Monster Beverage mulls teaming up with Constellation Brands to unlock new revenue opportunities

USA – Energy drinks maker Monster Beverage Corp is reported to be exploring a potential deal with international beverage alcohol company Constellation Brands Inc, according to a report by Bloomberg.  

The structure of a potential deal involving the companies, which have a combined market value of nearly US$92 billion, was not immediately known and it remains unclear if discussions will lead to a full merger or asset deal.  

If the two companies decide to merge, it would create a beverage juggernaut with a combined market value of close to US$100 billion. 

The new company would have a dominant portfolio with brands like Modelo, Corona, and Monster Energy.   

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A complicating factor that could make a partnership more likely than a merger is that Monster has close ties to Coca-Cola – which recently agreed to buy the remaining stake in BodyArmor it did not already own for US$5.6 billion. 

The Atlanta-based beverage giant purchased a 16.7% stake in Monster in 2015 and agreed to distribute its energy drinks in the U.S. and Canada.

Coca-Cola, with its global reach, could be a valuable partner for Monster to expand to other international markets. 

The beverage sector as a whole has seen ongoing blurring between nonalcohol companies and their alcohol counterparts.  

Coca-Cola and Molson Coors first teamed up in 2020 to create Topo Chico Hard Seltzer, which hit U.S. shelves earlier this year in nine states.  Molson Coors now plans to roll out the beverage nationwide in 2022.  

And earlier this summer, PepsiCo and Sam Adams maker Boston Beer debuted plans to launch a hard offering under the Mtn Dew brand expected to reach shelves early next year. 

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Morgan Stanley analyst Dara Mohsenian said in a note on Seeking Alpha that some type of combination between Constellation and Monster would make sense given that beverage companies are looking to gain incremental revenue opportunities. 

Hard seltzer could be one possibility as it still remains a lucrative category and one where Monster could potentially find success given its brand recognition. 

Mohsenian was of the opinion that Monster providing its brand name, and Constellation energy potentially producing, as well as distributing the brand through its system would be one way that the two companies could launch into hard seltzer. 

Monster Beverage did not immediately respond to a request for comment while  Constellation Brands told journalists it does not respond to rumors or speculation.

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