How does a booming company spark new growth the year after its sales nearly double and its stock skyrockets 333 percent? If you're Hansen Natural, maker of Monster Energy drinks, you start by signing a two-year endorsement deal with Ricky Carmichael, the Michael Jordan of motocross and supercross racing. Motorcycle fans are prime consumers of the sugary, caffeine-laced drinks, so it's good for business when "R.C." hoists a can of Monster on the victory stand, as he did recently in front of 70,133 cheering fans at Atlanta's Georgia Dome. Hansen executives have always supported a "Monster Army" of lesser-known extreme-sports stars, but they believe the 26-year-old R.C. is so big they plan to put his image on some Monster cans.
Giving a Carmichael a big endorsement deal is just one way Hansen hopes to build on its growth. The upstart drink in the black can with the recognizable "claw M" logo is now No. 2 in the burgeoning $3 billion energy-drink market, behind privately held Red Bull of Austria, but ahead of Rockstar, Coke's Full Throttle, Pepsi's SoBe No Fear and many also-rans. Hansen CEO Rodney Sacks wants to roll out new products that reach deeper into the key male market of 18- to 25-year-olds, while also trying to attract women and older drinkers.
It's odd that what Sacks calls the "in your face" Monster brand is an arm of a sedate southern California beverage maker that used to be better known for fruit smoothies, natural sodas and Junior Juice boxes for children. But Sacks and fellow South African-born company president Hilton Schlosberg, who together bought the company in 1992, launched a few energy offerings starting in 1997 to compete with Red Bull. Those failed to thrive, but the company regrouped and launched Monster in 2002 with testosterone-friendly branding ("Unleash the Beast") and a 16-ounce can that offered twice the volume of Red Bull for the same price.
With plenty of granular marketing at concerts and motorcycle and snowboard races, as well as a black and green Monster train on the Las Vegas monorail, sales took off. Energy drinks now account for about 75 percent of the company's revenues, which jumped to $250 million in the first nine months of 2005, from $130 million in the same period in 2004. Last year Monster drinks grew 180 percent in the key convenience-store market, according to Beverage Digest, five times the rate of the much larger Red Bull, which controls 40 percent of that market to Monster's 16 percent. The stock also jumped from $18 to $78, putting them on top of last year's Forbes list of 200 hot companies.
To build on the buzz, the company is offering many new versions. In addition to regular Green Monster, there's low-carb Monster Blue, a sweeter Monster Assault in a camouflage can aimed at teens and a Lost Energy brand targeting surfers and skateboarders. Since more than a third of energy drinks are consumed before lunch, Hansen is also rolling out Monster Khaos, made with 70 percent juice. The flavor masks the slightly medicinal flavor of energy drinks, which could lure some of the traditional coffee and orange-juice crowd. New drinks aren't the only way to grow. Monster is experimenting with can packaging, finally going small with its first 8.3-ounce can, and a 23.5-ounce "XXL" version with an industrial-style screw top.
But pitfalls remain. The energy craze could cool, and with more than a third of Hansen's available stock held by short sellers, the stock could face a steep sell-off if growth wanes. Other energy companies will likely introduce their own new drinks; privately owned Rockstar, distributed by Coke, just launched its own breakfast mix called Juiced. And the advertising budgets of the big boys could swamp Monster's niche marketing. Sacks remains positive. With a brand called Monster, you wouldn't expect anything less.