Energy drinks have become an incredibly significant product category in a very short period of time. It is no secret that Coca-Cola owns a roughly 17% stake in Monster, a deal that was arranged in 2015 largely for distribution purposes. Simply put, Coke has plenty of distribution, and distribution was what Monster marketers craved. It was a perfect match.
But now Coke wants more, and plans on introducing its own namesake brand which will surely compete with Monster's products. In essence, Coke will be cannibalizing its own revenue by competing with its strategic partner, but Coke marketers stand to gain much more by keeping 100% of a new product rather than a relatively paltry fraction of what Monster sells. The math makes sense, but surely Monster can't be too happy about what is transpiring.
The deal Coke signed bars it from distributing competitive energy drinks but unfortunately for Monster, it excludes anything marketed under the Coke brand. Coke transferred ownership of its Full Throttle and NOS brands to Monster in 2015, and so perhaps marketers are remorseful about the decision and now thirsty for a larger share of the $15.3 billion category. The new product will be called Coca-Cola Energy, a rather unimaginative name, but a bit better than Full Throttle (pandering to the "extreme") or NOS (an obscure acronym). The brand extension will be all-natural, appealing to the ever-prevalent health and wellness trend, and will hopefully juice a category whose annual growth has slowed to 1.5%, suggesting that it has reached the maturity stage of the category's life cycle. Coke needs growth too. Let's see what happens.
Discussion: Coke says it values its relationship with Monster. Do you agree? Do you think that Coke's brand equity will help this new product succeed? Why or why not?
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