Hansen Natural has created a monster.
In just three years, the maker of natural beverages has seen its Monster Energy drink become second only to Red Bull in the fast-growing business of beverages with a buzz.
"It's just resonated unbelievably well with consumers,” said Rodney Sacks, Hansen Natural’s chairman. “They feel good about the brand. They feel good about the package [and] they love the taste, which is very unique," he added.
Energy drinks grew by 74 percent in volume last year, compared to just 1 percent growth for traditional soft drinks.
More than 200 different brands are now fighting for shelf space, but Hansen’s Monster has squashed the competition thanks to an aggressive marketing campaign that includes sponsoring extreme sports events.
“The marketing we’ve put behind the brand has really given it its own personality, its own cutting edge personality,” Sacks said.
Monster has given a huge jolt to Hansen’s stock, which has tripled in the last year and doubled year to date. Scott Van Winkle, an analyst at Adams, Harkness and Hill, sees the company’s share price hitting $90 over the next 12 months. Van Winkle doesn’t own any shares and has no banking conflicts with the company.
“We’re talking about a company that’s trading at 24 times this year’s earnings, 80 percent earnings growth this year is my forecast,” Van Winkle said. “It’s a very attractive business model, and I think the earnings estimates will continue to go higher, and the momentum will carry the shares higher.”
With Monster currently in 40 percent of the nation’s supermarkets and half the nation’s convenience stores, there’s plenty of growth ahead says money manager Jim Oberweis of Oberweis Asset Management. He has ridden the stock for about two years.
“They have significant profits that they can reinvest back in the business as a laboratory for new product development,” Oberweis said. “And that, historically, has been the mark of successful growth companies.”
Monster is expected to face competition from Rockstar, another energy drink that Coke has started to distribute. But Hansen’s Sacks says bring it on.
“We think we’re up for the challenge, and we’re pretty excited for the brand going forward,” said Sacks. “We’re continuing to see strength both in our brand and in the category.”
In fact, sales of Hansen’s Monster Energy drink didn't miss a beat when Coke started selling its own buzz beverage. That’s why people who follow Hansen think the company will have no problem meeting this latest challenge from the cola giant.