Image source: Flickr user Mike Mozart.

Energy drinks have revolutionized the beverage industry, and longtime shareholders in Monster Beverage (MNST -1.99%) have reaped huge profits from their early call on the success of that market. Yet even with its key partnership with beverage giant Coca-Cola (KO -0.29%), Monster still has to produce the growth that investors are looking for. Coming into Thursday's fourth-quarter financial report, Monster Beverage investors wanted to see continued strong increases in revenue and profits, but what Monster provided fell well short of their expectations. Let's take a closer look at what Monster Beverage did to close 2015 and whether it can get back its lost momentum in 2016.

Monster Beverage crashes from its sugar high
Monster Beverage's fourth-quarter results stood in stark contrast to the healthy performance that the energy-drink specialist gave investors last quarter. Net sales grew less than 7% to $645.4 million, which was less than half the ambitious 15% growth rate that investors had wanted to see. The news on the bottom line was even more concerning. Net income picked up 11% to $140.9 million, but a big increase in outstanding share counts pushed earnings per share down from year-ago levels to $0.68. That missed the consensus forecast by $0.14 per share.

Taking a closer look at Monster's figures, a couple of factors directly affected results. First, the strong dollar hit net sales, although the impact was just $19.7 million, or about 3 percentage points. Second, just as Monster got a boost in the third quarter from customers who chose to stock up prior to an anticipated April 31 price increase on energy drinks, the company felt the negative payback this quarter, and it said that the move probably cost it $11 million, or just under 2 percentage points, in net sales.

Looking at its segments, finished product sales climbed 1.8%, while concentrate sales added another $60 million to total revenue. Net sales to customers outside the U.S. were up almost 9% to $145.3 million, pointing to the popularity of energy drinks internationally. Gross margins climbed almost eight percentage points to 62.5%, and a nearly full-percentage-point drop in distribution costs likely stemmed from the Coca-Cola partnership. Yet big increases in overhead and marketing expenses ate into profits.

Monster Beverage saw mixed performance in its key business metrics were once again mixed. Case sales jumped 15% to 67.5 million. But average sales price fell 7.5% to $9.56 per case, offsetting much of the volume gains.

What's next for Monster Beverage?
Monster Beverage CEO Rodney Sacks blamed some of the ongoing issues in its work with Coca-Cola and non-Coca-Cola distribution methods for parts of the shortfall. "Distributor transitions and uncertainties in portions of our international non-Coca-Cola distribution network limited further revenue growth during the quarter," Sacks said. Yet the CEO did say that Monster Beverage has been able to reach agreement with many Coca-Cola bottlers for distribution.

More interesting than the quarterly earnings results was Monster Beverage's announcement earlier in the week that it had acquired American Fruits & Flavors for $690 million. The deal brings the primary supplier of flavoring under Monster's corporate umbrella, and that will allow greater certainty about the future of Monster's intellectual property and ability to keep manufacturing its products without any possibility of a breakup. It also gives Monster Beverage the capacity to try out new flavors in the future, something that could prove increasingly necessary as it fights against Red Bull and other energy-drink competitors.

Investors in Monster Beverage didn't like its short-term results, sending the stock down 7% in the first 30 minutes of after-hours trading following the announcement. Monster still is well positioned to benefit from further growth in energy drinks, but its latest results point to possible limits to the growth in that market that could put a ceiling on future share-price gains in the immediate future.