Japanese C-store sales boom fires Monster Energy's international turnaround

By Rachel Arthur

- Last updated on GMT

Opening up the throttle: Monster hopes Coca-Cola partnership will help it power into international markets
Opening up the throttle: Monster hopes Coca-Cola partnership will help it power into international markets

Related tags Coca-cola The coca-cola company

Monster Beverage Corporation CEO Rodney Sacks hopes the company's recent deal with Coke will fire further international growth in markets including Japan, after its international arm returned to year-on-year earnings growth in Q4 2014. 

Over the year ending December 31, 2014, operations outside North America had an operating income of $37.8m. In the same period the year before, the company had reported an operating loss of $13.4m.

Speaking in last week’s earnings call, Rodney C. Sacks, chairman and CEO, Monster Beverage, said the company’s Q4 results show the energy drink category bucking trends:  accelerating while the rest of the beverage industry ‘continues to show weakness.’

Over the full year, the company achieved record sales of $2.8bn, up 9.3% from $2.6bn in 2013.

Net sales were $2.5bn, up 9.7% from $2.2bn. Operating income was up 30.5% to $747.5m from $572.9m in 2013. 

Japan, Germany, UK, Chile

In Q4, operating income was boosted by international operations, particularly Europe and Japan, said Sacks. In contrast, these regions had shown an operating loss in the fourth quarter of 2013.

“In fact, our operations outside of North America delivered operating income of $13.8m in the 2014 fourth quarter as compared to an operating loss of $4.4m in the same quarter in 2013,” ​he said.

Japan is becoming one of Monster’s largest international markets, Sacks added. In January 2015, Monster’s market share in the convenience store channel in the country grew from 29% to 32.6%, according to INTAGE data.

“We are pleased with the performance of our international expansion, particularly in Japan, Germany, Great Britain, Greece, The Netherlands and Chile,” ​said Sacks.

 Analyst sees 'white space' opportunity

Sack’s optimism is backed by industry analysts.

Bonnie Herzog, an analyst at Wells Fargo Securities, wrote in a note that Monster’s international results were good news, while further growth prospects were promising. 

Overall we were impressed with the majority of Monster’s international results, and are particularly enthusiastic about the long term prospects for Monster to grow its international sales through its partnership with The Coca-Cola Company,"​ she wrote.

“We think the largest opportunity remains in international markets, particularly outside of Western Europe. Here, we believe that the Monster brand has vast white space opportunities, including most of Asia, Africa, and South America particularly given its access and strategic alignment with the Coca-Cola system.”

Cowen and Company analyst Vivien Azer agrees that Monster's international segment "continues to make strides".

“While operating expenses were down, Europe and Japan were both named as key contributors to profitability,"​ she wrote.

“What is more, according to Nielsen the company grew its market share across a number of key regions, including Great Britain (12.8%), France (18.3%), Germany (10.9%), Belgium (7.9%), The Netherlands (5.9%), and Sweden (8.7%).”

Monster and Coca Cola

In August Monster Beverage and The Coca-Cola Company agreed a long-term strategic partnership. Monster will hand over all its non-energy drinks (Hansen’s Natural Sodas, Peace Tea, Hubert’s Lemonade, and Hansen’s Juice Products) to Coca Cola, in exchange for the beverage giant’s energy brands (Burn, NOS and Full Throttle). Coca-Cola will take a 16.7% ownership interest in Monster.

Sacks said the partnership will “accelerate growth for Monster in the global energy drink category,” ​with Coca-Cola’s extensive bottling and distribution system opening doors.

“Monster and The Coca-Cola Company will amend their current distribution coordination agreements to expand distribution with Coca-Cola bottlers into additional territories,” ​he said.

“The Coca-Cola Company will become Monster's preferred distribution partner globally.

“We believe that this partnership will strategically align both companies for the long term by combining the strengths of The Coca-Cola Company's worldwide bottling system with Monster's dedicated focus and expertise as a leading energy player globally.

“We believe that this distribution arrangement will accelerate Monster's opportunity to grow internationally.”

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