Shares of Monster Beverage (NASDAQ:MNST) soared higher today after the Food and Drug Administration released a letter addressing health concerns related to energy drinks like those sold by Monster. Earlier this year ,the FDA launched an investigation into the safety of such beverages following the death of a 14-year old girl who died after allegedly drinking Monster energy.
As it stands, Monster drinks have been tied to five deaths. Report data from the FDA also outlines multiple cases involving hospitalization after the person in question consumed Monster energy. However, according to the FDA review released today, they found no problems with the two primary additives, taurine and guarana, in Monster energy .
The report also explains, "There is no certainty that a reported adverse event can be attributed to a particular product or ingredient." The market reacted favorably to the report, with the stock rising more than 14% this afternoon to $52 a share. Year to date, shares are down less than 1%.
While the FDA has not reached any final decisions, a likely outcome would be increased regulation on these products. That said, the FDA only has regulatory power over food and drugs. And since highly caffeinated products such as those from Monster energy are considered nutritional supplements, it isn't likely that the FDA's involvement will have any lasting affects on the company.
Consider, too, that the 24-ounce Monster energy drink the 14-year old girl drank contained 240 mg of caffeine. That's significantly less than the 415 mg of caffeine in a 20- to 24-ounce cup of Starbucks (NASDAQ:SBUX) coffee. And the java giant still sells billions of dollars' worth of its coffee beverages each year.
Today, Monster Beverage is the second largest energy drink producer behind Red Bull, and I don't see that changing because of the company's recent run-in with negative press.
Fool contributor Tamara Rutter has no positions in the stocks mentioned above. The Motley Fool owns shares of Starbucks and has options on Starbucks. Motley Fool newsletter services recommend Monster Beverage and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.