Against the backdrop of ongoing U.S. arbitration with Monster Energy, The Coca-Cola Company shared details of its plans to launch a new natural energy drink in Europe next month.
Coca-Cola Energy will debut in Spain and Hungary in April in 250 ml cans, according to a statement on Coke’s website. The product will have “a great Coca-Cola taste and feeling that people will know and love,” and contain natural caffeine (80 mg), guarana extracts and B vitamins.
In a Q&A posted to Coke’s website, Javier Meza, global CMO of sparkling beverages, cited energy as “one of the fastest-growing categories in our industry.”
“Coca-Cola Energy was developed by listening to what people told us they want from a Coca-Cola Energy drink,” Meza said. “It has a great Coca-Cola taste that people know and love, along with caffeine from naturally-derived sources. Coca-Cola Energy gives people an option to have an energy drink that fits their specific lifestyles and preferences.”
However, the launch of a new energy drink under the Coca-Cola mark, first announced in November 2018, has threatened to destabilize the soda giant’s relationship with one of its critical partners in the energy category, Monster. The two companies are currently engaged in arbitration proceedings to resolve a dispute over the interpretation of terms in their 2015 agreement which prevents Coke from launching a product that will directly compete with Monster.
Coke is the largest shareholder in Monster, owning a 16.7 percent stake in the company. The beverage giant also control two seats on the company board. As part of Coke’s nationwide refranchising of its bottling partners, Monster has gradually moved from DSD distributors to Coke partners over the last several years. Following its departure from Kalil Bottling Group in the Southwest earlier this month, New York-based Big Geyser is the only remaining independent distributor for Monster in North America.
According to Wells Fargo Securities analyst Bonnie Herzog, Coke’s intention to move forward with the launch of Coca-Cola Energy in Europe, despite the fact that arbitration proceedings have not concluded, indicates that Coke “is increasingly confident that it will prevail.”
Coupled with a downbeat company forecast earlier this month, Herzog said Wells Fargo views the announcement as more negative news for Monster and a sign that “risks are increasing for Market-Perform rated MNST from multiple vantage points.” She noted the group’s outlook on the stock remains “cautious.”
In terms of Coke’s innovation, Herzog wrote that, despite the potential for Energy to cannibalize some of the company’s other SKUs, she expects “sales of Coca-Cola Energy to be accretive to KO’s total beverage share in Europe (and beyond…).”
The news of Coca-Cola Energy’s European launch is the second dose of bad news for Monster this week, following yesterday’s announcement of a new trademark infringement lawsuit from rival VPX Sports, makers of Bang Energy.
Indeed, Meza said Coke plans to introduce the product into other markets in the future.
“We plan to introduce Coca-Cola Energy in additional countries through 2019 and 2020,” Meza wrote. “We will confirm plans and timings if a decision is made to launch this new brand in a certain market.”