onster Energy Case Study

Presented by: Anthony Nguyen, Derek Vanthan, and Travis Butler

Table of Contents
1. History 1.2 History Continued 2. Executive Summary 3. Stock Price Graph 4. Revenue, Cost Margin 5. Key Ratios 6. Product Development Issues 7. Relevent Costs 8. Profitablility 9. Recommendation 10. References

 Past

Company Background

Founded by Hubert Hansen and sons in Los Angeles, California in 1930 Focused and sold non-pasteurized juices Expanded into the soda market in 1977 Transferred ownership to Rodney Sacks in 1992 for 14.9 million Introduced Monster energy drink in 2002 Changed name from Hansen to Monster Beverage Co. in 2007 Increased profits from 50 million in 2003 to 2 billion in 2012

Company Background Continued

Present
Markets based on passion and dreams Sponsors athletes, musicians, equipment, apparel, auto Teams up with professionals in respective fields Brands introduced in Europe, Asia, and South America

Executive Summary

CEO: Rodney C. Sacks Stock Price: $49.68 (April 5, 2013) Earnings per Share: $1.96 Gross Profit Rate: 51.7%

Profit Margin Ratio: 16.5%

Dividends: N/A

Stocks

Revenue, Expenses, Contribution Margin

Overall Revenue: $2,060,702,000 Overall Expenses: $1,720,682,000

Sales Price: $2.00 per can

Variable Cost: $0.48 per can Contribution Margin: $1.52 per can

Key Ratios and Graphs

2.5

Contribution Margin Ratio: 76% Current Ratio: 2.89 Gross Profit Margin:51.17%
Revenue in Billions

Revenue
$1,200,000,000.00 $1,000,000,000.00 $800,000,000.00

Gross Profit

1.5 $600,000,000.00 1 $400,000,000.00 0.5 $200,000,000.00 $2012 2011 2010 2009 2008 2007 2012 2011 2010 2009 2008 2007

Product Development Issues

In 2012, the FDA had launched an investigation into the companys products; this was a result of a lawsuit filed against the company The death of a 14 year old maryland girl was among 6 reported incidents over the past four years; the cause of death was determined as caffine toxicity linked to the Monster energy drink Monster energy drinks are classified and marketed as dietary supplements; As a result, monster is not subject to FDA caffine regulations (Edney, 2012) Shortly after the releasing of the FDA reports, the Monster Beverage Company had experienced a 7% decrease in stock value (Haiken, 2012) Although the company has not been deemed legally responsible for these reported deaths, past and possible future allegations against the monster beverage corporation could lead to new FDA regulations affecting the company and their product formula in the future.

Relevant Cost per Can

Direct Materials: Aluminum...........................................................$0.01 Ingredients.........................................................$0.27 Paint...................................................................$0.02 Direct Labor: Variable Salaries and Wages$0.10 Variable Overhead: Utilities...............................................................$0.08 Total Product Cost...$0.48

Profitability
Monster energy drinks is a very profitable product line. Since 2008, sales revenue has consistently increased. Gross income has also increased each year since 2008. 2012 is the first year that Monster Beverage company has reported gross profit exceeding $1B Gross profit for 2012 was $1.07B Opening of new markets internationally Increased consumption of Monster energy drink during Spring and Summer Addition of new bottlers and distributors

Recommendations

1. 2. 3.
4. 5.

For Monster Beverage Corp.

Explore ways to change product seasonality to all year round demand Adapt Monster energy drink taste to international markets Find and develop new markets in high tempo centers such as Tokyo, Japan, Mexico City, Mexico, Berlin, Germany Develop strategic alliances with organizations and professionals Maintain or increase market share by product deletion, advertisement, and new product developments

1.
2.

For Potential Investors and Current Investors:

Hold on to stock, current stock trend suggest maintained increased growth and greater return on investments Buy more stock, trend suggests buying price will gradually increase with time

References
http://files.shareholder.com/downloads/HANS/2408724337x0x567558/64f1566f9fdd-407c-8b5c-56b4c18c7f63/2011_Monster_Bev_AR_10K_for_Webposting.pdf http://investors.monsterbevcorp.com/releasedetail.cfm?ReleaseID=743823 http://monsterbevcorp.com/ http://management.fortune.cnn.com/2012/11/05/how-hansens-natural-created-amonster/ http://www.marketwatch.com/investing/stock/mnst/financials https://www.google.com/finance?q=monster+beverage&ei=neBhUcjwJp2clgO7Ug http://investors.monsterbevcorp.com/secfiling.cfm?filingID=1104659-1214573&CIK=865752 http://www.hansens.com/us/en/about-us/hansens-story/ http://files.shareholder.com/downloads/HANS/2409792431x0x567558/64f1566f9fdd-407c-8b5c-56b4c18c7f63/2011_Monster_Bev_AR_10K_for_Webposting.pdf http://www.bloomberg.com/news/2012-10-22/monster-energy-drinks-cited-in-deathreports-fda-says.html http://www.nytimes.com/2012/10/23/business/fda-receives-death-reports-citingmonster-energy-a-high-caffeine-drink.html?_r=0 http://www.forbes.com/sites/melaniehaiken/2012/10/23/can-energy-drinks-kill-thefda-investigates/