As popular as drinking coke still is, under the many different types and flavours, there has been a need for the company to continue diversifying its offerings and this deal will offer both parties benefits.
Coca-Cola will get a solid foot hold in the energy drinks market and further dilute its reliance on its core Coke products. Monster already had an agreement to use Coca-Cola’s distribution network in the US, and this new deal has seen it expanded to the global distribution network. With this infrastructure at its disposal it is likely that Monster will see a sizeable increase in its global sales figures.
At the moment US regulators are currently looking into the consequences of caffeine in energy drinks and this might prevent Coca-Cola from increasing its holding to 25%, as are the terms of the agreement. Should these investigations be completed without negative consequences to the energy drink sector, then a full acquisition could be on the cards.
Shares in Coca-Cola have performed well over the last couple of years and have only tested the longer-term support of the 200-day moving average sporadically. Only a close below the $39 level would give cause for concern, but this latest acquisition should prove beneficial for both companies.