Monster stock slips after investigation disclosure
NEW YORK (AP) — Shares of Monster Beverage Corp. continued to slide Friday after the country's biggest energy drink maker disclosed that it was being investigated for its advertising practices.
The Corona, Calif.-based company said in a filing with the U.S. Securities and Exchange Commission Thursday that it received a subpoena last month from an unidentified state attorney general's office concerning the advertising and ingredients of its energy drinks, which have skyrocketed in popularity in recent years.
The disclosure comes at a time when scrutiny of the industry is intensifying.
Energy drinks remain a tiny part of the carbonated soft drinks market, representing just 3.3 percent of sales volume, according to the industry tracker Beverage Digest. But while soda consumption has flagged in recent years, energy drinks have grown by leaps and bounds.
Last year, sales volume for energy drinks rose by nearly 17 percent, with the top three companies — Monster, Red Bull and Rockstar — each logging double-digit gains, according to Beverage Digest. The drinks are often marketed at sporting events popular among younger consumers, such as surfing, skateboarding and snowboarding.
The levels of caffeine and other stimulants in the drinks have prompted concerns. Although the FDA caps the amount of caffeine in soda to 0.02 percent, there is no such limit for energy drinks.
In April, Sen. Dick Durbin, D-Ill., called on the federal Food and Drug Administration to investigate the industry, noting that the high levels of caffeine and stimulating additives in the drinks could be dangerous for younger consumers. The letter came after a 14-year-old Maryland girl died of a cardiac arrhythmia after drinking two 24-ounce cans of Monster energy drinks in a short time.
A month later, the FDA sent a letter to RockStar that its Coffee & Energy drinks contain Ginkgo biloba, an unapproved food additive. The agency noted that RockStar marketed the drinks as conventional beverages, even though they're labeled as dietary supplements.
In its regulatory filing Thursday, Monster provided few details about the investigation, saying only that it was in the early stages. The company said it did not know whether any action would be taken or whether its business could be significantly impacted.
In a note to investors, Stifel analyst Mark Astrachan said that his understanding was that Monster was not alone in the receiving the subpoena in July, suggesting other energy drink companies may be involved as well.
A representative for Red Bull, the country's second biggest energy drink maker, said the company does not comment on legal matters. A representative for RockStar, the third largest energy drink maker, could not be reached. A representative for Monster declined to comment beyond what was disclosed in the filing.
Last year, Monster had a 35 percent share of the energy-drink market, while Red Bull had 30 percent and RockStar had 19 percent.
In the past two years, Monster's shares have more than tripled, from about $22 and hit a high of about $78 in June. On Friday, the shares were down 8 percent at $56.09.