Monster Beverage Shares Jump as Regulatory Fears Ease

Tuesday, 27 Nov 2012 06:03 PM


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Shares of Monster Beverage Corp., the largest U.S. energy drink maker by sales volume, rose 13 percent Tuesday after Goldman Sachs Group Inc. said a Food and Drug Administration response to questions over the safety of energy drinks was “encouraging.”

The shares surged $6.09 percent to end at $51.97 in New York, after earlier trading at $53.19. The stock was little changed this year through Monday, after U.S. regulators confirmed reports last month that the Corona, California-based company’s caffeinated energy drinks were cited in the deaths of five people in the past year.

The FDA is employing the help of outside advisers to determine whether the beverages may cause harm when consumed in excess or by those with pre-existing cardiac conditions, it wrote in a letter released Tuesday. Any regulatory outcome is likely to be “benign,” Judy Hong, an analyst with Goldman Sachs, said today in a note.

“Our overall impression of the FDA letter would be that, at this point, the FDA has little reason to think energy drinks are unsafe when used in a responsible manner,” Hong wrote in response to the FDA letter to Democratic Senator Dick Durbin, of Illinois. “To the extent energy drinks are used ‘inappropriately’ the FDA has no jurisdiction to take action against the manufacturer.”

Victims reported to the FDA had consumed Monster drinks prior to their deaths, according to incident reports that doctors and companies submit to the agency. The FDA said the incidents are considered to be allegations, and no conclusion is drawn until an investigation is completed.

Labeling, Ingredients

“Monster reiterates that its products are and have always been safe,” the company said following the reports’ release.

Based on the review revealed Tuesday, the agency may move to regulate the product’s use or labeling. The FDA said it will also look into whether the drinks’ ingredients in addition to caffeine are safe. The agency said it hadn’t seen problems with two main additives, taurine and guarana.

Energy drinks aren’t bound by the FDA guidelines for caffeine in sodas because they are often sold as dietary supplements. Soda typically can have as many as 71 milligrams of caffeine per 12 ounces and be considered safe by the FDA.

Caffeine in energy drinks often ranges from 160 milligrams to 500 milligrams a serving, the FDA said in an August letter responding to Durbin’s call for greater regulation.

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