Wells Fargo: Competition, Volume Drops Hurting Monster

Wells Fargo securities analysts expressed growing concern that dragging volumes and competitive pressure from an ascendant rival are starting to take their toll on Monster Beverage Corp.

In a “data deep dive” released on Tuesday, Wells Fargo analyst Bonnie Herzog raised a number of challenges currently facing Monster, ranging from questions over pricing strategy to speculation around the future of its relationship with distribution partner The Coca-Cola Company. The report also highlighted how the company has been ceding market share to Bang, the fitness-oriented energy drink brand with which Monster has a history of contentious litigation.

Herzog cited declining U.S. sales dollars and volume growth over the last several weeks as causes for alarm at Monster. According to Nielsen all-channel data for the period ended Mar. 9, dollar sales for Monster Energy drinks were up 6 percent over the last 12 weeks, but down 1.6 percent over the last four weeks and down 3.4 percent for the last week.

Meanwhile, average price increased 6.3 percent over the last four weeks while volume fell 7.4 percent during that time. Over the last week of the period ending Mar. 9, average price increased 6.1 percent while volume fell 8.9 percent.

Overall energy category sales were up 11.5 percent over the last 12 weeks and 7.1 percent over the last four weeks. Volume decreased 7.4 percent over the last four weeks and 0.9 percent for the 12 weeks.

“We think the set-up for Monster remains tough, and [Tuesday’s] Nielsen data only amplifies our concerns about Monster’s recent pricing actions and new competitive threats,” Herzog wrote.

Monster is also feeling the pressure from Bang, according to Herzog. She cited the upstart performance energy brand as accounting for over 100 percent of total energy category volume growth over the last one week and four week periods. Over a 52-week period ended Mar. 9, the brand has achieved retail sales of $403 million, according to Nielsen data.

While asking if “Bang could indeed be the Juul of the energy category,” Herzog suggested that because Bang’s channel penetration remains low — and because of retailer skepticism about Monster’s new release Reign, designed to compete directly with Bang — the upstart company has a long runway of growth opportunities.

Other potential issues highlighted by Herzog were ongoing negotiations between Coca-Cola and Monster over the former’s plan to release an energy drink and the potential for Monster to be acquired by PepsiCo.