Food and Beverage Sector Ideas

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Monster Energy enters alcohol with $330M purchase of Canarchy Craft Brewery

https://www.fooddive.com/news/monster-energy-enters-alcohol-with-330m-purchase-of-canarchy-craft-brewery/617118/

Dive Brief:
Monster Beverage will acquire Canarchy Craft Brewery Collective, a craft beer and hard seltzer company, for $330 million in cash, the company said in a statement. The energy drink maker said the deal will provide Monster with a "springboard" to enter the alcoholic beverage space.
The transaction is expected to close before April. Canarchy will function independently, retaining its own organizational structure and team, led by its current CEO Tony Short.
The decision by Monster to enter beer and hard seltzer comes as more nonalcoholic beverage companies enter the category in an effort to cover more drinking occasions and spur growth.
Dive Insight:
Monster rose to prominence to become a dominant player in the energy drink space, but now the $50 billion beverage giant is hoping to replicate its success in alcohol.

"This transaction provides us with a springboard from which to enter the alcoholic beverage sector,” said Hilton Schlosberg, Monster’s vice chairman and co-CEO. “The acquisition will provide us with a fully in-place infrastructure, including people, distribution and licenses, along with alcoholic beverage development expertise and manufacturing capabilities in this industry.”

The transaction will immediately bring beer and hard seltzer from brands including Cigar City, Oskar Blues, Deep Ellum, Perrin Brewing, Squatters and Wasatch to the Monster beverage portfolio. The transaction does not include Canarchy’s stand-alone restaurants.

The deal comes at a time when Monster itself has been rumored as an acquisition target.

In November, Bloomberg reported Monster Beverage was exploring a deal with Modelo and Corona brewer Constellation Brands. Today's decision to spend more than $300 million to buy Canarchy doesn't necessarily preclude such a deal from happening. But the fact that Monster is buying a company on its own, and choosing to do it in alcohol, may mean any combination with Constellation is dead, at least for the foreseeable future. Monster has found its own way to enter alcohol and stay independent at the same time.

For years, Wall Street has speculated Coca-Cola could buy Monster. The beverage giant purchased a 16.7% stake in Monster in 2015 and agreed to distribute its energy drinks in the U.S. and Canada. Monster noted the Canarchy deal comes with all the infrastructure and necessary licenses, so it appears unlikely that Coke would handle alcohol for Monster.

Canarchy is an interesting move for Monster because it is entering alcohol through craft beer and hard seltzer, a pair of maturing yet popular categories where consumers have countless options to chose from. While at one point there was speculation that Monster would develop its own hard seltzer, the company obviously sees a better path forward in alcohol through purchasing existing brands where it can benefit from their expertise rather than venturing into the area on its own, even with the potential to use the name recognition of its signature energy drink.

It's possible Monster could somehow tap into the expertise of Oskar Blues' work in hard seltzer, for example, and bring that insight to its own energy drinks. The deal also could mark the first step by Monster to become an even bigger player in alcohol, putting it head-to-head with industry giants AB InBev and Molson Coors.

Monster has been exploring other avenues for growth in recent years. It released the first 100% vegan energy drink called Java Monster Farmer's Oats in 2019 that is made with oat milk, coffee and Monster's energy blend that contains taurine, ginseng and guarana. It also reportedly has been considering a move into cannabis. But Canarchy is its biggest bet yet to show it's more than just an energy drinks company.

Monster is the latest nonalcoholic beverage company to enter alcohol, although others have done so through partnership deals in an effort to generate growth at their businesses.

Coca-Cola teamed up with Molson Coors to create Topo Chico Hard Seltzer, and last week said it is working Constellation to launch ready-to-drink cocktails through its Fresca brand. PepsiCo and Sam Adams maker Boston Beer followed last summer with plans to launch a hard offering under the Mtn Dew brand, expected to reach shelves in the next few months.