After Failed Coke Energy Launch, Could The Company Go All In With Monster Acquisition?

Beverage giant Coca-Cola Co KO is pulling the plug on a highly marketed product after a year and a half. Could the move lead to an acquisition that has been rumored for years?

What Happened: Coke Energy drinks are being discontinued in North America after the new brand failed to gain traction in the market.

The move comes as PepsiCo, Inc. PEP invested in the energy drink sector with the acquisition of Rockstar Energy and is planning a large marketing blitz for its Mtn Dew Rise Energy using new spokesman LeBron James, who was lured away from Coca-Cola.

BeverageDigest reports that Coke Energy only had a 0.7% market share for the energy drink sector in 2020, compared to 25% for Red Bull and 15% for Monster.

Coca-Cola continues to streamline its product line by getting rid of underperforming brands. The big problem here could be the amount of money and time spent behind the Coke Energy line will make this a highly publicized failed launch.

Related Link: Molson Coors Continues Hard Seltzer Push With Coca-Cola, Topo Chico Deal

Why It’s Important: Coca-Cola owns a 19% stake in Monster Beverage Corp MNST, one of the leaders in the energy market sector. For years, analysts and industry experts have speculated that Coca-Cola could acquire the company outright.

Coca-Cola and Monster battled a bit back in 2019 when it was announced that Coca-Cola would be launching its own energy drink. The company also distributes Monster, which did not take too kindly to competition from its partner and the two went to arbitration.

A judge ruled in favor of Coca-Cola that it could launch its own energy drink line. The friction caused by this could make a deal a little bit harder to negotiate and could lead to Monster wanting a higher premium to offset some of the hurt feelings and court costs.

Coca-Cola has invested in diversifying its non-carbonated beverages but might need to reach for its pocketbook in the energy drink sector. WIth Coke Energy not capturing consumers' imaginations and pocketbooks, Coca-Cola could be facing huge competition soon from its largest rival Pepsi.

Price Action: Shares of Coca-Cola were down 0.54% $54.34 Tuesday afternoon.

Shares of Monster were down 0.59% to $90.81 on Monday. Shares of Monster have traded between $63.90 and $99.23 over the last 52 weeks.

(Photo by Christian Wiediger on Unsplash)

 

Posted In: beverage stocksCoca-Cola Energyenergy drinksLeBron JamesMtn Dew EnergyNewsTrading Ideas