entry into the category, but also the infrastructure to allow it to develop an alcohol business of its own.
Not with the Monster brand itself, however, noted Sacks and Schlosberg, who said he was “vehemently opposed” to putting the winning trademark into play as an alcohol-infused product.
Schlosberg and Sacks noted that CANarchy’s seven manufacturing facilities, 566 employees, 616,000 barrels of beer capacity and 211,000 barrels of seltzer capacity annually brings the “people, the distribution network, the licenses, the alcoholic beverage development expertise, the manufacturing capability and the infrastructure necessary to grow” Monster’s alcohol business. Those assets will combine with Monster’s wholly owned flavor company, American Fruit & Flavors, which it purchased in 2016, will help with creating new alcoholic beverages, the founders noted.
With regard to Monster’s long-term ambitions, analyst reports continued to indicate that the purchase of Canarchy will allow the energy drink company to extend into the beverage-alcohol segment without creating headaches around its relationship with vital distribution and investment partner the Coca-Cola Co., Inc.
Coke purchased roughly one-sixth of Monster for about $2 billion in 2014, and has two seats on the Monster board of directors, so the soda giant was most likely aware that the purchase was in the offing.
The Coke/Monster relationship has been an important one as sales have grown from about $2.5 in 2015 billion to more than $5 billion in 2021 for the energy drink company, which is distributed nearly entirely by Coke globally. At times there have been areas of tension – the companies sued each other over Coke’s launch of Coca-Cola Energy, a product that was quickly shelved – but the partnership has also been a source of speculation that the older company would acquire its caffeine-fueled upstart.
Nearly eight years later, with Monster’s market capitalization having increased from $18 billion in 2014 to nearly $50 billion today, sources downplayed the possibility that such a deal was still part of many investors’ motivation for owning Monster, pointing to the company’s relative size and maturity. As announced in the press release, the intent for the Canarchy acquisition is independent operation – an arm’s length relationship the company has been able to maintain with American Fruits & Flavors in early 2016. Additionally, noted one source, if the potential for Coke owning a beer company were to become a stumbling block, it would be easy enough to spin Canarchy back out elsewhere.
Both companies have expressed interest in the beverage-alcohol space of late, with Coke taking brands like Topo Chico sparkling water and, most recently, Fresca grapefruit soda, and creating partnerships for spiked seltzers and RTD cocktails with Molson Coors and Constellation Brands, respectively.
As recent Monster job listings, as well as analyst rumblings around a merger with Constellation brands indicate, the energy drink company was no less interested in beverage alcohol – it just chose to get there by acquisition.
“We’ve developed products, we’ve developed liquid,” Sacks said. “The idea would be to use this whole organization…. To look at their brands, to try to improve their brands, to put some of the brands we create out through their system.”
Brewbound editor Justin Kendall contributed to this story.