Small-Cap Success Story: Monster Beverage

Jacob Harper |

Monster Beverage (MNST) is the undisputed king of American energy drink-makers, occupying 35 percent of the of the entire industry, and coming in second only to the Thai-Austrian company Red Bull. It is somewhat surprising to think that a only 15 years ago, Monster was a natural soda company with only a dozen employees.

While some small caps-turned Wall Street darlings found success by sticking to their guns, like True Religion Jeans, Monster did the exact opposite. A long focus on making esoteric, offbeat, almost deliberately un-commercial sodas under the Hansen Natural Brand gave way to making a decidedly populist energy drink in Monster Energy.

The change in strategy and the company's subsequent success can be traced back to a South African lawyer named Rodney Sacks.

America, Meet Energy Drinks

Sacks came to the US in 1989 and went looking for investment opportunities – he didn’t have a particular industry in mind, only some investors and a desire to make a mark in American business. After some combing, Sacks settled on Hansen, a tiny Southern California soda company, which he purchased in 1992 for $14.6 million.

Hansen was formed in 1935, and more or less stayed low-key and private. Sacks and his group of investors had a different idea.  

After purchasing the company, Sacks decided he wasn’t interested in keeping things the same. During a trip to Britain, he took a keen interst in the popularity of a new energy drink called Red Bull, and decided that such a drink could be a wild success in America.  

Hansen went public in 1995, and launched the first iteration of an energy drink concoction in 1996. In 1997 they launched Hansen’s Energy at the same time Red Bull finally hit America. After Hansen Energy found some success, the company decided to considerably amp up the focus on high-octane beverages.

Hansen Energy didn’t make the dent the company had hoped for. It was citrusy and fruity, and din’t appeal to the teenagers they felt were their target market. They decided they needed something with more sugar, more caffeine. More rush.

In April 2002 the company designed the formula, and look, for a new super sweet, super buzzy energy drink.  After polling a few teenagers and consulting with a branding executive, Sacks finally settled on a name for this new teen-targeted concoction, a name that was wholly antithetical to Hansen’s easy-breezy hippie roots: Monster. And it would completely transform the company.

It’s Got What Teenagers Crave

Sacks had a vision for Monster. Through sponsorship agreements, he sought to associate the drink with extreme sports atheletes. Motocross bikers, surfers, and race car drivers were all used to define the extra-caffeinated beverage as the obvious choice of thrill-seeking outsiders. “Outsider,” of course, in the most inclusive way possible.

Sacks marketed the energy drink aggressively. Monster became famous for its “ambassadors” who would tour skateboarding competitions and concerts and hand out free samples. The company's hands-on, street-team approach proved effective in creating an image of drink as the natural preference of extreme sports tastemakers, and provided a solid base from which to reach the population at large.

After gaining a cult following in Southern California, the drink grew exponentially in popularity. Very quickly, Monster began outshining all of the company's other offerings, and their history as a producer and purveyor of natural soda was just that.  

In 2004 the company’s stock finally climbed above $1 a share. By 2006 it had jumped to over $26, and Hansen’s Natural had gained both a cult following on Wall Street, as well as the typical army of naysayers.

Break Out the Shorts

As with any meteoric rise, Hansen Natural had its doubters. Most of them pegged energy drinks, which by 2006 had grown to a $5.6 billion industry, as a fad that was poised to fold like a cheap leisure suit.  In 2005, for instance, Marketwatch columnist Herb Greenberg urged readers to bail on Hansen. Even after skyrocketing through 2006, the company retained an unusually heavy short position all the way through 2007.

Even as the energy drink market continued to become grow, Hansen bears remained unconvinced. When the stock backed off in 2008, Cannacord Adams analyst Scott van Winkle said the company would continue to drop, and eventually be gobbled up by a competitor like Coca Cola Company (KO) , since “all beverage categories are dominated by an oligopoly of drinkmakers.”

After faltering along with the rest of the market in late 2008 though, Hansen began crawling back. Eventually, the shorters started to dwindle, as it became clear that energy drinks were here to stay. The stock ascended steadily, eventually topping $70 a share in 2012.

The Monster at the End of the Small-Cap Success Story

Though the stock has fallen retreated considerably, shares are still priced at an astronomical 60,284 times more than they were at the time of the company's initial public offering.

And their success is pretty much all thanks to that maddeningly sweet big buzz in a can. In a fitting move, in January 2012 the company formerly known as Hansen Natural officially changed their name to Monster Beverage.


(image courtesy of Flickr)


DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


Symbol Name Price Change % Volume
KNCRY Konecranes OYJ ADR 4.77 0.00 0.00 0
MNST Monster Beverage Corporation 146.61 -0.88 -0.60 576,651


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