Monster Energy - Switching Industries

[Music] you know one of the cool things about having a YouTube channel like this is every so often I get to pretend I'm on Who Wants to Be a Millionaire by asking the audience something and I did just that when I took a poll a few months ago asking which was your favorite energy drink after 43,000 votes it turns out about half of you don't like them at all but of the half that does like them the winner was monster no I should disclose that most of my audience is American and I imagine Red Bull would've won had it been a more global poll but still America is a pretty big market so I'd say Monster is doing pretty well monster has recently become the number one energy drink in the US and is gaining some ground overseas it's sold in 143 countries around the world according to markets Insider it's the best performing US stock of this century they own and operate more energy drink brands than I would have thought here's a list of them all owned by Monster some of them use the company's traditional branding some use a variation of it some are completely different we all know these signature cans with that green logo printed over the black background it promotes sort of a hardcore dark and edgy image which you may be surprised to learn is completely different from how this company started they didn't start by selling energy drinks either they started long before energy drinks even existed the origins date back to 1935 hubert hansen started a family business called Hansen's fruit and vegetable juices we can already see this is already completely different as the name suggests it portrayed a very healthy image through their sales of fruit and vegetable juices they were based in Los Angeles and actually in the beginning most of their business came from film studios now going forward to the 1970s Tim Hansen one of Hubert's grandsons formed his own similar company that would focus on all-natural sodas for the next 30 years or so these natural sodas were probably the thing that most people would associate with this company that is if you knew the company at all odds are if you weren't from Southern California you didn't know them but they did grow fairly large an estimated 50 million dollars in sales in the middie but by the late 80s they had overextended themselves evidenced by the fact that they couldn't generate enough money to pay for their newly bought factory they ended up filing for bankruptcy businesses were consolidated and ownership was transferred a few times it all led to a man named Rodney sax buying the struggling company for 14.5 million dollars in 1992 right away he became the new CEO and still holds that position today looking back at this company during the years following the acquisition in the new leadership I wouldn't exactly call them innovative they weren't the ones who set the trends there were more than ones who followed the trends an example of this was in 1993 when they introduced their first ready to drink iced tea and lemonade in general these drinks were exploding in popularity at the time Snapple had already been selling this type of drink for the past six years and since they were part of the market from such an early stage they were not one of the leaders of it I think it's safe to say Hanson saw the success of Snapple and the growth of the market in general so they finally decided to start offering some iced teas I'm not saying there's anything wrong with that they identified potential in a market and tried to take advantage of it but they most definitely did not create that market then the same sort of thing continued happening through the rest of the 90s the way I see it anyway they would figure out which markets were on the rise and then do their best to squeeze their way into them in 1993 they also introduced their first line of bottled water in 1995 it was fruit juice smoothies and in 1997 it was energy drinks that's obviously the one that's more applicable here I need you to realize despite its long history this was still a pretty small company in 1997 it was on the stock exchange but it was the Nasdaq small cap market there were only about nine million shares outstanding each worth a couple of dollars they had 856 total shareholders and here's their sales numbers from 1992 through 1997 clearly growing at a healthy rate more than doubling over this range but obviously if it's going to hit monster status get it monster steady it has to start growing faster now I've made an entire video about how Red Bull got so big and if you watch it you'll realize when it comes to energy drinks they're the pioneer they practically invented the concept and because of that you can make the argue that any competitor has taken some influence from them but in Hansen's case it really looks like they took a lot of influence I found this statement in their 1996 annual report it says management plans to introduce a lightly carbonated energy drink in an 8 ounce slim can early in 1997 similar drinks have become popular in Europe and management believes that there are good prospects that these types of drinks can become popular in the United States as well let me break down that statement the obvious part that stands out to us is when it says a lightly carbonated energy drink in an 8 ounce slim can if you repeat that sentence to someone and ask them what brand comes to their mind I have to think that almost anyone would say redbull they're known for their 8.4 ounce and the other part is when it says that they're popular in Europe and can be in the US as well in 1996 redbull was dominating the European energy drink market a market that they created by the way so it's obvious that that part is referring to redbull - to me this statement essentially says redbull has been doing well over in Europe so we're going to try to copy them and see if we can't capture some of that US market before they find their way over here redbull and Hansen both ended up introducing their drinks in the United States in 1997 redbull was in their signature 8.4 ounce can and Hansen was in a very similar 8.2 ounce can which later became an 8 point 3 ounce can really how much closer can you get they did look different though redbull was the clear winner here I don't think I have to prove that but this was all beneficial for Hansen we see that they did start increasing their sales at a much faster rate in their annual report they state that this increase was due to their energy drinks from 1997 through 2002 their sales continued rising every year the energy drinks were a big part of it they introduced a few other products they even acquired a couple smaller businesses in the year 2000 they bought blue sky which was a soda business and the next year they bought jr. Jews who made juices targeted toward children but all of this is minor compared to what happened in 2002 I think you know where I'm going here that's when they introduced monster again this is all for my perception but most of the success that Hansen experienced to this point was built from the ideas of others Snapple and Red Bull but monster was a different story this was one of their most original ideas to date and I don't think it's a coincidence that it was their most successful I'm talking about the size of the can I know I'm obsessed with the can size today but it's important almost every competitor at the time was following Red Bulls lead with the near 8 ounce can uncharacteristically Hansen went out on a limb by offering their drink in a 16-ounce can which is almost double and when you combine that with the cans unique edgy design that's a recipe for success I've actually come to learn that the design of these cans is ridiculously important in this sort of thing I think the lesson here is obvious in business and life and anything you do you'll probably get by if you simply jump on the bandwagon and follow the trend but if you want to make it big you have to be different yeah it's a bigger risk but potentially a bigger reward I can almost guarantee you and I think you'll agree that the original copycat energy drink would have never passed Red Bull or even come close but now with monstered we can see what's happened they introduced it in April of 2002 so we'd have to look at their sales through 2003 to see their first full year effect and as we suspected 2003 marks their highest one year percentage increase over this range bringing their total sales over the 100 million dollar mark for the first time ever and they say it's primarily attributable to sales of Monster energy drink in fact the vast majority of their success to this point could be attributed to Monster I thought this was a pretty cool chart if you had invested $100 in this company in 2002 the year they introduced monster by 2007 you would have well over 8,000 I don't think I need to tell the investors watching this at this kind of return in a span of five years is pretty respectable let's just expand this revenue chart all the way through 2018 to properly show how much things have taken off since monster was introduced 98 million the year it was introduced to 3.8 billion in 2018 that's almost 40 times higher over a 16 year span plus of that 3.8 billion in sales 3.5 billion of it was a beautiful two monster branded products it's effectively become their whole business in 2012 they changed their name from Hansen natural corporation to monster beverage corporation to reflect that and I should mention this a big contributor to their growth is the fact that they've been working closely with coca-cola over the last decade as far as distribution and in 2014 they made a huge deal with them there's a lot of parts to it but here's the highlights it gave coca-cola 17% ownership of Monster in return for two point one five billion dollars and 100 percent ownership of all of monster's non energy drink products that includes all their natural sodas and juices we talked about before in addition to other brands I've introduced and acquired since monster received all of the energy drink brands owned by coca-cola which includes full throttle I'd say the takeaways from this is for Coke it gave them a much more respectable presence in the energy drink industry and for Monster it gave them a much stronger relationship with a much needed distributor especially since they've been pushing to get their drink in other countries let me know in the comments what do you think about Monster specifically compared to redbull do you agree with the results of this poll they seem to be fairly neck-and-neck in the u.s. monster with a little leader but then Red Bull is dominating almost everywhere else which I would expect I just think it's cool how Red Bull is a perfect story of a company creating an industry and then Monster is the perfect story of tweaking that creation and finding their own way in the industry even though their direct competitors I don't think either one of them would be nearly as big without each other so which you think will come out on top or do you think they'll continue as they are maybe a third unexpected competitor will take over Rockstar I'd like to hear what you have to say Monster Energy put it in your body and ask questions later it's green so its nature now I don't know if what Stewie says is completely true so be careful with this stuff just thought I should say that and I should also say thank you for watching [Music]

Channel: Company Man

Views: 732,140

Rating: 4.9307041 out of 5

Keywords: Monster, Monster Energy, Red Bull, Business, Hansen's, Energy Drink

Id: 4DOM7nG0W7U

Length: 11min 1sec (661 seconds)

Published: Wed May 29 2019

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