A small company has created a monster in the pumped-up market for energy drinks. Hansen Natural, once an obscure seller of fruit juices...
CORONA, Calif. — A small company has created a monster in the pumped-up market for energy drinks.
Hansen Natural, once an obscure seller of fruit juices and sodas, is growing at a furious pace thanks to its Monster Energy line of beverages. It has been a welcome jolt for Hansen’s investors and spawned multimillion-dollar stock gains for its top two executives.
Monster has become the second-best selling energy drink behind industry leader Red Bull, which is battling with several new rivals that hope to capture the market’s surging sales.
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Industrywide, U.S. sales of the caffeine-laced drinks are expected to climb to nearly $3 billion this year from $2 billion in 2004, and should grow at least 50 percent annually for the next two years, predicted John Sicher, editor and publisher of Beverage Digest.
One reason: Consumers love the instant gratification of an energy boost, and “that is a growing component of the popularity of energy drinks,” Sicher said.
Hansen is growing even faster than the industry. The company said its sales for the first nine months of 2005 nearly doubled from a year ago, to $251 million from $130 million. Nine-month profit more than tripled, to $44 million, or $1.84 a share, from $13 million.
All of this is attracting notice even though Hansen is smaller than privately held Red Bull of Austria, which had 2004 sales of nearly $2 billion.
When Forbes magazine published its annual list of the 200 best small companies last month, Hansen was No. 1. This month, Citigroup analyst Gregory Badishkanian joined the few analysts who follow Hansen, with an initial “buy” rating on the stock.
But Hansen’s skeptics also are paying close attention. An unusually large amount of Hansen’s stock has been targeted by short sellers who hope to profit from a falling stock.
The short-selling is a big bet that energy drinks are another fad, Hansen’s growth will slow as competition heats up and its stock price will tumble.
New energy-drink rivals include such giants as Coca-Cola, which is distributing Rockstar and Full Throttle, and PepsiCo, which sells SoBe No Fear and SoBe Adrenalin Rush.
Although some analysts and Hansen executives acknowledge that sales growth for energy drinks undoubtedly will slow, they still predict double-digit annual gains in coming years — enabling Hansen to keep growing as well.
Hansen Chairman and Chief Executive Rodney Sacks said he’s not concerned by the short selling in the stock and rejected the notion that energy drinks in general, and Monster in particular, are merely a fad.
He noted Red Bull continues selling well eight years after hitting the U.S. market. Energy drinks also should keep enjoying strong demand because their appeal is spreading to different consumers, Sacks said.
The drinks initially were bought mostly by men age 18 to 30, especially at night, when they also are used as cocktail mixers, he said. But that age group has widened to 13-50, he said, and women now account for one-third of Monster’s customers.
The Monster line has benefited from Hansen’s ability to secure widespread distribution and the product’s savvy marketing campaign, analysts said.
The company’s sponsorship of “extreme” sports such as skateboarding and motocross also helped.
Monster is sold in black cans with neon-green claw marks on the side. Hansen describes the mixture as “the meanest energy supplement on the planet.”
Hansen also sells such wholesome drinks as apple juice, fruit smoothies and “natural” sodas.
The company dates to 1935, when Hubert Hansen started a juice business in Los Angeles. After a trip through bankruptcy in the late 1980s, it was sold in 1992 to two South African businessmen — Sacks and Hilton Schlosberg, Hansen’s vice chairman and chief financial officer — for $14.6 million.
They targeted the energy-drink market after Red Bull rapidly expanded in Europe and plunged into the U.S. market.
Red Bull, which made company founder Dietrich Mateschitz a billionaire, is sold in 130 countries, and the company said it has no fear of Monster and the other new entrants. Their arrival “really just validates the category,” said Red Bull spokeswoman Patrice Radden.