8-KMaterial AgreementsOther Events

Monster Beverage Corp 8-K Report, Material Agreement (Oct 9, 2008)

Filed October 9, 2008For Securities:MNST

Summary

Monster Beverage Corp (formerly Hansen Natural Corporation) announced a significant strategic shift in its distribution strategy through a series of material definitive agreements with The Coca-Cola Company (TCCC) and its affiliates, including Coca-Cola Enterprises Inc. (CCE) and Coca-Cola Bottling Company (CCBC). These agreements, effective October 3, 2008, establish extensive distribution networks for Monster Energy® beverages across the United States, Canada, and several international territories. The new arrangements involve long-term distribution agreements, with initial terms of 20 years for North America and 5 years for international territories, with renewal options. TCCC and its partners will facilitate the promotion and sale of Monster Energy products, leveraging their established infrastructure. This move signifies a substantial expansion of Monster's market reach and a commitment to scaling its global presence by partnering with a major beverage industry player. Investors should note the significant financial implications, including potential termination payments to existing distributors and non-refundable contributions from new distributors, which are expected to impact the fourth quarter of 2008.

Key Highlights

  • 1Hansen Natural Corporation (now Monster Beverage Corp) entered into comprehensive distribution agreements with The Coca-Cola Company (TCCC) and its affiliates on October 3, 2008.
  • 2These agreements establish TCCC's extensive network for distributing Monster Energy® beverages in the United States, Canada, and key international markets including Great Britain, France, Belgium, Netherlands, Luxembourg, and Monaco.
  • 3The North American distribution agreements have an initial term of 20 years, while international agreements have an initial term of 5 years, indicating a long-term strategic partnership.
  • 4The company anticipates making aggregate pre-tax termination payments to existing distributors estimated between $110 million and $130 million, primarily impacting the fourth quarter of 2008.
  • 5Monster Beverage Corp will receive non-refundable contributions from new Coca-Cola affiliated distributors, which will be recognized as deferred revenue over the 20-year life of the agreements.
  • 6The new distribution structure aims to enhance the promotion, wide distribution, and sale of Monster Energy products by utilizing TCCC's established infrastructure and market penetration.

Frequently Asked Questions

The primary purpose is to establish and coordinate a vast distribution network for Monster Energy® beverages across the United States, Canada, and several international territories, leveraging Coca-Cola's extensive infrastructure and market reach to significantly expand the product's availability and sales.

The company expects to incur pre-tax termination payments to existing distributors, estimated to be between $110 million and $130 million, impacting the fourth quarter of 2008. Conversely, Monster Beverage Corp will receive non-refundable contributions from the new Coca-Cola affiliated distributors, which will be recognized as deferred revenue over the 20-year term of the distribution agreements.

The North American distribution agreements with Coca-Cola Enterprises Inc. (CCE) and Coca-Cola Bottling Company (CCBC) have an initial term of 20 years. The International Distribution Agreements with CCE have an initial term of 5 years, with options for renewal. These long terms signify a deep, strategic commitment between Monster Beverage Corp and The Coca-Cola Company.

Yes, the company will make termination payments to its existing distributors who are being terminated as part of this transition. The company has also received non-refundable contributions from the new distributors that will help offset these termination costs.