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Research Team 2012
Consumer Staples Analyst: Alexis Summit
Consumer Staples Sector Update
The outlook for the consumer staples sector in 2012 has been bleak thus far. For
the first time since 1999, defensive non-cyclical stocks have been posting monthly
losses, causing dividends from these stocks to slump 1.5 percent in January1. Since
1963, the consumer staples sector has outperformed the overall market in ten of the
eleven declining years. Perhaps the consumer staples sector is declining because
consumers are looking to invest in cyclical stocks that produce higher gain during
economic growth. The February jobs report did a lot to assure consumers, and lead
them away from the consumer staples sector toward riskier stock options2.
As you can see, the unemployment rate is at 8.3%, where it was in February
2009. The U.S. economy is also adding jobs at a much higher rate. The important
statistic to note is that adding 227,000 jobs was above median estimates of 210,000.
Also important to note, 15 of the 19 largest financial firms have passed a “stress test”
and have enough capital to withstand a recession as of February. Although the
economy has been recovering, Investors are still cautious. Key tax rates are set to rise
in 2013 and Europe continues to be in crisis. Mark MacQueen, executive vice president
at Sage Advisory Services in Austin, Texas predicts that more likely the stock market
will “tread water” as investors look toward dividends and safer investments3.
1
Boomberg.com/news http://mobile.bloomberg.com/news/2012-02-09/defensive-stocks-losefirst-time-since-1999-as-equities-resume-bull-market
2
The Washington Post http://www.washingtonpost.com/blogs/ezra-klein/post/february-jobsreport-lets-call-it-a-recovery/2012/03/09/gIQADJ8B1R_blog.html
3
WSJ “US Stocks Appear to Lose their Fizz”
1
Luckily, the consumer staples sector is non-cyclical and contains the most stable
companies on the stock market. This sector includes companies that manufacture and
sell food & nonalcoholic beverages (Pepsi), alcoholic beverages (Budweiser), tobacco
(Phillip Morris), prescription drugs, and household products (P&G). Many companies
have notably climbed in recent months. Some of these companies are Chefʼs
Warehouse Holdings Inc in the specialty foods segment, Green Mountain Coffee
Roasters Inc, Monster Beverages Corp of which 90% of its revenue comes from energy
drinks, and even Phillip Morris International which contrary to the stricter tobacco
guidelines is still considered to be a strong buy. There are also constant go-to stocks in
the sector such as KO, WFM, and WMT.
Notably, Kellogg (K) has made a very advantageous acquisition of Pringles
supporting its expansive net in emerging markets. Demand for the on-the-go foods such
as Pringles is growing world wide, especially in markets such as China and India.
Kellogg anticipates adding 8 to 10 cents per share to its 2012 earnings if all goes well.
Kellogg also crossed above their 200 day moving average of $53.02 on February 15,
2012.
One of the more important elements in the consumer staples sector is expansion
in and access to emerging markets across the globe. Emerging-market stock funds took
in $907 million in the week ended March 7, the longest run of gains since 20104.
International expansion is essential for many big companies as incomes rise and
lifestyles evolve in developing markets. For companies that have already expanded
internationally, such as Wal-Mart and Phillip Morris International, foreign guidelines can
either be detrimental or supplemental to growth. For example, India has begun to
change guidelines in order to embrace retailers such as Wal-Mart and Carrefour
because the Prime Minister believes they will largely cater to the middle and upper class
of Indian society5. Even for a company like Monster, which gets only 20% of its
revenues overseas, guidelines concerning caffeine and other ingredients in different
countries can have a direct effect on sales and market share.
To circumvent new laws, such as the California law requiring companies to label
products containing a certain level of carcinogens with cancer warnings, Coca-Cola and
Pepsi have altered their recipe to contain less of their caramel-color additive6. Monster
Beverages also changed its serving size to meet caffeine regulations in the U.S. The
outlook for the tobacco industry, despite the FDAʼs initiative to require graphic warning
labels on cigarette packages as well as increasingly higher taxes, is positive.
Consumers continue to buy tobacco products despite the high tax rates and ubiquity of
information concerning the health risks.
Many companies, especially in the food & beverages segment will feel
constrained by significant supply chain costs due to the rising cost of raw materials.
However, companies are likely to have continued healthy growth as sales of snack
foods rose 3.3 percent to $16.6 billion during the past year. US consumers also spend
around 10% of their income on food, according to the Standard & Poorʼs industry report.
4
Bloomberg Businessweek “Emerging Stocks Rise on Greece Debt Swap”
NyTimes
6
Forbes.com “Pepsi and Coke Tweak Manufacturing to Remove Alleged Carcinogen”
5
2
Although the economy is doing better, the average consumer is still costconscious. In August 2011 45.8 million people were receiving aid under the
Supplemental Nutrition Assistance Program (Food Stamp Program)7. The consumer
staples sector is worth investing in because of access to a consumer who makes an
average of $15000 a year. Store-brand foods sell at an average 27% discount to their
name brand competition, but companies such as Coca-Cola, Pepsi, Kellogg, and
Monster have great synergy when it comes to name brand recognition and premium
price.
Although the sector has been slumping in comparison to the general trend of the
market, if companies continue to find innovative ways to build a loyal customer base in
both the United States and other foreign countries, their profits should continue to grow.
Pepsi developed the first 100% plant based PET plastic bottle in 2011 and Coca-Cola
claims to have made one as well8. International growth is assured as countries such as
South Korea and India embrace relations with the US. The Obama administration made
trade agreements with South Korea, Panama, and Columbia in October of 2011. The
deal with North Korea will increase exports by $10.9 billion in the first year.9 Under the
Obama administration, the unemployment rate has also decreased, making the every
day consumer more able to buy consumer staples products. Companies will combat
rising commodity prices with smaller package sizes and by refocusing distribution
strategies. Both Pepsi and Coca-Cola recently bought their bottling distribution
companies in order to increase productivity. The trend toward “healthier products” has
also benefited the consumer staples sector as companies such as Coca-Cola and
Unilever sell vitamin water and green tea products. The consumer is willing to pay
slightly more for added health benefits. Consumer staples companies will continue to do
well depending on whether or not rising commodity prices affect margin profits
significantly.
The Consumer Staples Sector has been underperforming recently. However,
consumer staples are always a solid investment as they tend to stay within the general
economic climate, often doing better than the S&P. The KXI ETF fund stayed within a
52 week range of $57-$69.17. Year to date through April 25, the S&P Soft Drinks Index
rose 4.65% versus the S&P 1500 Index which rose 9.12%.
7
S&P netadvantage
Pepsico.com
9
S&P Net Advantage
8
3
4
Monster Beverages Corp (MNST)
Stock Price: $65
Market Cap: 11.4 B
FY2011 Sales: $1.703 B
Daily Trading: 724,889k shares
Short Interest: 1,713,060k shares
Shares Outstanding: 187 M
B/S net cash: $771 M
F 12/13 EPS: $1.14/$1.54
F 12/13 EBITDA: 16.22/13.86
F 12/13 FCF: $303 M
52 Week Range: $30.75-$83.96
“We at Swire have always enjoyed a wonderful relationship with Monster and in particular with
Rodney. Not only does Monster have a great portfolio of brands, they have a solid management
team led by Rodney. We look forward to many more successful years of partnership and mutual
growth.”
o Paul Lukanowski, vice president of Swire Coca-Cola USA
“Energy is not a fad.”
o Rodney Sacks, CEO of Monster Energy
The US beverage market rose 1.2% in volume in 2010. U.S. alternative beverage
sales are estimated to have reached almost $32 billion last year10. Energy drinks
climbed 5.4% in 2010 outperforming the beverage industry11. The segment was the
fastest-growing category of the U.S. liquid refreshment beverage market in the five
years ended in 2011 with a compound annual growth rate of 11.9 %12. Monster has also
taken an interest in the Ready-to-drink Teas market with its fastest growing product, the
Monster Rehab drink.
Monster in Comparison
10
Beverage Marketing corp.
Standard & Poorʼs Industry Report.
12
Data and estimates from Beverage Digest and Goldman Sachs.
11
5
Monster also did better compared to consumer nondurables
Over the past three months, MNST rose 19.34%
And during one year, rose 96.69%
History & Products
Founded out of Corona
California in the 1930s as Hansen
Natural, Monster Beverages Corp
now makes over 90% of its revenues
from its Monster Energy brand energy
drinks.
These energy drinks include Original
Monster Energy, Monster Lo-Carb,
Monster Rehab, Monster Assault,
6
Monster Khaos, Monster juice hybrid M-80, Extra Strength Monster, and Java Monster,
premium coffee supercharged with their Monster Energy blend. Their fastest growing
brand is the non-carbonated Rehab drink which is tea + lemonade + energy, accounting
for over 10% of its earnings in the fourth quarter13.
Monster first offered an energy formulation in 1996 as part of its Hansen line of
smoothies. They launched Hansen energy drinks in 8.3-ounce cans in 1997. The first
Monster Energy drink, packaged in a black can to have masculine appeal and stand out
from competitors, was not available until April of 200214. One article from January 24,
2012 is entitled “6 Stocks to Capitalize on College Partying.” Monster is one of the
companies featured as being a growing and desirable company for investors. One of the
reasons for this is that Monster is different from other companies in three ways. One:
Right now, it only makes 20% of its revenue internationally. Two: Its approach to
marketing is different. On the Monster Energy Facebook page it says, “Most companies
spend their money on ad agencies, TV commercials, radio spots, and billboards to tell
you how good their products are. Instead, we support the scene, our bands, our athletes
and our fans!” Remarkably, they have gained a large amount of the market share
without launching a large marketing campaign. Three: The DSD (Direct Store Deliver)
segment and partnerships with third-party distributors enables Monster to compete with
larger companies such as Coca-Cola (Full Throttle) and Pepsi (Amp). It is the second
largest Energy drink company, Red Bull being the first.
Monster is a BUY because:
o Growth
• International revenue grew from 16% to 20% of total profits
• Average revenue growth: 24% over the past five years
• Predicted 17% earnings growth rate over the next year
• Price target raised to $70
o Cash Cow
• $800 million in FCF
o Brand Equity
13
Q4 earnings call.
Interview with CEO Rodney Sacks, winner of the 2011 Beverage Industry Executive
Award.
14
7
• “Unleash the Beast”
o Competitor against larger companies
• Highest operating margins among publicly traded North American soft-drink
companies with a market value greater than $500 million
• Rumors of possible acquisition by KO
Direct Store Delivery
Monster is able to compete with larger companies because of its unique market
strategy. Monster only employs 1,543 people15. Unlike other beverage companies,
Monster partners with third parties such as Anheuser-Busch and Coca-Cola Enterprises
to distribute its line of energy drinks. This leaves executives with the sole task of
marketing and refining their product line. Direct store delivery enables Monster
distributors to skip central distribution and deliver directly to stores, saving the stores
money.
Their direct store delivery segment (DSD)
represented 94.4% of sales in 2011 with
their warehouse segment representing
only 5.6% of sales.
In 2006, they partnered with
Anheuser-Busch for distribution of
Monster Energy in a large portion of the
United States. In 2008, Monster entered
into a partnership with The Coca-Cola
Co. and Coca-Cola Enterprises Inc. to
distribute Monster Energy in the
remaining portion of the United States not covered by Anheuser-Busch distributors,
Canada and six Western European countries. Sacks says of these partnerships, “Coke
bottlers are generally more focused on traditional grocery chain accounts and mass
merchandisers, whereas Anheuser-Busch distributors are really focused on the
convenience and gas channel, which is our sweet spot.”
15
WSJ
8
Management Team
The growth justifies the valuation. The leaders in a large growth company need to
know how to motivate and value each person on their team. Many ideas for new
products come from within the company—Sacks says he often listens to the younger
guys. “Part of that is making sure that your company, your employees, your team,
everybody, lives, breathes and dies by the brand.” Says Sacks, “Itʼs not just a job, you
donʼt come here simply to work; you come here because you feel good about yourself
and what you are doing16.” Sacks was chosen as the Beverage Industryʼs 2011
Executive of the Year by a committee of industry experts including John Faucher,
beverage analyst at JP Morgan Chase and Kaumil Gajrawala, director at UBS
Investment Bank.
Rodney Sacks: Rodney Sacks has been chairman of the board, CEO, and director of
Monster since November, 1990, and serves as its member of the executive committee.
Sacks bought the company with partner Hilton H. Schlosberg in June of 1992 for $14.5
million when the company was making $17 million a year. It is now worth billions.
16
Interview with CEO Rodney Sacks, winner of the 2011 Beverage Industry Executive
Award.
9
Financials
The financials for Monster Beverages Corp show a rapidly growing company as
revenues and EPS have been steadily growing for the past six years. Monsterʼs 27%
operating margin in 2011 is the highest among publicly traded North American soft-drink
companies with a market value greater than $500 million. YTD is 29.30% as of March
11, 2012. Analysts predict that EPS will grow 19% to $1.84. Impressively operating
income for the 2011 fourth quarter increased 29.6% to $103.4m from $79.8m in the
comparable 2010 quarter. Net profits increased by 31.4% to $64.5m. For every sales
dollar, there are 17 cents of net income. So thatʼs a net profit margin of over 15% (17%).
Net sales amounted to $318.7m, an increase of 28.7% on the prior-year period. Diluted
earning per share was $1.53 compared to $1.14 a year ago.
Contribution margin for the DSD segment was $543.2 million for the year ended
December 31, 2011, an increase of approximately $106.5 million, or 24.4% higher than
the contribution margin of $436.7 million for the year ended December 31, 2010. The
increase in the contribution margin for the DSD segment was primarily the result of the
$380.0 million increase in net sales of Monster Energy brand energy drinks.
Monster
Energy's chairman and
CEO, Rodney Sacks
says, “Monsterʼs
continuing to grow.
Weʼre very optimistic
about its growth in
America, where we
continue to see
category growth and
we continue to grow
ahead of the category,
and overseas as well,
which is where we see
10
unlimited growth opportunities.” Monster increased expenditures for sales and
marketing programs by approximately 46.8% in 2011 compared to 2010, which shows
dedication to their growth and brand name. Free cash flow increased from 216.5 m in
2010, to 308.28 m in 2011. This is especially important since Monster needs as much
cash on hand to deal with roadblocks they will inevitably encounter during further
international expansion.
The quick ratio for Monster is 3.72, making it extremely liquid. Monster is less
liquid than this time last year probably because they have taken on additional staff to
prepare for international launches in Poland, South Korea in Japan. Also because
smaller countries in Central and Eastern Europe aren't profitable yet because the
energy market is smaller there17. Monster has also recently hired Don Blaustein as
Senior Vice President, previous President of Heineken, to head up international
operations in Asia, South America, and Latin America18. Stockholderʼs equity has
increased 18.19% from the same quarter last year as Monster continues to increase
revenues and spend cash on tangible assets. This is evidenced by the 29.30% Year to
date return on investment so far. Although monster is in the Consumer staples sector, it
is rapidly growing and will continue to grow over the next year. Beta is .29, showing
Monster as being predictably less volatile than the market. Sacks commented that their
consumer base has been affected by the hard economic times but remains steady. As
mentioned in the sector overview, the economy is recovering but the environment
remains volatile. I think that Monster will continue to outperform the stock market even
as the economy recovers.
Over the past five years, gross margin peaked at 53.6% and averaged 52.4%.
Operating margin peaked at 29.5%
and averaged 25.1%. Net margin
peaked at 18.3% and averaged
15.7%. TTM gross margin is 52.5%,
10 basis points better than the fiveyear average. TTM operating
margin is 26.8%, 170 basis points
better than the five-year average.
TTM net margin is 16.8%, 110 basis
points better than the five-year
average19.
17
Q4 Earnings call, questions
Q4 Earnings call, questions
19
Daily Finance
18
11
Monsterʼs free cash flow margin has averaged about 12.7% during the past 3
years. Rodney Sacks estimated that capital expenditures are likely to be less than $40.0
million through December 31, 2012.
Monster has no debt. This is a perfect time for rapid expansion as Monster can use its
cash without debt expenses draining funds.
Competition
The energy drinks segment holds 63% of the functional beverages market and is
the fastest growing segment in the beverage industry since bottled water. Both Monster
and Red Bull have about 30% of the market share. The other shares go to Rockstar
(11.4%), Full Throttle, produced by Coca-Cola
(6.9%), and Amp, produced by PepsiCo (3.6%).
The U.S. energy drink industry is anticipated to
more than double and reach an astounding $19.7
billion in 2013, almost a 160% increase from
200820. Energy drinks were up about 16% in the
convenience store channel in 2011. Energy drinks
are expected to see a 64% increase overall
between 2011 and 2016. Sales of energy drinks
20
University of Illinois Energy Drinks Market Report
12
and shots in 2011 totaled about $7 billion. Sales of energy drinks are expected to see
an annual increase of 11-12% through 201621. If Monster continues to innovate with
products such as Lo-Carb Monster Energy in a reusable can, they will continue to gain
market share. According to the Nielsen reports for the 13 weeks through January 21,
2012, for outlets combined namely, convenience, grocery, drug and mass
merchandizes, excluding Walmart, sales in dollars in the energy drink category including
shots, increased 16.4% versus the same period a year ago. Sales of MNST grew 23.6%
in the 13-week period, while sales of Red Bull increased by 18.7%.
Coca-Cola(KO): The Coca-Cola Company is a non-alcoholic beverage company.
The Company owns or licenses and markets more than 500 non-alcoholic beverage
brands, primarily sparkling beverages but also a variety of still beverages such as
waters, enhanced waters, juices and juice drinks, ready-to-drink teas and coffees, and
energy (Full Throttle) and sports drinks. It also owns and markets non-alcoholic
sparkling beverage brands, including Diet Coke, Fanta and Sprite. It operates in six
segments: Eurasia and Africa, Europe, Latin America, North America, Pacific, Bottling
Investments and Corporate. On October 2, 2010, it acquired the North American
business of Coca-Cola Enterprises Inc. (CCE). Recently Dunkinʼ Brands ended its fiveyear relationship with PepsiCo and made Coca-Cola Co its exclusive beverage partner
in 9,400 of its locations. It has not been successful thus far breaking into the energy
drink market. Recently, there have been many rumors that Monster would be an
advantageous acquisition for KO.
Pepsi(PEP): PepsiCo Inc. is an American multinational corporation headquartered in
Purchase, New York, United States, with interests in the manufacturing, marketing and
distribution of grain-based snack foods, beverages, and other products. PepsiCo was
formed in 1965 with the merger of the Pepsi-Cola Company and Frito-Lay, Inc. PepsiCo
has since expanded from its namesake product Pepsi to a broader range of food and
beverage brands (Amp), the largest of which include an acquisition of Tropicana in 1998
and a merger with Quaker Oats in 2001 – which added the Gatorade brand to its
portfolio as well. Pepsi has not wowed investors with its latest earnings although its
sales growth beat Coca-Colaʼs two months in a row, 8% and 3.4% respectively22.
Dr. Pepper Snapple(DPS): Dr Pepper Snapple Group, Inc. is an integrated brand owner,
manufacturer, and distributor of non-alcoholic beverages in the United States, Canada
and Mexico. The Company offers include flavored carbonated and non-carbonated soft
drinks, ready-to-drink teas, juices, juice drinks and mixers. J.P. Morgan commented that
DPS does not have enough non-carb exposure for forecasts to be positive23.
21
Convenience Store Report
Analyst forecasts, J.P. Morgan, Deutsche Bank
23
J.P. Morgan Analyst Report
22
13
Coca-Cola Enterprises(CCE): Coca-Cola Enterprises, Inc. produces, markets and
distributes non-alcoholic beverages, including energy drinks, still and sparkling waters,
juices, sports drinks, fruit drinks, coffee-based beverages and teas. The company
manufactures many of its finished products from syrups and concentrates purchased
from The Coca-Cola Co. Its products include Coca-Cola Classic, Diet Coke/Coke Light,
Fanta, Coca-Cola Zero, Capri Sun, Schweppes, Sprite, Chaudfontaine, MinuteMaid and
Dr. Pepper. In 2010, the North American operations were spun off to The Coca-Cola Co,
with Coca-Cola Enterprises continuing to serve customers and consumers in Belgium,
Great Britain, France, Luxembourg, the Netherlands, Norway and Sweden. The
company was founded in 1944 and is headquartered in Atlanta, GA. CCE distributes
about half of Monster Energy Brands in the US and abroad.
These numbers are relevant because you can see that although MNST is not as large
as Coca-Cola or Pepsi, it competes with them quite well. The PEG ratio is more
applicable to comparing Monster to other companies because its growth is taken into
account. Its PEG ratio of 1.85 is significantly better than that of Coca-Cola or Pepsi. One
would not expect Coca-Cola or Pepsi to grow as fast as Monster as they both have
dividends and are more mature companies. However, the fact that Monster is rapidly
growing and only continues to grow justifies its high P/E ratio. Its P/E ratio of 41.24 is
below the average food & beverage industry P/E ratio of 44.9 but above the S&P 500
P/E ratio of 17.7. The quick ratio shows that Monster is very liquid compared to the
other companies. The net profit margin also proves that MNST is able to compete with
larger companies as Coca-Cola is the only other competitor with a higher net profit
margin.
14
International Market
Monsterʼs greatest obstacle is breaking into the European market where Red Bull
dominates. However, Monster just reported a growth rate of 31% from 2010 in its latest
quarterly earnings report. Comparatively, Coca-Cola grew 33% over the same time
period. Coca-Cola gets 75% of its revenue from overseas whereas Monster, with 20%
of its revenue overseas, is just beginning to expand into other countries so there is great
opportunity for future growth. Internationally, Gross sales increased to $102.6m in the
second quarter of 2011 compared to $66.6m during the same time period in the
previous year.
In North America, Energy Drink growth rates have fallen flat (35% to 3%), which is why
international investment and growth is so essential to the future of Monster Beverage
Corporation. However, North America, where Monster has strong sales in the US and
Canada, continued to consume the most liters per capita in 2010.
15
In Canada, MNST sales increased 23%. In Mexico, sales in December 2011 grew
21.1% over the same month in 2010, while sales of Red Bull were 12.1% lower. Gross
sales in Europe were 87.5% higher than in 2010. If Monster continues to invest in global
market growth, their market share will continue to gain. They are planning rapid
international expansion with launches of Monster Energy brand in Japan, Korea, Hong
Kong, Macau and Taiwan in the first half of 2012, and planning additional launches in
Central and Eastern Europe, Turkey, Middle East, Africa, South America and Asia
during the remainder of 2012. Monster has also targeted small markets in Africa for
future growth It has already been extremely successful in Canada, Mexico, the UK,
France, Europe, Australia, South Africa, Central America and Brazil. When Monster first
enters an international market, it imports Monster beverages. However, it already
operates international facilities in Australia, Brazil and Canada.
SWOT Analysis
The major risks include: global instability: regardless energy drink markets
continue to grow; government regulation of energy drinks: Monster has combated
government regulations by increasing the amount of ounces per can in order to curtail
regulations on caffeine per serving; and rising raw material and distribution costs: Raw
materials include sugar, aluminum cans, apple juice, and PET plastic. Rodney Sacks
said in the Q4 earnings call that they have largely covered their costs for aluminum cans
in 2012, but sugar and apple juice remain largely uncovered. This could be an issue in
2012 because most sugar is produced in Brazil, where the cost of production is
expected to rise by 85% due to droughts, bad crops, and labor conditions.
16
According to the Wall Street Journal, China produces most of the apple juice
concentrate used in the US annually, an estimated 70%24 which makes Monster and
other peers dependent on China for its supply. The chart on the upper right shows
Orange juice futures prices which is comparable to apple juice which has become even
more in demand. Apple juice concentrate is set to begin trading this year25. Sugar has
also sky-rocketed in price since 2009, making it a large expense for many companies.
In terms of PET plastic, Pepsi and Coca-Cola have both created 100% plantbased plastic bottles for their products and are testing them in 2012. Hopefully, Monster
can jump on the bandwagon so it is not dependent on oil and current events in China for
its supply of plastic bottles. Since Monster uses Coca-Cola Enterprises for distribution
purposes, a lot of that is up to Coca-Cola.
Strengths
One of the Energy Drink
Leaders
Solely focused on Energy
Drinks
Direct Store Delivery
No Generic Brand Competition
Financially sound
Opportunities
International Expansion
Continuing popularity in US
Weaknesses
Competition is getting fierce in Energy Drinks
Has less resources than certain competitors
Red Bull has large market share internationally
Overvalued
Threats
Rising Cost of Raw Materials
Foreign Exchange, General Instability of European
24
The Wall Street Journal
http://online.wsj.com/article/SB10001424052748703551304576260591420067976.html
25
The Wall Street Journal
17
Economy
Start-up Cost during international Expansion
Final Remarks
The question is: Can Monster keep up its rapid growth rate in the upcoming
months? The answer: Yes. In the recent economy growth reports, consumer spending
grew 2.9% compared to 2.1% in the last quarter of 201126. There have also been
rampant rumors of the possible acquisition of MNST by KO in recent weeks. Monster
Beverages Corporation has solid management, outstanding financials, rapid
international expansion plans, and a loyal consumer base and people are taking notice.
Monster Beverages Corp exists because the consumer is looking for an extra kick that
also tastes phenomenal. Whether you are gearing up for a night out with Monster
Energy, or recovering from a long night out with Monster Rehab, Monster Beverages
Corp has the right products for consumers. This is demonstrated by their strong
financials, and ability to compete with large companies such as Coca-Cola and Pepsi.
According to the 2011 Food and Health Survey, 79% of consumers said price influenced
their decision to buy, although 87% of consumers still consider taste as the top
consideration. Monster is low-priced and tastes good. You canʼt beat that. MNST has a
share price of $65 and a 52 week range of $30.75-$83.96. Although it is toward the top
of its 52 week range, based off its high liquidity, large expansion plans, and solid
management team led by Rodney Sacks, itʼs a very advantageous investment. Having
no debt, Monster is also in a position to issue a dividend to shareholders. As the price
target is set at $70, the entry point should be around $65. Monster is no longer a lowstatus operation. Even Coca-Cola has taken notice. It is transitioning into a high-profile
operation similar to those of Coca-Cola and Pepsi. Now is the time to buy.
26
NYTimes “US Growth Slows to 2.2%”
18