Monster Beverage Is Entering The Booze Business
Monster Beverage is (NASDAQ: MNST) is best-known as the energy drinks maker whose Monster Energy brand commands a significant share of the energy drinks market in the US and abroad. According to Statista, Monster Energy is the second leading energy drink brand in America, with a 15% market share as of 2020.
After its conquest in the energy drinks market, Monster Beverage is expectedly looking towards other sectors to expand, and we see that alcoholic beverages are the next target. Just in, the energy drinks giant has agreed to acquire CANarchy Craft Brewery Collective, a Colorado-based maker of craft beers and hard seltzers. CANarchy has a constellation of craft beer and hard seltzer brands that will add to Monster Beverage’s portfolio after the purchase.
- Monster will pay $330mn in cash for CANarchy. The energy drinks maker said CANarchy would be a “springboard” to enter the alcoholic beverages market. The purchase will give Monster a solid infrastructure for the alcoholic beverages market, including product development and manufacturing expertise, distribution networks, and licenses in specific markets.
- $330mn is an outstanding exit for CANarchy, which started less than a decade ago in 2015. In the food & beverages market, acquisitions are usually 1-5x revenue multiples, unlike tech, where 10x, 20x, and more are typical, and $330mn is unusual for a relatively young beverage company.
- CANarchy is a collective of independent craft beer and hard seltzer brewers that teamed up to take on the big players in the industry. It consists of 7 distinct brands whose products sell in nearly two-dozen countries, including the US. Combined, the Colorado-based company claims to be the sixth-largest craft brewery in America.
- Craft beer and hard seltzer are nascent yet popular categories of alcoholic beverages. Both categories have made a killing in the alcoholic beverages sector in recent years, though many speculate that it’s a “bubble.” Nonetheless, Monster, a leading energy drinks company, sees it fit to spend $330mn in cash on a company that makes them; it wouldn’t pay a significant sum if it didn’t have high expectations in the sector.
- Monster saw significant growth in 2021, reporting $4.1bn in sales in the nine months ended September, up 20% year-over-year. It disclosed a profit of $1.1bn in that same period. As of Q3 2021, the energy drinks giant reported having $3bn in cash and short-term investments, and it’ll spend roughly 10% of that on CANarchy.
Monster Beverage is a publicly-traded company whose biggest shareholder is The Coca-Cola Company (NYSE: KO). Despite having a significant stake in Monster, Coca-Cola has its brands of energy drinks rivaling the company.
Monster has a current market capitalization of $50bn. The stock is down about 2% year-to-date.