International growth opportunities
Beverage companies such as Coca-Cola (KO), PepsiCo (PEP), and Monster Beverage (MNST) are focusing on international markets to capture the increasing demand for their beverages. Austria-based Red Bull GMBH—Monster Beverage’s key rival—sells its products in ~167 countries.
A growing population, a rising standard of living, and urbanization are stimulating this growth in developing countries. The SPDR S&P 500 ETF (SPY) has 1.79% holdings in Coca-Cola, PepsiCo, and Monster Beverage, collectively.
Monster Beverage’s international sales
In 2014, Monster Beverage derived 78.3% of its net sales from the US and 21.7% from its international operations. This compares to 20.8% of international net sales in 2013. Monster Beverage’s international sales increased by 14.3% to $534.2 million in 2014, compared to last year’s net sales.
Monster Beverage is gaining momentum in Europe, specifically in Great Britain, Germany, The Netherlands, and Greece. The company is also seeing improvement in its Western European and Africa divisions with the help of better distribution levels and in-store execution.
International gross sales in 4Q14 increased by 16.1% to $160.1 million, driven by higher sales in Europe, the Middle East, and Africa. Net sales in the Asia-Pacific region grew by 11.1% in 4Q14, compared to 4Q13. However, sales in South America declined by 17.1% due to foreign exchange fluctuations, price adjustment in Chile to offset an indirect tax, and issues with the company’s Colombian distributor.
Rivals Coca-Cola and PepsiCo derive around 50% of their revenues from international operations. Dr Pepper Snapple (DPS), on the other hand, is more of a domestic player.
Monster Beverage is further expanding in Japan, Germany, Great Britain, Greece, the Netherlands, and Chile. The company continues to establish local production in certain international markets so as to improve margins, reduce damages, and mitigate the impact of currency fluctuations. Plus, the company plans to produce Monster Beverage in India very soon. The Consumer Staples Select Sector SPDR Fund (XLP) has a 1.27% exposure to Monster Beverage.
Monster Beverage also expects to benefit heavily from its deal with Coca-Cola, which should provide access to more international markets through an extensive distribution network.