Monster Energy Is Paying $362 Million to Acquire This Key Competitor to Celsius Holdings
Celsius Holdings, known for its calorie-burning energy drinks, has often been dubbed a “baby Monster” in reference to its rival, Monster Beverage. However, with Celsius experiencing significant growth and stock appreciation, Monster is taking notice. In a reactionary move, Monster has announced its acquisition of Vital Pharmaceuticals, the maker of Bang energy drinks. While some may question the importance of Bang, there are compelling reasons why this acquisition could be significant for Monster. Let’s delve into the details.
Celsius’s Rapid Growth and the PepsiCo Partnership
Celsius has demonstrated remarkable growth, with its stock surging over 3,000% in the past five years. This growth has been accompanied by a staggering 1,500% increase in revenue, indicating its strong appeal among consumers. In August 2022, Celsius entered into a long-term partnership with PepsiCo, injecting $550 million in cash and providing access to Pepsi’s extensive distribution network. This collaboration has accelerated Celsius’s growth trajectory, with the partnership offering both distribution opportunities and increased production capabilities.
Bang’s Untapped Potential
Bang energy drinks once enjoyed a Celsius-like growth trajectory. In early 2020, Bang held almost 10% of the U.S. energy drink market share, making it the third-largest player behind Red Bull and Monster. Bang’s fortunes changed when it shifted from its distribution network to that of Pepsi in April 2020, only to sever ties with Pepsi in October of the same year. This rapid switch caused disruption and financial strain, ultimately leading to Bang filing for bankruptcy protection in October 2022. However, had the relationship with Pepsi remained intact, Bang could have continued its growth trajectory.
Monster’s Interest in Bang
Both Celsius and Bang target the fitness-oriented consumer segment within the energy drink market. With Celsius’s remarkable success, Monster seeks to capitalize on this market segment by acquiring Bang, potentially becoming Celsius’s biggest rival. Celsius shareholders need not be concerned, as the partnership with Pepsi still offers substantial growth opportunities. However, Monster shareholders have reasons to be optimistic about the acquisition of Bang. Monster boasts an extensive range of energy drink brands, alcoholic beverages, and sparkling water. Adding Bang to its portfolio allows Monster to tap into a specific niche within the energy drink market.
The Value of the Bang Acquisition
Monster’s acquisition of Bang presents an exciting opportunity for the company. In addition to gaining access to a high-growth brand, Monster is acquiring Bang’s production facility. Reports indicate that Bang generated approximately $1.4 billion in revenue in 2021, with a slight decline in sales of around 30%. Nonetheless, this places Bang’s sales at approximately $1 billion, making the acquisition a bargain deal for Monster. Acquiring a promising brand at less than 0.5 times its sales creates significant potential value for Monster and its shareholders.
Monster’s decision to acquire Bang Energy reflects its strategic move to secure a position in the fitness-oriented segment of the energy drink market, where Celsius has achieved remarkable success. While Celsius’s shareholders have a promising growth trajectory with the support of Pepsi’s distribution network, Monster’s acquisition of Bang presents an opportunity to tap into a growing market niche. With Bang’s impressive sales figures and production facility included in the deal, Monster stands to create substantial value for its shareholders. The energy drink market is set for an intriguing competition as these industry giants make strategic moves to stay ahead.
