KO To Sell Its Own Energy Drinks, MNST's Objection Ruled Out
Zacks Investment Research | Jul 01, 2019 10:28PM ET
The Coca-Cola Company (NYSE:KO) and Monster Beverage Corporation (NASDAQ:MNST) recently settled a dispute over the launch of Coca-Cola Energy last April. The disagreement, continuing since last October, was sparked as Monster Beverage believed Coca-Cola violated the terms under an initial agreement between them. Monster Beverage apprehended this energy drink puts the two companies in direct competition.
However, an arbitration tribunal of the American Arbitration Association cleared that the roll out and sale of Coca-Cola Energy is permitted under to the terms of Coca-Cola’s contract with Monster Beverage. It further stated that the Coca-Cola Energy products are exempted according to the non-compete provision for beverages marketed or positioned under the Coca-Cola brand. The ruling allows Coca-Cola to sell its own energy drinks in markets where it has been launched as well as in new markets across the globe.
Notably, the Coca-Cola-Monster Beverage dispute was over the contractual language of their initial partnership signed in 2015. Under the agreement, Coca-Cola bought a 16.7% stake in Monster Beverage and transferred ownership of its energy drinks business to Monster Beverage. Meanwhile, Monster Beverage transferred ownership of its non-energy business to Coca-Cola. The launch of Coca-Cola Energy led to the rise of a dispute over the terms of the initial agreement, after which both companies submitted the dispute with the arbitration tribunal for resolution.
In a bid to diversify its portfolio for increasing sales, Coca-Cola first launched its energy drink in Hungary and Spain in April 2018. Apart from Coca-Cola Energy, the company has been looking to expand in the healthy sports drink, sparkling water and coffee categories.
Coming back to the ruling, both Coca-Cola and Monster Beverage have heartily accepted the decision of the tribunal and look forward to the continuation of their partnership deal. Shares of both the companies responded positively to the news. Coca-Cola stock was up 1.3% yesterday, while Monster Beverage gained about 1.5%.
Year to date, Coca-Cola has improved 9%, while Monster Beverage has surged 31.6%. In the same time period, Monster Beverage, which carries a Zacks Rank #2 (Buy), has outperformed the Zacks Investment Research
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.