- Monster Beverage Corp. stock was down nearly 3.7% on Tuesday after a hedge fund issued a short report claiming the $55 billion energy drink maker was in jeopardy of being hip checked by rising brands like Celsius, Plezi, Zoa, and Joker. Those drinks emphasize wellness, hydration, and athleticism over extreme energy, and they have social media influencer backing to go with it, according to the short seller.
Hedge fund Spruce Point Capital Management is betting against $55 billion energy drink purveyor Monster Beverage Corp. and has issued a new short-seller report claiming sports drinks that focus on athleticism and hydration are scooping market share right out from under Monster. After Spruce Point published its short report on Tuesday urging a “strong sell” opinion on the beverage maker, the stock price tumbled more than 3% to $55.
California-based Monster markets and sells energy drinks under the same brand name along with craft beers and hard seltzers like Dale’s Pale Ale, Florida Man IPA, Hard Tea, and Nasty Beast, among dozens of others. It also has its own still and sparkling water brand, Monster Tour Water. The company has continued to launch new products and flavors and in 2024 sold Bang Energy Sour Ropes and Monster Killer Brew Mean Bean. But Spruce Point claims the company is being outpositioned by drink rivals like Celsius that are seen as “wellness” beverages and have a better strategy to meet swiftly changing consumer tastes.
“The Monster product hasn’t evolved fast enough or positioned itself as a functional health product,” Spruce Point founder Ben Axler told Fortune. Monster drinks are perceived by consumers as being packed with sugar and caffeine and that they “might not be healthy for you,” said Axler.
“They’re a little bit behind the curve in terms of serving where the evolving customer needs are,” the chief investment officer told Fortune.
Monster did not immediately respond to a request for comment. Spruce Point has taken a short position in the Fortune 500 company’s stock and stands to benefit if its share price falls.
According to Axler, Monster co-CEOs Rodney Sacks and Hilton Schlosberg were early visionaries who built a “phenomenal” business, but that growth has made it even harder for the company to continue to advance. To boot, the competitive landscape for energy-and-wellness drinks has evolved dramatically over the company’s more than 30-year lifespan, said Axler.
The report notes that even convenience store chain 7-Eleven has gotten into the energy drink game, with its private label brand Fusion. Philadelphia metro area mainstay Wawa now offers customers their own “customized” energy drinks.
“There are only so many locations to sell… and only so much shelf space,” said Axler. He said he personally sees Celsius at checkout lines in grocery stores, vying for attention for consumers who previously might have only seen Monster.
“It’s a land grab,” said Axler.
According to Spruce Point’s report, Monster’s foundation started eroding last year with the launch of new competitors and upstart brands like Prime Energy that were able to “come in and kind of steal the noise” with retailers, the report states. Spruce Point claims Monster’s core energy brand is squeezed in a high-pressure competitive environment in which celebrity endorsements and athletes with starpower can quickly launch products to their millions of social media followers and immediately gain traction. In addition, the marketing of some of the new beverages is more focused on health concerns over pure unadulterated extreme energy.
Recent partnerships and brand launches that jeopardize Monster’s position include Celsius, which acquired Kim Kardashian partner Alani Nu; Mas+ by soccer megastar Lionel Messi; and Plezi, co-founded by former First Lady Michelle Obama. Plezi counts NBA star Steph Curry as a partner.
Monster is also facing new competition from alcohol brands, said Axler. As Gen Z and younger demographics continue to show that they are “sober curious” and therefore less inclined to drink wine and beer, companies like Anheuser-Busch and Molson Coors are turning to energy drinks as a new growth angle, said Axler.
AB-InBev’s Anheuser-Busch announced a partnership with Ultimate Fighting Championship CEO Dana White to launch energy drinks under the Phorm Energy brand, Spruce Point wrote. And Molson Coors took an ownership stake last year in Zoa, an energy drink marketed as “better-for-you” and co-founded by Dwayne “The Rock” Johnson. Denver Nuggets center Nikola Jokić launched a self-branded drink, Joker, on April Fool’s Day.
Management quality is also an issue, according to the Spruce Point report. Axler noted that Sacks, 75, alerted the Monster board that he would resign in June to make way for Schlosberg as the sole CEO, but that investors are likely to want to hear the company’s full succession plan for the CEO position.
“They need to stimulate growth,” said Axler. “But, ultimately, I think there will need to be more of a change.”
This story was originally featured on Fortune.com
