plans to launch Coke-branded energy drinks, returning to a growing category that would put the beverage giant in competition with partner
Coke’s plans became public on Wednesday when Monster executives disclosed that Coke had filed an arbitration claim to resolve a dispute over whether a proposed product called Coca-Cola Energy would violate a deal the companies struck in 2015.
As part of that deal, Coke bought a 16.7% stake in Monster and agreed to distribute the company’s products in the U.S. and Canada, later expanding the agreement to include distribution in other markets overseas. Coke also transferred ownership of its energy drinks business, including NOS and Full Throttle, to Monster.
The deal bars the soda giant from distributing competitive energy drinks but includes an exception for products marketed under the Coca-Cola brand.
“Coca-Cola has developed two energy products it believes it may market under an exception relating to the Coca-Cola brand. We believe that the exception does not apply,” Monster Chief Executive Rodney Sacks said on a conference call with analysts Wednesday after market close. Mr. Sacks said Coke had committed not to launch the new energy drink before April.
“We’ve agreed to go to arbitration civilly and determine what course of action is appropriate,” Monster Chief Financial Officer Hilton Schlosberg said on the same call.
Coca-Cola Energy and a diet version called Coca-Cola Energy No Sugar would contain caffeine from naturally derived sources and guarana extract. They were developed as an option for people who want natural ingredients in an energy drink, a Coke spokeswoman said.
Coca-Cola CEO James Quincey has been pushing to broaden the company’s beverage portfolio as consumers turn away from sugary soda toward drinks with less sugar and more natural ingredients. Energy drinks are expected to generate $15.3 billion in sales in the U.S. this year, though the annual growth of the category has slowed to 1.5%, according to independent research firm Euromonitor International.
“We value our relationship with Monster,” the Coke spokeswoman said. “As in any commercial relationship, we will abide by our contractual obligations.”
Write to Jennifer Maloney at email@example.com