Wells Fargo: Reign Plateaus as Monster Lags Behind Category Growth

Despite outpacing past product launches, sales of Monster Energy Corp.’s fitness line Reign appear to be plateauing after six months in the market, according to a Wells Fargo Securities analysis of Nielsen data released today.

Since launching in February, Reign surpassed $8 million in weekly dollar sales within 15 weeks. However, at 25 weeks dollar sales for the line — widely seen as a competitor to VPX Pharmaceuticals’ “performance energy” product Bang — have remained stagnant.

According to Wells Fargo Securities analyst Bonnie Herzog, the brand is “still off to a solid start.” She attributed its strong out-the-gate performance to the strength of the Coca-Cola distribution system and improved execution relative to past product launches.

Comparatively, previous Monster line extensions have taken far longer to reach the same threshold, with Ultra passing $8 million after 35 weeks. Meanwhile, Hydro and Mutant both failed to reach $3 million in their first full year.

Reign’s all commodity value (ACV) also increased sharply in the four-week period ending August 24, going from 47.5% to 74.9%, a jump likely due to distribution expansion at Walmart. Dollar sales for the line grew just 4.6%, which analysts attributed to “a pull-back” in promotions. According to Herzog, the combination of a rise in ACV and flat sales suggests that “incremental distribution opportunities are limited.” The report also projects strong volume growth for Reign in the next fiscal year, estimating a 35% increase in 2020.

Since launch Reign has reported $153 million in dollar sales. In the four-week period, the line accounted for a 3.1% dollar share in the energy category. Net sales for the line are expected to reach about $275 million by the end of the year, according to Wells Fargo. However, Monster management has given a more generous prediction, suggesting net sales could reach $305 million.

Reign is still seeing tough competition from Bang, which saw dollar sales grow 265.3% in the four-week period, accounting for about 8.1% of category dollar share. The two companies continue to be caught up in a number of ongoing legal battles; last month, VPX filed a lawsuit accusing Monster of “conspiracy” to “suppress, obstruct, and conceal” alleged health risks associated with the brand’s beverages.

According to Herzog, ongoing litigation, as well as pricing concerns and competitive pressures, have potentially contributed to Monster’s declining stock value, which since July 30 has fallen from $65.51 per share to $58.67 on August 30.

Overall, Monster grew dollar sales by 5.8% and volume by 1% during the four-week period. However, Herzog noted that the company “continues to lag the broader energy category,” which saw increased dollar sales of 10.4% in the same period. The company was impacted by muted improvements for its core line, which saw only a 2% increase in dollar sales.

In the same period, dollar sales for Monster Ultra were up 2.5%, Java Monster grew 5.3% and Hydro was up 2.1%. Sales for Monster Rehab declined 18.5% and Monster Absolutely Zero fell 12.7%. Other brands in the Monster stable also fell — Nos by 1.8% and Full Throttle down 13.3%.