Did Monster Beverage 'Overpromise And Underdeliver'? New Hydro Product Launch Reportedly Delayed

“We just learned from several of our retailer contacts that due to unforeseen production complications, Monster Beverage Corporation (NASDAQ: MNST) has delayed the launch of its enhanced-water energy product Hydro ‘indefinitely’ according to one retailer, and ‘up to 90 days’ per another retailer,” Wells Fargo’s Bonnie Herzog said in a note, while maintaining a Market Perform rating on the company.

Delayed Launch

The analyst mentioned another retailer stated Monster Beverage had informed them the company “won’t guarantee consistent product flow over the next couple months.”

Given that the key summer selling season is fast approaching, Herzog expressed concern regarding the ability for Monster Beverage’s new innovation to have any material impact on sales in 2017, indicating that the recent slowdown in the energy category was likely to persist.

The analyst also continues to be concerned about “soft energy trends at retail, higher marketing spend to drive top-line to attract/retain consumers, and margin dilution from ongoing negative channel, product, and geographic mix shifts.”

Over-Promise And Under-Deliver

Herzog noted the delays in the launch of Hydro seems to be adding to the strain in the relationship between Monster Beverage and many of its retailer, as the company continues to “over-promise and under-deliver.”

“Many retailers reported being ‘let down’ with the Mutant launch (‘totally botched’), many have ‘struggled with out-of-stocks,’ and the issues with Java production have been ‘going on for the whole 1st quarter,’” the analyst went on to say.

In fact, Herzog said several retailers even reported they opted not to include Hydro at all due to its original scheduled launch already being too late for planning purposes.

“New products are the fuel that drive Monster’s growth in the U.S. Without the benefit of strong working relationships with all of its retail partners, we have concerns about Monster’s ability to gain incremental shelf/cooler space for its new products going forward to drive a reacceleration of growth,” the analyst added.

Benzinga reached out to Monster Beverage, but the company did not immediately respond to requests for comment.

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