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The billionaire SA expats who created Monster Beverages

When Coca-Cola bought a 16.7% stake in California’s Monster Beverage Corp in August last year, it entrusted its energy drink portfolio to two former South Africans.

Coca-Cola effectively agreed to hand over the management of its existing portfolio of energy-drinks to Monster – including NOS, Full Throttle, Burn and Power Play – while Monster shifted its juice-based and soft-drink portfolio to Coca-Cola management.

Monster’s energy-drink products, which include more than 30 Monster variants in the US, are sold in 114 countries and territories. Last year the products enjoyed 39% of market share in the US and 16% of the global market, with $2.4-billion (about R33-billion) in sales revenue. Sales were up nearly 10% in 2014.

This was the R2.43-trillion Coca-Cola company’s second tilt at a stake in Monster, after finding the price too high in 2011.

The distribution muscle of Coca-Cola is expected to help give Monster’s drinks better traction – but not necessarily in South Africa, from where the two founders of Monster hail. Here, Red Bull, the brand co-founded by Austrian Dietrich Mateschitz, continues to lead the energy-drink market.

Monster Beverage Corp CEO and chairman, Rodney Sacks (left), and president and vice-chairman, Hilton Schlosberg, emigrated to the US in the late 1980s.

They were part of a consortium that bought a heavily indebted US drinks company called Hansen Natural Corporation in the early 1990s. The company was listed in the US in 1992.

Sacks, now 65, has been chairman and CEO since that time. He had been the youngest-ever partner at Werksmans law firm in Johannesburg and had met Schlosberg – now 62 and a UK citizen – before leaving South Africa.

Both men are estimated to be worth R24-billion each and continue to hold an estimated combined 14% of Monster, which is now valued at R384-billion.

After they entered the energy-drinks market in 1997 and introduced Monster in 2002, the brand’s success eventually led to the company – which had been founded as Hansen in 1930 – changing its name to Monster Beverage Corporation a decade later, in 2012.

Despite the long-standing dominance of the Red Bull brand in South Africa, Euromonitor International senior research analyst Ronald Mapiye said he believed the market was in flux as smaller energy-drink brands gained a foothold because consumers were under pressure.

In 2014 in South Africa, Red Bull enjoyed 24% market share, according to Euromonitor International’s data, while Power Play was second with 21% and Monster third at 9%.

However, even these brands were losing share to smaller entrants such as Score and Dragon, Mapiye said.

Mapiye said local buyers in this segment were moving away from reputation in favour of value, and while Monster’s stable had such a wide presence around the globe that it could effectively gang up on Red Bull, in South Africa the bigger brands were under threat from smaller new entrants.

“The smaller brands have seen sharp growth in volume sales. The success of these brands has been pinned to lower price points as well as incorporating independent retailers, including spaza shops, as part of their distribution channels.

“Leading brands have entrusted most of their distribution to modern channels like supermarkets and forecourt retailers, hence there hasn’t been much growth in their market share.”

Mapiye said the South African energy-drinks market had yet to reach maturity, and consequently he thought it unlikely that Sacks and Schlosberg would elect to rationalise the brands in Monster’s portfolio as they sought a wider market.

“I would instead expect Monster to launch cheaper variants of sub-brands which would appeal to the lower-income masses whose purchase decisions are driven by the deemed value of a brand, rather than quality and brand heritage.”


Related reading:

Coca-Cola’s Stake Buy Makes Monster Founders Billionaires

Rodney Sacks Success Story