Specialist
General sales manager at Vital Pharmaceuticals Inc (Bang Energy)
Agenda
- US energy drink trends and dynamics, plus 2022 segment outlook
- Monster Beverage’s (NASDAQ: MNST) portfolio and US organic growth strategy, leveraging its Coca-Cola (NYSE: KO) partnership
- Competitive positioning – Monster vs Red Bull and others
- Monster's agreed Canarchy Craft Brewery acquisition and alcoholic beverage strategy
- Further M&A and diversification scenarios, included possible merger with Constellation Brands (NYSE: STZ)
Questions
1.
Could you give an overview of the energy drinks sector, highlighting structural trends and consumer behaviours driving growth?
2.
How have consumer needs developed or broadened over the last few years within the market? You highlighted the consumer wanting the next thing and the proliferation of flavours, but have any underlying trends developed more recently?
3.
How has the pandemic impacted the energy drinks segment, if at all, and how long-lasting are those impacts?
4.
The pandemic accelerated consumer health and wellness needs across other categories. Is that also applicable to the energy category?
5.
How does the sports drink segment interplay with energy drinks? It has been growing, perhaps more than energy.
6.
Could you give an update on supply? You mentioned can shortages changing business models.
7.
How are energy drinks companies managing cost pressures throughout the P&L? It’s more than just can shortages. What does this mean for trying to pass pressures on to the consumer? How might that impact volumes?
8.
How price sensitive is the consumer towards the energy segment?
9.
How might the segment’s key drivers evolve over the next five years? Will there be anything different from what we’ve discussed?
10.
Can you elaborate on your comment that the market is saturated and will fizzle itself out over the next five years? Do you mean the number of players or the growth will reduce, as there will eventually be consumer pushback?
11.
What might be the segment’s growth in aggregate over the next five years? How would you assess this as volume units vs value or price?
12.
How should we assess the segment’s demographic drivers? How does it play to gen Z and how can players retain some older consumers, who are well-documented as dropping out of the category at a particular age point?
13.
Do you believe that players in the category come and go, but Red Bull and Monster will still dominate it? If so, why?
14.
You said there are many new flavours and brands emerging for the consumer to trial, but they seem to eventually revert to being brand loyal to Red Bull or Monster. Can you explain this consumer behaviour?
15.
How does retail think about energy vs other big soft drink or beverage categories? What’s retail’s incentive to allocate more space?
16.
Could anything else change for the retailer over the next few years if the high margin profile doesn’t change?
17.
Could the shift to e-commerce have any ramifications for the competitive landscape? Does it play to the bigger companies’ favour or does it enable smaller players to get more air time?
18.
What have been the drivers behind Monster Corp and the Monster brand’s success?
19.
What does the Monster brand stand for among its loyal consumers? What are its differentiating qualities vs other brands?
20.
Could you elaborate on the distribution strength with Coca-Cola? How big a competitive advantage is this vs other brands? Is Coca-Cola’s 20% ownership of Monster enough of an incentivisation for the former’s salespeople to distribute?
21.
What is the Monster brand’s core target consumer profile and how might that differ to Red Bull, Bang and Rockstar’s consumers?
22.
You said Rockstar isn’t part of the discussion. Does Pepsi ownership change that dynamic or distribution?
23.
Where can Monster continue to grow in the US and where might that growth come from? Is it about participating in category growth? Is there the opportunity to grow share even from its high base?
24.
Could you expand on Monster’s innovation and how it might approach it slightly differently to its competitors? How does it keep up with the new consumer preferences?
25.
What is your thinking behind Monster developing its own hard seltzer brand? How synergistic is this to energy?
26.
What are your thoughts on Monster not using the brand for energy seltzer? Could Monster work as an alcohol brand? My understanding is the company is choosing to keep the brand away from alcohol.
27.
What are your thoughts on Monster’s international growth prospects, and how big an opportunity will this continue to be for the company, obviously leveraging the Coca-Cola distribution? Should we think about Monster as an international growth story rather than domestic from today?
28.
What are the longer-term drivers or moving parts around Monster’s profitability profile, beyond the immediate cost pressures? How could the product mix develop the margin further? We hear a lot about expensive ambassador and marketing costs.
29.
What is the likely rationale for a potential tie-up between Monster and Constellation Brands? Merger talks between the two are continuing.
30.
How might getting close to Constellation benefit Monster or its shareholders’, if we take the terms out of the equation?
31.
What could be Monster’s opportunities in CBD [cannabidiol] or marijuana, categories where Constellation could provide a benefit? What might be the synergies with an energy brand, other than being a white space opportunity?
32.
Could Monster bring some specific know-how to CBD or marijuana commercialisation opportunities that Constellation doesn’t necessarily have?
33.
Is Monster or Constellation under-indexed in a particular channel that the other party could fill in for?
34.
Where would Monster go if the Constellation deal doesn’t materialise? Part of the thinking was to enter more categories, such as alcohol and hard seltzer.
35.
What are your thoughts on Monster’s announced acquisition of Canarchy? Presumably the rationale was again to get into alcohol. How significant a step is this as an indication of what might follow?
36.
Why doesn’t Monster develop an alcohol brand organically? What are the barriers? The company’s done it with True North, but what’s stopping it from entering craft beers organically?
37.
Monster has spoken positively about its ability to develop and innovate around the Canarchy brands. Do you think it has the innovation capability, know-how and consumer understanding? Could it replicate that in craft beer?
38.
Do you have any other thoughts on Monster or the wider energy sector?
