Coca-Cola doesn’t own Monster, but the two have a close partnership that stems from a deal settled in 2015 (which saw Coca-Cola take a 17% stake in the company and involves certain distribution agreements). Conditions of the deal say energy products between the two companies are to be released under Monster, and all non-energy Monster products are to be released under Coke.
But on its third quarter earnings call last week, Monster revealed that Coca-Cola is developing two new energy drinks that it plans to market with its own brands in 2019. Monster says this violates their deal, but Coca-Cola claims the deal has exceptions that allow the move.
The dispute went into arbitration on October 31, with Coca-Cola delaying the launch of its energy products until April 2019. Monster CEO Rodney Cyril Sacks said that, despite the dispute, its relationship with Coca-Cola is 'good and continues to be good'.
Hilton Schlosberg, VC and president at Monster, added: “There is an issue in an agreement, which we've agreed to go to arbitration civilly and determine what course of action is appropriate. So, nothing has changed in the relationship and the manner in which this situation will be dealt with will be conducted from both parties on a civil basis according to the agreement.”
Coca-Cola says that referring the matter to the arbitration panel is a mechanism agreed by the two companies.
“We value our relationship with Monster," it told this publication. "As in any commercial relationship, we will abide by our contractual obligations. We filed for arbitration with Monster regarding the proposed launch of Coca-Cola Energy. As a good partner, we have submitted the difference in interpretation to an arbitration panel for resolution, which is the mechanism agreed by The Coca-Cola Company and Monster in the original agreements.”
Hitting the mark
Beyond the Coca-Cola news, Monster had a profitable Q3 2018. It hit $1.02bn in net sales, an 11.7% over the $909.5m it earned in the same period last year. The Monster Energy Drinks segment specifically increased 13% to $935.1m. Operating expenses hit $268.1m, up from $252.3m.
It expanded distribution to 40 major cities in India, reaching 75% of the country. Monster Energy also launched in Ecuador and Ukraine for the first time in Q3 2018, with ‘further international launches’ to come. It debuted other house brands in Myanmar, Vietnam and South Africa.
“We are excited about the prospects for our brands and our new product launches. We are pleased with our performance in our international markets and reiterate the growth potential for us in China and India,” Sacks said.