ATLANTA -- The Coca-Cola Co. and Monster Beverage Corp. have entered arbitration over whether Coca-Cola has the right to market an energy drink of its own.
The largest soft-drink company in the world is poised to launch Coca-Cola Energy and Coca-Cola Energy No Sugar in the near future, but Monster executives believe the launch would violate the strategic partnership between the two companies reached in 2015.
"Coca-Cola has developed two energy products it believes it may market under an exception [to our agreement] relating to the Coca-Cola brand," Monster CEO Rodney Sacks said during an earnings call on Nov. 7. "We believe that the exception does not apply."
The disagreement led the two companies to begin an arbitration process on Oct. 31, with both companies insisting their partnership is strong.
"We value our relationship with Monster," Coca-Cola said in a statement. "As in any commercial relationship, we will abide by our contractual obligations. We filed for arbitration with Monster regarding the proposed launch of Coca-Cola Energy. As a good partner, we have submitted the difference in interpretation to an arbitration panel for resolution, which is the mechanism agreed by the Coca-Cola Co. and Monster in the original agreements.”
Sacks said, "Coca-Cola has indicated that it has suspended the proposed launch of such energy products until April 2019.”
The disclosure of the disagreement led to a steep decline in Monster Beverage stock prices on Nov. 7. Prior to the earnings conference call, the price stood at $55.92 per share. Shortly after, it dropped as low as $50.77.
Sacks said he expects the disagreement will be resolved "civilly" and the companies' partnership will continue as it has. "Nothing has changed in the relationship and the manner in which this situation will be dealt with will be conducted from both parties on a civil basis according to the agreement."
Coca-Cola Co. acquired a 16.7% stake in Monster Beverage in 2015, transferring its ownership of its energy-drink brands, including NOS and Full Throttle, among others, to Monster Beverage Corp. In exchange, Monster transferred its nonenergy business, including Hansen’s Natural Sodas, Peace Tea and other drinks, to Coca-Cola Co.
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