Despite a strong start by its fitness energy sub-brand Reign, Monster Energy Corp. is still feeling the pressure from insurgent competitor Bang, according to a Wells Fargo Securities analysis of Nielsen data released this week.
After 15 weeks on the market, Reign, is currently generating weekly dollar sales just shy of $8 million in retail, which Wells Fargo analyst Bonnie Herzog noted is “significantly ahead” of where past Monster lines such as Ultra, Mutant, and Hydro were at this same stage of their respective launches. Of that group, the former was selling $3 million each week after 15 weeks and did not reach the $8 million mark until 35 weeks; Mutant and Hydro, comparatively, never achieved $3 million in weekly sales during the respective products’ first 52 weeks in market.
According to the report, Reign has generated $87 million in total retail sales since its launch. The brand made up 3.1% of total energy category dollar share for the four-week period ending June 29. Herzog credited The Coca-Cola Company’s distribution and merchandising network and Monster’s improved product execution for Reign’s solid early performance.
“What’s more,” Herzog wrote, “Our analysis also suggests that Reign [has] a significant runway of growth potential with an ACV [all commodity value] of only 41% in all channels – with a full launch in Wal-Mart likely coming in August.”
The report projects Regin’s volume growth to nearly double next year, with the brand estimated to sell more than 30 million cases in 2020. Net sales are projected to grow 45% to about $400 million.
Despite Reign’s strong performance, Florida-based competitor Bang continues to dominate the energy drink category, growing 397.2% in the four-week period. Although Bang’s dollar share is beginning to plateau to about 8.4% of the space, according to the report. However, the VPX Pharmaceuticals-owned brand’s ACV remains low at 62.6% (compared to 9% last year), meaning it still has plenty of room to expand.
Overall, Herzog called Monster’s growth trends “mixed.” The company’s 2.8% dollar sales growth for the four-week period is below historical trends. Sales of the core Monster line were down 1.7% in the period, while Hydro dropped 23.4%. Additional energy lines owned by the company were down as well: Nos dropped 3.6% in the four-week period while Full Throttle declined 16.3%. Dollar sales of Java Monster were up 6.3% in the same period and Monster Ultra rose 0.2%.
Herzog noted, however, that Monster’s pricing — up 4.8% for the four-week period — is “clearly weighing” on the company’s volume sales, which were down 2% across all SKUs (excluding Reign, which did not show full sales data).
Herzog, said she expects “the stock to reflect many of [Wells Fargo’s] long-standing concerns about [Monster’s] business,” including potential increased competition from The Coca-Cola Company’s new Coke Energy line, although Coke has not announced plans for a U.S. launch of the product. As well, headline risks including litigation against Bang and negative channel, geographic and product mix shifts factored into Herzog’s mixed assessment.
Monster’s stock has risen since April, when it hit its 2019 low of $52.59 per share. The current price is about $65 per share.
“We’re still mindful that muted Nielsen scanner data could be a leading indicator & possibly more reflective of consumer purchases/interest in [Monster’s] products,” Herzog wrote. “Furthermore, we’re still not entirely sure that sales in non-measured channels (such as Costco, Amazon & Lowes) are enough to completely explain the difference between the Nielsen data and what [Monster] reported in Q1 (+8.7% sales growth in the U.S.).”