Will $2 Billion Monster Purchase Caffeinate Coke’s Sales?

Soda maker buys 17% stake in energy drink brand

The Coca-Cola Co. has spent a reported $2.15 billion on a big share in energy drink maker Monster Beverage Corp. in a move to expand further into the energy drink category while appealing to millennials, according to The New York Times.

Coke’s purchase of a 16.7 percent stake in Monster is a long-awaited move to bolster the brand's slumping soft drink sales and get a foot in the youth beverage market.

Monster makes extremely caffeinated beverages that are popular with young consumers and holds the No. 1 spot in the U.S. energy drink market, reports USA Today.

The deal will eventually allow Coke to own a 25 percent stake in Monster, according to the Times. In return, Coke will share its global distribution network with Monster. The two companies will also swap brands in a rationalization of market segments. Coke will hand ownership of its energy drink portfolio, which includes the Full Throttle and Burn brands, to Monster while Monster will hand its Hansen's brand and other soft drinks to Coke.

The companies also plan to work together to expand international sales and distribution.

Industry observers have commented that Coke’s move could boost sales through an acquisition strategy into a growth market. Energy drink sales reportedly increased 4 percent last year, while carbonated beverages decreased by 3 percent.

In early trading today, Monster shares were up 27 percent, while Coke’s shares have gained a little over 1 percent.