Coca-Cola takes $2.2bn stake in Monster Beverage

Coca-Cola, the world’s largest beverage company, agreed to swap some brands and buy a 17 per cent stake in Monster Beverage for about $2.15 billion, increasing its bet on the burgeoning energy-drink market. The move is part of a deal that will include the transfer of Coca-Cola’s energy drinks NOS, Full Throttle, Burn, Mother and Play to Monster, according to a statement yesterday.

Monster, meanwhile, will shift Hansen’s natural sodas and juices, Peace tea and Hubert’s lemonade to Atlanta-based Coca- Cola. Under the agreement, the two companies will share marketing, production and distribution.

Coca-Cola, which already distributes Monster in the US and Canada, will expand the arrangement globally, helping the energy brand grow overseas. “It gives them exposure to one of the fastest-growing segments of carbonated soft drinks globally,” said Ali Dibadj, a New York-based analyst at Sanford C. Bernstein and Co. “The category’s growth is clearly slowing in the US, but the potential is very strong globally.”

Monster rose 22 per cent to $87.50 at 6:13 p.m. in late trading yesterday in New York. Coca-Cola gained 1.3 per cent to $40.72 in late trading. The energy-drink maker will look to transfer all of its US and Canada distribution to Coca-Cola, Monster chief executive officer Rodney Sacks said during a media call. Coke and Leuven, Belgium-based Anheuser-Busch InBev NV share distribution in the two countries.

Coca-Cola has the right to purchase as much as 25 per cent of Monster, whose directors would have to approve any larger investment. “There is always an opportunity on a mutually agreeable negotiated basis to go further,” Sacks said. “What will be will be will be. We are happy running it.”

The investment fits into Coca-Cola's strategy of taking equity stakes in promising new brands and technologies, especially as its main source of revenue is under threat from a shift to healthier habits. In May, Coca-Cola said it would boost its stake in Keurig Green Mountain to 16 per cent, making it the coffee brewer's largest shareholder. "There is a pattern here, and this is what we are talking about in terms of a different approach to innovative partnerships," Coca-Cola CEO Muhtar Kent said during the media call. "We look at deploying capital in an intelligent and efficient manner to get us a very important footprint in growth categories."

Coca-Cola also will add two directors to the board of Corona, California-based Monster. While Coca-Cola has helped distribute Monster since 2008 and owns smaller brands such as Full Throttle and NOS, it doesn’t have its own major energy drink.

Bloomberg