Sacks spoke to investors this morning on a call to discuss yesterday’s transformative deal, which is expected to close in late 2014/early 2015 and will see Coke pay $2.15bn in cash for a 16.7% stake in Monster.
Prior to this deal the distribution availability and reasonable margin returns had determined where Monster would go next beyond North America, he explained.
“There are some markets that we haven’t been in, big markets, where we see very strong long-term incentives to go there. We’ll be progressing those very rapidly,” he said.
For instance, neither Coke nor Monster had an energy position in China, Sacks said, but believe it would be a very large energy drinks market within the next 5-6 years.
“China is a very long-term strategic goal for us – we want to be there, we want to get there as quickly as we can. There’s a complex regulatory procedure to get through to register,” he added.
“But now that we have that partner that we can work with…we’ll get something like China going pretty quickly, though it will take time because of regulatory issues there.”
'We wanted to get into China - we just haven't had the right partner'
“These are the kind of things we were struggling with on our own. We wanted to go to China, we just haven’t had the right partner and haven’t been able to go there – it’s a big market for us in the future,” Sacks said.
Monster’s CEO said the first task would be to integrate Coke’s energy brands – NOS, Burn and Full Throttle key among them – into its system, and integrate its own brands into Coke’s.
Coke’s brands and Monster’s compete in 100+ countries he added, and in the majority of territories there is overlap – Monster will now work with Coke to start producing through their system in most countries to eliminate problems stemming from damages shipping and transport costs.
“I think the best use of our resources in the short-term is to take on their brands, rationalize how we’re going to move forward with their brands and our strategy on a country-by-country basis,” Sacks said.
'NOS: It's a small brand with a strong base'
Coke’s energy portfolio is a mixed bag, but Sacks singled out Coke energy brand NOS for praise. “The numbers are nice. NOS in the US if you look at the Nielsen numbers – it’s been growing nicely.
“It’s a small brand with a strong base. We think the brand is really good, and will be really beneficial to the company in the long term,” he added.
Summing up his feelings on the transaction, Sacks said: “We’re very excited about it. It’s a very unique transaction – I would say this is the first time any brand has become a true part of the Coke international system, which is completely open to our brand,” Sacks said.
This transaction differed from others in that Monster retained its autonomy and control of marketing yet benefited from Coke managing its bottling relationships – rather than competing, as in the past, he added.
“One of the challenges we’ve always had in the Coke system is The Coca-Cola Company with their representatives motivating the bottler to promote, and if they could give preference to, their brand,” Sacks said.
Sacks predicts long-term energy industry will 'boil down to Red Bull and ourselves'
“We’re sitting in different meetings going to the same people trying to motivate them to give our brand preference – that conflict really gets eliminated, which will be helpful to us going forward.”
In those countries where the Coke brands are ahead of the Monster brands, Sacks said this gave Monster a platform, “so we don’t end up investing and having a negative margin for many years while we try to establish our full infrastructure”.
“The Coke brands have their own strengths in many countries, in others they’re weaker. Where they’re weaker we’ll look at what we’ll do with them,” Sacks said.
“We may want to reposition them on pricing. In other countries where Coke brands are stronger we’ll continue to promote those brands and run them together with Monster,” he added.
Our primary objective is to end up with Monster a truly global brand. We believe… long-term that the industry energy will boil down to Red Bull and ourselves,” Sacks said.