Health concerns drag on Monster Beverage sales

FMCG SUPPLIER NEWS

Reuters - May 29th, 07:43

(Reuters) - Energy drinks maker Monster Beverage Corp's (MNST.O) sales missed analysts' estimates as the industry took a hit from concerns over the health risks of such drinks, sending its shares down 16 percent after the bell. 

Energy drinks have come under review for their caffeine levels, which opponents argue, could lead to serious cardiac and other health problems. The U.S. FDA is investigating reports of five deaths that may be associated with Monster's energy drink.

"The softness in the energy drinks market ... continued through the first quarter of 2013, we believe partially due to the ongoing negative publicity that continues to appear in the media questioning the safety of energy drinks," Chief Executive Rodney Sacks said on a conference call with analysts.

Sales at Monster, which has posted double-digit quarterly sales growth over the past two years, rose 7 percent to $484.2 million in the first quarter.

Analysts on average were expecting sales of $501.7 million, according to Thomson Reuters I/B/E/S.

Monster reported a 17 percent fall in quarterly profit due to higher operating expenses and costs related to distributor terminations and foreign currency transactions.

Profit fell to $63.5 million, or 37 cents per share, in the first-quarter, from $76.1 million, or 41 cents per share, a year earlier.

The company's Monster Energy brand energy drinks contributed more than 92 percent to net sales in 2012.

Operating expenses at the company, formerly known as Hansen Natural, jumped 26 percent to $144.7 million.

Monster said it incurred costs of $8.3 million related to the termination of certain distributors, and foreign currency transaction losses of $4.7 million primarily related to its operations in Japan and South Africa.

"We did experience cost increases in certain raw materials in the first quarter of 2013 and expect to continue to experience limited increases during the remainder of the year," Sacks said.

Monster incurred $3.0 million in legal and other costs related to regulatory matters and litigation concerning Monster Energy brand energy drinks.

Last month, the company sued San Francisco's city attorney accusing the city of violating its constitutional rights by demanding that it reformulate its drinks and change its product labels and marketing materials.

A week later San Francisco City Attorney Dennis Herrera sued Monster for violating California law with its marketing of highly caffeinated energy drinks to children.

Shares of the Corona, California-based company closed at $57.15 on Wednesday on the Nasdaq.