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Monster Beverage Company

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by

Lindsay Allee

on 5 December 2012

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Transcript of Monster Beverage Company

History of Hansen Beverage Corporation 1935 1992 2002 2005 Forbes ranked Hansen
number one on its list
of the 200 best small
companies in the U.S. Monster, Hansen's new energy drink, is launched. Rodney Sacks acquires the company, and lists Hansen Natural Corporation on the NASDAQ under the ticker HANS. Monster Beverage Company Company History
Industry
Competition
Marketing Strategy
Press Releases/Industry Health Concerns
Quantitative Analysis
Future Investment Opportunity
Analyst Opinion on MNST
Our Buy/Sell Opinion Hubert Hansen and
sons began selling
juice in Southern California. 2012 Hansen Beverage Company changes name to Monster Beverage company and operates under ticker symbol MNST. 2007 Hansen Natural Corporation and Anheuser-Busch announce On-Premise Sales and Distribution Deal. Hansen Beverage Corporation and Anheuser-Busch Anheuser-Busch manages and coordinates the sales, distribution, and merchandising of Monster Energy products
On-premise retailers include: bars, nightclubs, liquor stores and restaurants
Anheuser-Busch has a first-class distribution system that will enable Hansen to expand availability and increase the presence of our products across all channels Industry Background Energy Drink industry was an early subset of the soft drink industry
Coca-cola was marketed as an energy booster early in the 1900’s
In 1985, Jolt cola was introduced to the United State, with a marketing campaign centered around its high caffeine content Growth By 2001, the US energy drink market had grown to nearly 8 million per year in retail sales
Over the next 5 years, it grew an average of over 50% per year, totaling over $3 billion in 2005
The energy drink market became a $5.4 billion dollar market by 2007 Market Share Competition Monster vs Starbucks Marketing Strategy Production Do not directly produce the beverage itself
Third party manufacturing, Monster buys ingredients from separate suppliers
Monster sold in over 70 countries around the world Partnership with AB
In 2002, switched to new carbonated energy drink in 16-oz. can
Doubled the size of previous bottle as well as most competitors’ Promotion Drinks marketed to younger generations.
MNST identifies target markets within this wide range
Extreme sports, video games, and other celebrity endorsements help connect with these markets
Similar tactics are employed by both Red Bull and Rockstar, and seems to be an industry standard. Quantitative Analysis Future Investment Opportunity Analyst Opinion Our Buy/Sell Opinion Goldman: FDA ruling “encouraging” for Monster
Holding a lot of cash for possible upcoming lawsuits
Monster has been consistently putting off expansion into Korea, over a year delay
Monster underperforming in Brazil and parts of central Europe already reached by Red Bull
Legislation even more uncertain in foreign countries, increasing trend of banning energy drinks. Dollar Sales for Top 8 Drinks in 2012 Fruit Smoothies Kern’s
Jumex
Jugos del Valle
Libby’s nectars
V8 Smoothies Fruit Juices Mott’s
Welch’s
Ocean Spray
Tropicana
Minute Maid Java Products Starbucks
Rockstar Roasted
Caribou Coffee
Cinnabon coffee drinks
Godiva dairy based drinks Energy Drinks Red Bull
Rockstar
Full Throttle
Amp
NOS
Xyience Xenergy
VPX Redline
Vitaminenergy
Pepsi Max
Mountain Dew
Mountain Dew MDX
Vault Natural Sodas The Coca-Cola Company
PepsiCo, Inc
Cadbury Schweppes plc Press Releases Nov 13th, 2012
Board authorizes $250m share repurchase plan for outstanding common stock
No timetable given, but transactions will be made through the open market/negotiated transactions
Shows they believe they think their stock is undervalued Safety Concerns April 1st, 2011
Mr. Sulzhik filed a lawsuit claiming he found a mouse in his monster can
Monster claims that it is “virtually impossible” for a mouse to be trapped during production
Scientists claim mouse would have disintegrated and left beverage undrinkable from the first sip
Mr. Sulzhik claimed to leave the can unattended for several hours. October 23rd, 2012
Lawsuit by family of 14 yr old Anais Founier
Found dead after consuming two 24oz monster drinks in less than 24 hours
Autopsy revealed cardiac arrhythmia due to caffeine toxicity
Monster claims drinks are safe for consumption, citing the amount of energy drinks consumed worldwide without any complications With growing concerns, countries could start enforcing regulations
Canada will soon begin to regulate how much caffeine is allowed in energy drinks
Cannot be more than 180mg
Mexico, France, and India are considering raising taxes on energy drinks to discourage their use
Monster energy stock has not responded well to recent safety concerns
Past two years: MNST Price went from $22-$79 per share around June of this year
On the day of the news for FDA investigation
Shares plunged 14.2% to close at $45.73
We are worried that increased safety concerns could bring industry regulation/increased taxes that will hurt Monster’s share price Industry Safety Quantitative Analysis Monster Beverage Company:
Stock Price:$ 51.88
P/E Ratio: 28.54
EPS: 1.82
Mkt Cap: 8.89B
ROIC: 31.6%
Return On Equity: 33.28%
Current Ratio: 3.561 Book Value: 889.68M
Price/Book value: 10.3
Price/Sales ratio: 4.582
Return on assets: 24.14%
Quarterly revenue growth (current): 14.16%
Earnings Yield for last quarter: 3.51%
Company Beta: 0.45
WACC: 10.8% Our recommendation of Monster stock would be to sell in the near future
Growth may increase for a short period, but the stock price is near its resistance point (ceiling), leaving little room to grow but ample room to fall
Monster has increased its market share in recent years, but our concern lies not within the company, but within the industry Reasons for long-term concern
Safety
As industry safety concerns grow, more regulations or taxation will deflate the value and profitability of Monster
Monster’s stock fell significantly after the announcement of the FDA’s investigation
As there is an increase in deaths and health related issues, society will associate monster with an unsafe product
Leads to bad publicity
Once this negative information regarding Monster’s safety becomes bigger news, we believe this will be reflected in the stock price. A lot of uncertainty depending on legislation, analysts very uncertain
S&P: B Rating- Hold
Citi: 4 stars
Goldman Sachs: 4 stars
October 2012- rating agency Stifel Nicolaus downgraded MNST from Buy to Hold
MNST Projected Growth Rate: 23.3% in 2013
Sector Growth Rate: 2.6%
Full transcript