Monster Riding Category Resurgence; Still Seeks Co to Acquire; Eyes Far East, Eastern Europe Pushes    Outlook update offered Tues eve by Hansen Natural brass offered lotsa little nuggets on Monster Energy direction, here and overseas, even as co reassured analysts that brand continues to outgrow category that itself is seeing rebound in recent mos.  On presentation Webcast from NY, chmn/ceo Rodney Sacks made case that splitting Monster distribution between Coca-Cola and Anheuser-Busch is lookin’ like smart strategy, even while offering a few examples where scrappy little distributor got better results than big KO or BUD house.  He also demonstrated that, despite moves into more-mainstream activities like MotoGP (Grand Prix), brand by no means is abandoning grass roots activities that have conferred brand’s greatest credibility.  And questioned about possibility of paying dividend, Sacks said co prefers to keep funds available to do acquisition, tho so far no candidates have surfaced whose potential outweighs risk of loss of focus on Monster brand.  Topic hadn’t arisen for some time, but Rodney’s response seemed to assure analysts he has no intention of riding off on misguided adventure.  “We take some comfort in the fact that HANS has thus far been disciplined about investing money behind their highest-return opportunity: Monster,” wrote Goldman Sachs’ Judy Hong.  Highlights:

Category – and Core Brand – Both on Upswing in Fall    After ominous lull that saw c-store sales edge up mere 1% in Sep and Oct, per Nielsen data, category growth accelerated to 3.3% in Nov.  Ditto grocery sales: up 2.1%, 2.6%, 4.4% for 3 periods.  But rising tide isn’t lifting all boats:  Sacks dismissed most Coke and Pepsi portfolio energy lines as subsiding to single-digit share, with once-potent #3 Rockstar flat for better part of 5 years.  Exception is Coke’s still-growing NOS, but Rodney pegs that as niche item whose share will taper off at hi single digits, too.  So it’s “2-horse race” between Monster’s broad portfolio and Red Bull’s narrower range of sku’s.  Sacks also pointed to reassuring metric that’s not true of many rivals: core full-calorie sku – so-called Monster Green – continues to grow, not just line and size extensions.  Green rose 3.6% in latest 13 weeks, outrunning category’s 1.6% growth.

Happy to Split Market Between Bud and Coke    As tie to Coke approaches first anniversary, relationship is “continuing to improve . . . looking back we think it has been the right decision” despite initial softness in some markets.   After taking “small hit,” Atlanta, Fla now are ahead of pre-transition position.  That hasn’t happened in Tex yet, where “outstanding” execution of Dr Pepper Snapple org, which yielded share in hi 40s, has proved “very hard act for Coke to follow.”  Shift from DPS network to Anheuser-Busch network similarly cost a few points of share in Mich; in Ohio, segue to Bud houses has gone well except in 1 market where Bud house’s struggles to get hang of NAs have caused dropoff from efforts of small distributor.  All told, tho, Rodney claims to be happy with unusual move to split brand between 2 major networks rather than tying fate to single partner.  “No plans to change anything in that regard,” he declared.

Overseas: Delay in Brazil; Eastern Europe, Far East May Get Push     Monster is raising sights overseas, where it has access to Coke bottlers but is free to pursue best option in any particular market.  Brazil got off to slow start when customs held up some ingredients, but production has been established there and country will serve as platform for forays elsewhere in Latin America later in 2010.  In that market, Monster went with small indie house “that understands how to scrap and fight at the small-store level.”  Tho UK has proved tuff market, Monster/CCE secured key win in Sep when JD Wetherspoon national pub chain dropped Red Bull for Monster.  (In sign of segment’s guerrilla warfare, Rodney described how co interdicted Red Bull email outlining scheme to disrupt transition by having field marketing staffers smuggle Red Bull into pubs to protest substitution by Monster.  Scheme drew media coverage, with Wetherspoon rep chastising Red Bull for “stooping to wide-boy tactics.”)  On Continent, France, Belgium have been solid but Netherlands has suffered from CCE’s inability to reach individual stores.  In Sweden, small distributor has vaulted Monster to position ahead of Coke’s own energy brands.  Monster now is eyeing entry into Central and Eastern Europe.

Next hemisphere over, Australia has enjoyed solid launch via production/distribution partner Schweppes, which picked up Monster after losing Red Bull.  Hansen may turn next to Far East, still largely dominated by “traditional” energy players, where Red Bull hasn’t made much of a dent, per Rodney.  (As reported, Monster is believed to be talking to Asahi about alliance, but no deal inked yet that we’ve heard.  BBI, Nov 6.)

Marketing: Growing Monster ‘Army,’ Expanding Epicenter Music Event   Co continues to seed grass roots, looking to lure influential youth who can drive interest in their local market.  Case in point: Monster Army, amateur athletes who’re plied with equipment, shirts, stickers, as way to motivate their peers to consume Monster.   So far, 200,000+ applications have come in, and thousands of kids enlisted, in keeping with brand premise of being inclusive rather than exclusive, Rodney said.  Brand promos generally offer intangible prizes, such as chances to hang with athletes, rather than items that people can buy elsewhere.  Brand continues with strategy of endorsing individual athletes, not teams, knowing their accomplishments – say, haul of 15 gold medals at Summer X Games and 4 at Winter X Games – will yield credible viewership online and on TV.  While brand has been sponsor of Vans Warped Tour, its self-developed Epicenter music event in Southern Calif was successful enuf to merit expansion in 2010.  Web site has been revamped for greater interactivity.  Asked about cause-embracing activities that have become broad bev fad, Sacks nixed as “not relevant to our consumers” given Monster’s “aggressive, in-your-face” image.  Co only enacts those on natural-bev side where they’re better fit.

Trying to Gain On-Premise ‘1 Account at Time’   Sacks implicitly acknowledged that dislodging Red Bull from on-premise has been arduous, speaking of making progress “1 account at a time.”  Key win: multiyear contract at Las Vegas branch of Hard Rock Hotel, making Monster official brand in club, rooms, casino.  

Production Shifts to CCE in Canada; No Sweeping Cutover Planned Soon   Touching on thorny issue in copacking community, Sacks confirmed that some production in Canada has shifted to CCE operations.  There are plans to look at further such production shifts, but “not in the immediate future.”  Similar transition to CCE production is under way in UK.

Import Grabs Momentum; Shots Uncertain   Holland-produced Monster Import is off to brisk start, hitting #23 among energy sku’s despite having attained only 37% ACV so far.  That will be line-extended with lower-carb version in 2010.  Hot-fill Peace Tea line offers Coke network a value alternative to AriZona and Lipton in 23-oz cans prepriced at 99 cents.  Once it’s established, Sacks assured Wall St listeners, line will be extended into other packs offering better margins.  As for shots, Rodney insisted that, even at reduced $1.99 price point, Monster Hitman is profitable, tho co plans to attack tuff-to-crack but slowing category “from a number of angles.”  He took solace from fact that only Monster and Red Bull have made any headway vs category-defining 5 Hour Energy and reminded listeners he’s challenging 5 Hour’s claims.

Natural Biz Edging into Some DSD    Vice chmn Hilton Schlosberg made case that warehouse-delivered side – meaning natural sodas and other legacy brands from time he and Sacks bought co in early 90s – remains viable part of biz, even at less than 10% of sales.  Unit has been expanding some lines, intro’ing others, in process edging into DSD.  Upsized Hansen’s soda line, going from 12-oz can to 16-oz, has been going DSD on West Coast to work c-store accounts, with other regions targeted.  On innovation side, Hilton pointed to Blue Sky as among brands offering unusually palatable stevia-sweetened bevs, as well as pending launch of fruit and tea powder sticks, all-natural items “without the nasties” of segment leader Crystal Light.