Rodney Sacks, chairman and chief executive officer of Hansen Natural Corp., Corona, Calif., in conjunction with his executive team comprised of Hilton Schlosberg, vice chairman and president of Hansen Natural, and Mark Hall, president of Monster Beverage Co., lead the company once known solely for its namesake natural beverages to international growth as the producer of one of the top-selling energy drinks on the market.
Its line of Monster Energy drinks continues to drive performance for the company, which reported a 36 percent increase in Hansen Natural’s gross sales to $935.1 million in the first six months of 2011 from $685.9 million in the comparable time period last year.
Sacks, who is Beverage Industry’s 2011 Executive of the Year, says energy is “not a fad.”
“Energy drinks have become premium soft drinks with the added benefit of function,” Sacks says. “That’s why we see the ability to continue growing the brand and the category in America.”
In the United States, the company recently expanded its Monster Energy line with low- and no-calorie options, a re-branded Extra Strength platform and the debut of its non-carbonated Rehab line.
“Monster’s continuing to grow,” Sacks says. “We’re very optimistic about its growth in America, where we continue to see category growth and we continue to grow ahead of the category, and overseas as well, which is where we see unlimited growth opportunities. At the same time, we’re a beverage company, so we need to look at other beverage products because you never know what will be the next big hit in five or 10 years’ time.”
Hansen Beverage partnered with Anheuser-Busch in 2006 for distribution of Monster Energy and additional beverage brands in a large portion of the United States. Two years later, the company complemented the Anheuser-Busch agreement with a partnership with The Coca-Cola Co. and Coca-Cola Enterprises Inc. to distribute Monster Energy in the remaining portion of the United States not covered by Anheuser-Busch distributors, Canada and six Western European countries.
“I think that each of the different partnerships brought different strengths to the table,” Sacks says. “While the number of accounts covered by Coke bottlers may be broader than, for example, Anheuser-Busch distributors, on the other hand, Coke bottlers are generally more focused on traditional grocery chain accounts and mass merchandisers, whereas Anheuser-Busch distributors are really focused on the convenience and gas channel, which is our sweet spot.”
“We at Swire have always enjoyed a wonderful relationship with Monster and in particular with Rodney. Not only does Monster have a great portfolio of brands, they have a solid management team led by Rodney. We look forward to many more successful years of partnership and mutual growth.”
— Paul Lukanowski,
vice president of Swire Coca-Cola USA
As can be expected with all new relationships, the partnerships initially experienced some minor bumps in the road. Sacks says in the early stages certain distribution partners underestimated the brand’s velocity and initially it took time for certain partners to fully realize the value of Monster’s signature marketing strategy.
Although the partnerships have greatly expanded both the brand’s presence and quality of distribution across the United States, Sacks says there are still opportunities for growth.
“We think that we still have a lot of distribution gains that we can make,” he says. “We have an extensive range and after the first few SKUs, the distribution levels begin to drop off. We have a lot of potential growth left if we could get our full range onto the shelves of every store.”
Although Sacks sees untapped potential in the United States, the company also has primed Monster Energy for international expansion.
“We believe that Monster has the potential to be an international brand and to be the real challenger to Red Bull around the world,” he says. “We believe that we are the only brand out there today that can effectively do that.”
The global awareness of Monster and its claw logo has helped its international expansion, Sacks says. He says the company receives pictures from around the world of the Monster logo on cars, racecars and extreme sports athletes, even in areas where the product is not yet available. He attributes Monster’s notoriety to the Internet, including the brand’s website, online exposure of its sponsored athletes and the Monster Energy Facebook page, which tallied nearly 12.3 million fans as of early September.
Hansen Natural reported that gross sales to customers outside the country increased to $102.6 million in the second quarter of 2011 compared to $66.6 million during the same time period in the previous year. Monster Energy has been successful in Canada, Mexico, the United Kingdom, France, Europe, Australia, South Africa, Central America and Brazil. The company also has targeted the remainder of Central and Eastern Europe, South America, Asia and small markets in Africa for future growth, Sacks says.
While the Coca-Cola partnership brought the brand to certain countries in Western Europe, the company also expanded Monster Energy’s availability into the remainder of Western Europe and into portions of Central and Eastern Europe. The European market is a challenge because it is a highly developed energy drink market with Monster competing against private label, local and international brands, Sacks says.
When beginning in a new market, the company initially imports its products, he says. However, when Monster Energy achieves enough volume, the company opens local production. It currently has its products manufactured in three European facilities, Australia, Brazil and Canada, Sacks says. It also is reviewing production in Mexico and elsewhere due to the growth of the brand, he says.
One of its latest expansion targets is Asia, where energy drinks are thought of as 2-ounce glass bottles of product, Sacks says.
“The size of the traditional small format energy/vitamin-enhanced drinks market is enormous in Asia,” he says. “So the key is being able to work out how to change the purchasing habits of consumers in Asian markets, to switch consumers from those traditional small format drinks to more modern energy drinks, which provide refreshment as well as energy. We are just starting in those markets and we think there’s lots of opportunity there. We hope to launch in one or more countries in Asia before the end of the year or early next year.”
Early on, Hansen Natural was drawn to energy formulations and, as Sacks explains, the category benefits from unlimited use occasions. This drove the company to experiment with new functional products. The company first offered an energy formulation in 1996 as part of its Hansen’s line of smoothies, and it then launched Hansen’s energy drinks in 8.3-ounce cans in 1997.
The company introduced its Monster Energy brand in 16-ounce cans in April 2002. The brand was designed to have masculine appeal and was packaged in a black can to stand out from competitors, he says.
The company continued to break from tradition with the introduction of Lo-Carb Monster Energy in a black can with blue accents and Monster Khaos, a carbonated juice-based energy drink, which was followed by the Java Monster line of coffee-based energy drinks.
A further line extension came with a Monster Energy iteration that contained nitrous oxide, which has an effect on the taste and smoothness of the product, Sacks says.
However, consumers struggled to understand what made Nitrous Monster different, he says, so Monster re-branded the product as Monster Energy Extra Strength, which helps communicate the product’s efficacy more easily. Although Extra Strength is packaged in a 12-ounce resealable can, Sacks says consumers are willing to pay a premium for the variety, which also is available in a zero-calorie version known as Black Ice.
No-calorie also is the positioning for its Monster Energy Absolutely Zero, which does not contain calories, the company says. The low and no-calorie Monster Energy varieties have appeal beyond the brand’s typical younger male demographic to older males and females, who are frequently more concerned with calorie counts, Sacks says.
Give it a shot
The company remains unafraid to innovate, even if it takes a few attempts to create a successful product, Sacks says.
“One of the most important things is knowing that you’re going to make mistakes and you may have to change,” he says. “You have to be prepared to change the packaging, change the flavor, change the ingredients and sometimes walk away from a product. You’ve got to be able to do that quickly without excessive costs sunk into the project. If you can do that, you will be able to continue to innovate and develop different products until you hit upon a successful product.”
This year, Hansen Beverage began promoting its Worx energy shot, which was born out of its now discontinued Monster Hitman energy shots. Sacks says the emergence of energy shots inspired many energy drink brands to go after that market. Many energy drink brands, including Monster, created smaller versions of their products in an attempt to attract that category’s slightly older, office worker demographic, he says. Although Monster’s Hitman energy shots got some distribution, the product never really struck a chord with consumers, Sacks says.
“The problem as we saw it was that if you’re an energy drink, your credibility is for just that, namely an energy drink, which is associated with thirst-quenching and refreshment, and it just did not translate to an over-the-counter product that is non-refrigerated, and not particularly good tasting,” he says. “None of the energy drink companies were able to make a real dent in the category.”
However, the company continued to believe that there was an opportunity for a competitive product to go up against the leader in the energy shot category, he says.
“What we realized is that brands are not everything to everyone,” he says. “So in that tone, although we continue to expand Monster as a specialized beverage brand. You have to know where your limitations are.”
Worx is positioned as an over-the-counter product and has a separate brand manager within the company, Sacks says. It also is the focus for the company’s first major TV advertising campaign. The latest Worx ads are a spoof on TV infomercials and star an overzealous character named Marty Lempkin hawking the fictional Energy Blaster 3000 shot. Lempkin promises the shot is capable of myriad functions from physical benefits to stain removal to making women more attractive. The commercial closes with a contradiction of Lempkin’s promises that is embodied by the simplicity of Worx energy shots.
For Monster fans who want a concentrated energy boost, the company created M3. The product is a concentrated Monster energy drink that is packaged in a 5-ounce glass bottle.
“Monster means beverage,” Sacks says. “Although M3 contains only 5 ounces in a little bottle, it is a beverage, whereas a 3-ounce plastic bottle didn’t connect with Monster.”
This year, Monster Energy expanded into new territory with the launch of Rehab, a non-carbonated Tea + Lemonade + Energy beverage that contains electrolytes. During development, the company liked the term “rehab” and the connotation of needing to recover after a long night, Sacks says. It acquired the Rehab brand name from the Hard Rock Hotel Group in Las Vegas, which hosts a renown weekly pool party under the same banner.
With a formulation that provides electrolytes for recovery and energy for a pick-me-up, Rehab has caught on in the marketplace.
“We planned to have a single [Rehab] product for at least a year before expanding to allow us enough time to get the product into the market, build up distribution and create awareness,” Sacks says. “But the response to Rehab has been so good we’ve been getting a lot of pressure from our distributors to expand the line, which is unusual. People have continued to say to us, ‘When are you coming out with the next Rehab product?’”
The unusual zest from distributors inspired the company to develop three new Rehab varieties. Expected to launch in the fourth quarter, the new options have a tea base and contain some juice as well as energy and electrolyte ingredients, Sacks says. In addition to green tea and red tea varieties, the line also will include ProTEAn, which is a tea and juice product formulated with 15 grams of protein in each 15.5-ounce can. ProTEAn contains 50 calories in each serving, while the other varieties have the same 10 calories as the original Rehab variety.
The target for the protein-fortified Rehab is not the typical protein drink consumer, Sacks says.
“We’re trying to get to the weekend warrior who is a regular guy who simply wants to add protein into his diet in addition to getting an energy boost,” he says. “And do it in a good-tasting drink.”
Sacks says the new innovations create new opportunities to reach brand fanatics and new consumers alike.
“We believe it’s about making [Monster] available more broadly and creating new use occasions and expanding the demographics,” he says. “These new products make it easier for a broader spectrum of consumers to become Monster drinkers. Being a coffee- or tea-based product makes it easier for people to understand and get comfortable with the drink.”
Beyond the Monster
Although it embraces Monster’s popularity, Hansen Natural has learned during the years that the brand cannot extend to everything.
“If you had your wish list, you’d want one brand name and you’d want it to be everything to everybody,” Sacks says. “So you’d take that brand and its marketing and extend it to many different categories and different use occasions. I mean, everything, beverages for working out, going to sleep, waking up, etc.
“The market is too specialized,” he continues. “You can’t do it. Brands that are credible have a particular meaning to consumers. The moment that you go too broad, you tend to dilute that meaning and the credibility is diluted.”
The company recently recognized an opportunity in the RTD tea category, Sacks says, but felt that it would not be beneficial to the Monster image and credibility to extend the brand into traditional RTD teas. Instead, Hansen Beverage created the Peace Tea brand.
“We came up with the Peace name because we believe that is something that everybody aspires to,” Sacks says. “It makes people feel good about themselves and feel good about the drink.”
The Peace Tea line was introduced without substantial traditional marketing support and was positioned in pre-priced $0.99 24-ounce cans that feature illustrations of historic figures or occasions in the peace movement. The can’s price point is the company’s primary marketing tool to encourage trial, Sacks says. The varieties include Sweet Lemon Tea, Razzleberry, Green Tea and Imported Ceylon Tea. In March, Peace Tea also launched a Tea + Lemonade variety named Caddy Shack.
Last month, the brand promoted a three day Peace Tea Festival at Powellapalooza at Lake Powell in Page, Ariz. The festival, which is intended to become an annual event, featured rock, hip-hop, bluegrass, reggae, folk, funk and electronic artists.
The company also continues to expand the Hansen’s brand. One of its recent line extensions is the retro style Hubert’s Lemonade, which is named after Hubert Hansen, the original founder of Hansen Natural. Available in Original Lemonade, Raspberry Lemonade, Strawberry Lemonade, Mango Lemonade, Honey Lemonade and Limeade, the brand is performing well in health food stores as well as in limited up-and-down-the-street accounts, Sacks says.
“The Hansen’s brand is a solid brand,” Sacks says. “It has enormous heritage and I think that’s important. We have extended the Hansen’s Junior Juice line to flavored water and are coming out with a coconut water twist for kids. We think the brand has a lot of credibility as a premium natural brand.”
The health and wellness movement provides encouragement for the natural side of the business, Sacks says.
“We believe that Hansen’s will have its day again,” he says. “We feel that with all of these different brands in our arsenal, we have good opportunities to continue to grow. While Monster is our main lead brand, we continue to look for good additional brands.”
Leading the charge
The leadership team includes Sacks as well as Hall and Schlosberg.
“What’s interesting is that each of us have very different disciplines and strengths,” Sacks says. “We’re very, very different people. We’re fortunate that we’re able to put our heads together and ultimately achieve a good balance between us. Some of our ideas are very aggressive but through having worked closely with each other for so long, we are often comfortable with moving ahead with ideas that conservative management wouldn’t go with. On the other side, the other members of the team will pull you back when you go too far. We really have a nice blend of many styles between the three of us.”
In addition to the three-man executive leadership team, the company maintains an open-door policy and invites feedback from anyone within the corporation, he says.
“We have a small, but extremely competent executive management team who are all intimately involved throughout the business,” he says. “We’re all players. We don’t have any formality. We don’t have any politics. Everybody is able to share their views and make recommendations from the most junior guys up. We think everybody should be able to express their views and they should be respected.”
Many of our ideas for new products and new ventures come from within the company, Sacks says.
“When people say, ‘How do you come up with new products?’ We listen to the younger guys,” he says. “A lot of them are internal. What are they doing? What do they like? When we test our packaging and promotions, we run it by the younger guys. The key to finding the right product or packaging for the right demographic is hearing what they say and understanding them in their own environment as opposed to trying to figure out what an artificial focus panel says.”
That open culture has bonded employees, athletes and fans to the Monster brand, Sacks says.
“Part of that is making sure that your company, your employees, your team, everybody, lives, breathes and dies by the brand,” Sacks says. “It’s not just a job, you don’t come here simply to work; you come here because you feel good about yourself and what you are doing.
“If you talk to our guys, and our athletes, they generally have that same spirit,” he continues. “I talk to athletes, and deal with a lot of them personally, often at different events. They are particularly loyal. On many occasions I have heard them remark that they will not endorse another energy drink even if they are no longer sponsored by Monster; that loyalty makes us very proud of the reputation we have been able to build.” BI
Rodney Sacks was selected as Beverage Industry’s 2011 Executive of the Year by a committee of industry experts, who based their selection on criteria that included the following:
• Leadership qualities
• Financial performance
• Environmental contribution
• Marketing achievement
• Technological innovation
• Community service
• Employer/employee relations
The 2011 Executive of the Year committee included the following:
John Faucher, beverage analyst at JP Morgan Chase
Kaumil Gajrawala, director at UBS Investment Bank
Marion Glover, president of Glover Capital Inc.
Gerry Khermouch, editor of Beverage Business Insights
Susan Neely, president and chief executive officer of the American Beverage Association
Carlos Laboy, managing director at Credit Suisse
Harry Schumacher, principal of BeerNet Communications Inc.
Supporting its family
Since the start of Monster Energy, the brand has partnered with and sponsored many extreme sports athletes. The athletes have helped the energy drink brand with their communities and legions of fans, says Rodney Sacks, chairman and chief executive officer of Hansen Natural Corp. The company’s sponsorships are not just about marketing and sales, he says.
“We view the sponsorship of athletes as more than just writing a check; we support the athletes in many ways to make them better,” Sacks says. “It’s who we are as a brand.”
The Beverage Industry photo shoot took place at one element of this extended support system, a 50-foot vert ramp constructed by Monster and clothing brand DC for use by only a handful of the brands’ sponsored skateboarders. The ramp is the first of its kind and provides Monster athletes like Pierre-Luc Gagnon and Jake Brown, who were featured in the photo shoot, with a place to practice.
Monster Energy also recently purchased a 10-bedroom house in Park City for use by its athletes. The home has access to ski slopes and training facilities for its skiers and snowboarders.
Monster’s support for its athletes goes beyond providing support during training and competition. In November 2010, Monster-sponsored world record snowmobile jumper Paul Thacker sustained a major injury while warming up on his snowmobile. He broke nine ribs and injured his spinal cord, which has left him paralyzed below the waist. The Monster team is continuing to support and help Thacker, who is in rehabilitation and is determined to walk again and return to riding snowmobiles.
Thacker is unfortunately not the only Monster-sponsored athlete who has sustained major injuries. One of the brand’s first sponsored athletes, BMX rider T.J. Lavin, suffered a crash last October that put him in a coma for two weeks.
Friends and business affiliates, such as Monster, took part in a fundraiser to provide monetary support for Lavin’s recovery. The fundraiser was hosted in Lavin’s hometown of Las Vegas and raised hundreds of thousands of dollars. The funds exceeded Lavin’s needs and he made donations to a fellow injured BMX rider as well as Thacker.
Inspired by these events, Monster Energy has started an independent charitable trust to assist athletes who have been injured.
“We want to give back to the community who supports us, including athletes and fans who are pretty fanatical about the extreme sports that we support so much,” Sacks says. “We’re going to support and put money into those communities.”
Its charitable plans also include supporting research at local California hospitals, including stem cell research for spinal injuries.
Monster Energy also has partnered with the Make-A-Wish Foundation. The company is granting a wish for bike gear for a 14-year-old boy with lymphoma, explains Terri Sacks, associate brand manager for Monster Beverage Co. When the boy found out that Monster Energy was granting his wish, Terri says, he pretty much put his wish list on hold and said, “I just want to take a walk through the Monster warehouse.”
The company is taking him on a shopping spree for bike gear and will keep in touch with him going forward, she says.
The brand will continue partnering with Make-A-Wish and other community organizations to connect with patients who are passionate about extreme sports, Rodney says. Monster’s activities in those sports gives it the ability to share unique experiences with people in need, he says.
“We have a lot of events that we sponsor and we sponsor athletes who are their heroes, whether it’s skateboarders or supercross,” he says. “... We can take them on track walks, take them into the pits, take them into suites to meet the athletes.” BI
The convenience factor
Rodney Sacks, chairman and chief executive officer of Hansen Natural Corp., sees energy drinks as modern day soft drinks.
“They are the soft drinks of 50 years ago,” he says. “They are to the average consumer today what soft drinks were to consumers 50 years ago. They were innovative, they were cool, they were cutting-edge, they were new and they were premium — that’s all of what energy drinks are now.”
That positioning has helped convenience and gas retailers embrace the category, which often carries a high price tag among beverage options, Sacks says.
“You need to give the retailer a reason to stock a product — to make more money,” he says. “For him, the space he allocates to
energy drinks with their higher ring than traditional beverages is more profitable and that’s all the reason he needs. He makes more money per case that is wheeled in and the consumer feels good about his purchase, albeit at a higher price as he believes he’s getting a benefit in return, and so it’s a win-win situation for everyone.”
Sacks highlighted a Corona, Calif., Shell gas station owned by Isa Bahu, who has a large portion of his store dedicated to Monster products. “[Bahu] sells Monster like he started Monster,” Sacks says.
From the M3 5-ounce concentrated product to Rehab to 10-packs of regular Monster, the Shell store stocks every product that Monster makes, Bahu says. Within the store, Bahu stocks Monster products in the entry way, near the cash register in an open iced display, in two separate large-scale displays as well as in the refrigerator cases.
Eighty percent of morning sales are Monster Energy products, Bahu says. “In the morning, we just keep filling our displays,” he says. “It’s the coffee for people in their early 30s. I see more young people buying two Monsters in the morning than coffee.” BI