Hard seltzer has been a hot consumer trend since last summer, led by the privately owned White Claw brand and Boston Beer's Truly. Energy drink veteran Monster Beverage (NASDAQ:MNST) has been rumored to have an alcohol-infused seltzer brand of its own in the works, like pretty much every other beverage brewer on the market.
When Monster reported its second-quarter results on Tuesday, CEO Rodney Sacks addressed that speculation head-on. As it turns out, the company is thinking about the hard seltzer idea, but there are no firm plans to launch an energy-infused hard seltzer brand.
The word from the top
On Monster's earnings call, JPMorgan analyst Andrea Teixeira asked Sacks what's up with Monster's hard seltzer plans. The CEO was quick to admit that Monster is testing products in several new categories, but none of them are headed to store shelves anytime soon.
There's been a lot of speculation about what we are going to do both in the nonalcoholic and alcoholic spaces. . . . We are actually analyzing it. We're looking at developing some products in both nonalcoholic and alcoholic spaces. We're testing products, but we haven't yet decided on which of those we're going to go into.
That's business as usual for any major brand manager in a crowded consumer market. Monster has filed trademark applications for some potential new brands, but these names have to be run through the usual gamut of consumer testing and market research before they can be attached to a new drink recipe. The drink mixes themselves are obviously also up for discussion and refinement.
Monster doesn't break out its research-and-development costs as a separate line item in financial reports, but you can rest assured that it's an ongoing expense and that the results of R&D are vital to the company's future success.
Should Monster enter the seltzer market?
Analysts have suggested that a Monster-branded hard seltzer could become another needle-moving hit, much like the Reign workout-focused energy drink. On the other hand, hard seltzer could be more of a fad than a lasting market trend. Moreover, the new market segment has been flooded by a plethora of hopeful contenders. The number of available brands skyrocketed from 10 names in early 2018 to more than 65 at the start of 2020.
I don't mind that the company is taking a hard look at the market before jumping in with both feet. Fighting for a distant third-place finish behind White Claw and Truly might not be worth the marketing effort and related expenses.