Brief thoughts on Monster Beverage, one of the most successful stocks of all time, which has rewarded shareholders with a 61,738% return since going public in 1985, or 20.2% CAGR.

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Monster Beverage is a leader in the energy drink subsegment of the beverage industry. The Monster trademark trademark is the product portfolio’s anchor. They’re mostly a brand owner (like XPEL), outsourcing most of the manufacturing process to third-party copackers.

Monster mostly uses the Coca-Cola bottling system for distribution after Coca-Cola became Monster’s largest shareholder in 2015, which included the exchange of businesses between the 2 firms.

Despite starting up the US energy drink market over 2 decades ago, Monster keeps on innovating, seen by the launch of the Reign brand recently. Also, their positioning is the best in the market thanks to the partnership with Coca-Cola.

Coke's competitive advantage is with regards to distribution, merchandising and retailer negotiation allows them to be the top drink in the world & Monster benefits from this distribution. The partnership also allows Monster to

sell and deliver drinks to retailers, negotiate shelf space and store positioning and provide marketing support.

Branding is quite important for energy drinks since private-label penetration is quite low and below 1% in the US, meaning a Costco couldn’t manufacture their own

drink and undercut Monster on margins. The Monster trademark is like Coke in colas or Gatorade in sports drinks.

Monster markets its products by advertising at various car shows, concerts and extreme sporting events around the world. They’ve also started

sponsoring various gaming titles and players, which has been successful. Studies have shown that frequent energy drink drinkers are more likely to spend a lot of time playing video games.

There’s also a bit of a regulatory advantage, because new companies have to develop new ingredient compositions that go through intense inspection from regulators vs a new soda for example, because there’s more caffeine and other harmful ingredients in energy drinks.

Monster being a marketing company has made their ‘’IP’’ valuable. The brand’s popularity with consumers has increased over time and so loyal clients don’t look at competitors’ brands nicely. And energy drinks are like cigarettes, habits developed in younger years tend to persist

– young folks consuming energy drinks today will continue till they’re older.

So the main competitive advantage is a Partnership as a Moat (PaaM), since the agreement with Coca-Cola has allowed Monster to be integrated into the greatest beverage distribution system in the world, allowing availability around the world with minimal capital investment.