After selling its energy drinks as “dietary supplements” for the last decade, Monster Beverage (MNST) has decided to change its marketing strategy, and instead sell its products as beverages.
Critics of the industry have argued that the high level of caffeine in the drinks pose a significant risk to adolescents and children who are under the impression that energy drinks offer a natural way to boost energy. As a result, the entire industry has come under greater scrutiny from the Food and Drug Administration.
The F.D.A. has been looking into allegations that over consumption of some energy drinks has played a role in numerous deaths, but so far nothing has been proven. Monster and other energy-drink makers have denied any connection between their products and the deaths.
By opting to sell its drinks as beverages instead of dietary supplements, Monster will no longer be required to tell regulators about reports that link its products to deaths or injuries. However, it will be forced to print caffeine levels on its cans for the first time ever.
The new cans will show the caffeine level in its most popular drinks is between 140 to 160 milligrams per 16-ounce can. By comparison, a 16-ounce cup of Starbucks (SBUX) coffee has around 330 milligrams of caffeine.
While I believe that the company's decision to change its marketing strategy is merely a way to distance itself from the F.D.A., it claims it has other reasons for its decision.
Monster said it wanted to fend off criticism that it was marketing its products as energy drinks in to avoid the tighter regulations of the beverage industry, and that it would allow customers to begin using food stamps to buy the beverages.
Monster can give whatever reasons it wants for making the change, but it is hard to believe that its marketing shift is for any purpose other than distancing itself from the F.D.A.
The company reported that around half of its products will list caffeine content by April, and 90% will do so by May.
Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.