Soda Sales Are Slipping, But Energy Drinks Are Still Buzzing
Red Bull and Monster Beverage (MNST) dominate this market, commanding more than 80 percent of the sales in this country. The pesky presence of regulators, politicians, and activists concerned about the long-term effects of consuming these drinks aren't fazing folks seeking a quick burst of energy.
A Monster is Rising
According to Symphony IRI data that was compiled by Bloomberg last summer, U.S. energy drink sales had increased nearly 7 percent to $9.7 billion through the previous 12 months. That's not too shabby for a category coming under fire, but it was some serious deceleration from the better than 30 percent surge in 2011 and still healthy 21 percent pop in 2012.
There was a period when investigations into deaths that might have been linked to energy drink consumption were in the news, but, now that the headlines fare starting to fade, we're back to cracking open Monster Energy cans.
Monster Beverage posted strong quarterly results last week, experiencing a 15 percent surge in net sales. Revenue had only climbed 6.5 percent through the year's first two quarters and 7.3 percent through the first nine months of the year. Clearly top-line growth is starting to accelerate again, and that's good news for the industry in general and Monster in particular.
Just don't mistake Monster's accelerating growth with a renewed interest in flavored sodas.
Cola Wars Run Low on Ammo
The fizzy bubbles for Coca-Cola (KO) and PepsiCo (PEP) are rising too slowly these days.
Coca-Cola reported global volume climbed just 1 percent during the fourth quarter and just 2 percent for all of 2013, and that includes many of the beverage giant's other drink offerings. Carbonated beverage volume actually clocked in flat during the fourth quarter. PepsiCo matched Coca-Cola's flattish volume performance worldwide.
Sugary soft drinks have come under fire, but even diet beverages are failing to deliver the kind of growth that these two soda giants used to routinely deliver. We're drinking water, and not necessarily the "premium" bottled H2O that Coca-Cola and PepsiCo offer.
Consumers are also sipping a lot more coffee these days, but one could argue that the premium java trend is something that would hurt energy drinks more than carbonated beverages. However, the growing popularity of iced coffee and latte beverages -- even at fast food chains that are big sellers of fountain drinks -- is leaving a dent on Coca-Cola and PepsiCo.
Monster has escaped largely unscathed for now, but it may not be able to dodge trouble forever. Energy drink companies have been battling with other beverage companies about labeling regulations on their presumably functional beverages. Monster is also going on the offensive to promote the generally risk-free nature of consuming its product.
"Millions of Monster Energy Drinks are safely consumed every day," it offered up in a December press release discussing a California legal decision. "Monster is confident that Monster Energy Drinks are safe."
Whether safety is an issue or not, there's no denying that we're back to swallowing down Monster, Red Bull, and other energy drinks at times when we need a little pick-me-up during the day or while working our way through an all-nighter.
The health concerns may never entirely go away. The FDA will let us know if that ever changes. However, energy drinks are now delivering caffeinated boosts for investors who can use a little pick-me-up in their portfolios.
Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola, Monster Beverage, and PepsiCo. The Motley Fool owns shares of Coca-Cola, Monster Beverage, and PepsiCo. Try any of our newsletter services free for 30 days.