We're going to have to respectfully disagree with your statement "People that shop at Costco don't go after the established brands, they go after niche brands and private label brands....everybody knows that."
Actually, the main reason why people shop at Costco is price. Over 90% of what they carry are established name-brand products. They are not likely to put lesser-known, secondary brands on store shelves. The risk of losing consumer traffic is too great a risk for them. They know where their bread is buttered and will stick to the big names in the consumer packaging space.
One other advantage of dealing with big-name brands is that there is a reduced chance of having to worry about fulfillment issues.
The advantage that Costco offers to consumers is the cost of those big-name products are much cheaper on a per ounce/per unit basis.
We also have to disagree with you on the entry of MSLP into the energy drink market. As some others have pointed out, they are late to the party and there is nothing to differentiate themselves for the competition.
We are very familiar with the entire energy drink marketplace and the beverage industry in particular. We have authored a number of articles on Seeking Alpha, two of which have received "Editor's Pick" status.
We also have a blog devoted to the beverage industry and one company in particular that we have chosen as our number one investment idea for 2015.
We're not here to promote our research, but after seeing this company rise 47% in 2014, it is up another 200+% so far in 2015.
It's actually quite a turnaround story. The first thing that a new management team did in 2011 was discontinue their relationship with Costco. Why? The margins were razor thin, and they discovered that they couldn't make any money in the big-box retailers.
MSLP will most likely face a similar situation, if they go that route.
Furthermore, most people who bought at Costco were already users of the company's products, and it was discovered that the main reason why consumers purchased them was the lower price.
When we sat down with company management, we told them that we thought that they were crazy terminating the relationship with Costco, especially given that fact that over 40% of their total revenues came from this one distribution channel.
There was an article is Retailing Today magazine titled "Back From The Brink" that discusses the decision to exit Costco, and the reasons why that decision was made. It's an interesting read.
We are not going to disclose the name of the company on the MSLP message board because we don't want to be challenged for posting off-topic, and as we said we are not here to promote any agendas.
The bottom line is that we are not impressed with MSLP management's strategic business plan. They seem to be losing focus, and are scattering their energies across too many areas, instead of sticking with what got them to where they are. We also are worried about their tenuous financial condition.
The bottom line is we believe that MSLP's decision to attempt to compete in the energy drink market will result in a further deterioration in the company fundamentals, and put further pressure on their financial condition.
We would welcome any intelligent discourse from others, and are open to hearing cogent, fact-based opinions on this and other topics regarding the business prospects for MSLP.
Disclosure: We currently hold no position in MSLP shares, long or short.
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