Started as a Californian fruit juice company in 1934, Monster Beverage(NASDAQ: MNST) has been around the block a few times. The company tapped into energy drinks when they were new and fresh, dropping the fruit juice focus along the way.
Health-conscious energy drink rival Celsius Holdings(NASDAQ: CELH) feels like a fresher face, particularly in terms of building a large market presence. But this company was founded in 2004, just two years after the launch of Monster Energy, with the ambition to target energy drinks at a more health-oriented demographic.
Monster Beverage outgrew Celsius by orders of magnitude for many years, but the smaller company is carving out plenty of shelf space nowadays. Other than the privately held Red Bull empire, Celsius Holdings and Monster Beverage are pretty much the only energy drink companies that matter in 2024.
But which stock is the better buy right now? Let's take a look.
Monster Beverage: A mature energy drink veteran
Monster Beverage manages many of the most popular energy drink brands. Beyond its familiar Monster Energy and Reign names, the company also controls NOS, Bang, and Full Throttle -- just to name a few. Monster Energy is the biggest seller by far. The closest comparisons to what Celsius does are the two workout-oriented brands, Reign and Bang.
The company saw $1.9 billion of top-line sales in the second quarter of 2024. That's a 2.5% year-over-year increase, overcoming a 3.5% headwind from unfavorable foreign currency exchange rate trends. On a currency-adjusted basis, revenues rose 6.1%.
That needle-moving currency effect suggests that Monster Beverage does plenty of business outside American borders. Indeed, 39% of the second-quarter sales came from abroad. Overseas revenues also grew faster than the company overall, thus expanding the international segment's financial footprint over time.
The global expansion effort is based on Monster Beverage's long-running distribution partnership with The Coca-Cola Company(NYSE: KO). Signed in 2015, that deal has been a game-changer, boosting Monster Energy's global reach while providing a high-margin side business for Coca-Cola. The soft drink giant also owns roughly 20% of Monster Beverage's stock. This way, Coke has a direct financial interest in the energy drink specialist's success. It's good to have a global industry giant on your side through thick and thin.
Celsius Holdings: A hungry upstart -- with decades of experience
Celsius Holdings relies on a different distribution partner, but its brother in distribution arms in no less impressive. I'm talking about the other worldwide soft drink titan, PepsiCo(NASDAQ: PEP), which signed a long-term deal with Celsius Holdings two years ago.
This collaboration is not nearly as mature as the Monster-plus-Coke deal. Pepsi also has less skin in the energy drink game, limiting its Celsius Holdings ownership to 8.5%. It's also a smaller business with $326 million in total second-quarter sales, though it is growing much faster than Monster Beverage both domestically and abroad.
Skyrocketing international sales notwithstanding, Celsius Holdings is only getting started with it overseas expansion plans. PepsiCo holds the global distribution reins, with "certain exceptions" in the U.S. retail and food service channels. Two years in, the duo have introduced Celsius drinks in Canada and the British Isles, planning to launch in France, Australia, and New Zealand in the second half of 2024.
95.4% of the company's total second-quarter sales sprung from the domestic market, leaving just 4.6% to the fledgling international operations. It's a big world out there and the Pepsi/Celsius partners have barely scratched the surface of the foreign sales opportunity yet.
Final verdict: Celsius Holdings wins, but it's a risky bet
Celsius Holdings is the hungry underdog, scratching at Monster Beverage's mature global empire. The battle is complicated by the presence of household-name soft drink giants on each side. In a way, investors weighing Celsius Holdings against Monster Beverage must pick a side in the old Coke versus Pepsi debate -- which soda legend has the upper hand in global distribution and marketing?
Other than the high-octane growth that comes with launching expansion efforts from a smaller business base, Monster Beverage does almost everything a little bit better. It is much larger, its profit margins are a little wider, and its stock trades at slightly lower valuation ratios. Furthermore, I trust Coca-Cola's distribution know-how more than Pepsi's, unless you're thinking about snack foods and oat meal.
But is Monster Beverage's collection of small advantages enough to outweigh Celsius Holdings' exceptional growth and promising international expansion prospects? I don't think so, at least not for the moment.
I might consider picking up a few Celsius Holdings shares at their current prices, holding on for dear life as the smaller company plots a path to long-term success. I'm reluctant to do it, since the fickle nature of consumer tastes could undermine the health-oriented market message behind Celsius holdings at the drop of a hat. Still, it's a reasonable option if you're willing to take that risk.
Monster Beverage is the more robust business here, but the stock looks overpriced at the moment. Master investor Warren Buffett prefers to buy wonderful companies at a fair price, and Monster only checks one of those boxes today. So I'm keeping an eye out for a price correction before taking action on my Monster Beverage preference. Until then, there's always the semi-speculative Celsius Holdings idea.
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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Celsius and Monster Beverage. The Motley Fool has a disclosure policy.
