Latest / The Dutch Investors / #12 | From bankruptcy to billions | How Monster Beverage became the best performing stock in 30 years

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#12 | From bankruptcy to billions | How Monster Beverage became the best performing stock in 30 years · The Dutch Investors

• 0:00
  Siem: If someone asks you what has been the best performing stock over the past 30 years, what would you say?
• 0:06
  Siem: Most people might guess Nvidia, amazon, microsoft or perhaps Berkshire Hathaway All excellent investments, no doubt, but not the best performing stock.
• 0:18
  Siem: This company has rewarded investors with a staggering 200,000% return from 1987 to its peak.
• 0:27
  Siem: That means a $1000 investment would have turned into $2 million.
• 0:32
  Siem: Not bad right.
• 0:34
  Siem: And here's the crazy part this company doesn't even make its own product.
• 0:40
  Siem: What it truly sells is its brand.
• 0:44
  Siem: In this episode, we will also talk about a paradox and how this company actually needs its biggest competitor.
• 0:51
  Siem: Buckle up as we unleash the beast.
• 0:54
  Siem: Wink, wink, let us begin.
• 0:56
  Siem: Hi, everybody, welcome back.
• 1:06
  Siem: First of all, happy new year.
• 1:08
  Siem: New year and a brand new episode, the first one of 2025.
• 1:13
  Siem: And I'm so energized about today's episode, and that's not just because I'm also drinking a white monster energy.
• 1:20
  Siem: It's also because this company is pretty exciting and the story has quite a few lessons we can learn from.
• 1:27
  Siem: Luke and I recently did a 90-minute deep dive for our members on Monster Beverage and what a fascinating story and such a cool company.
• 1:35
  Siem: From becoming the best performing stock over the past 30 years.
• 1:39
  Siem: Imagine taking a bankrupt juice company flipping it on its head and turning it into the best performing stock over the past 30 years.
• 1:49
  Siem: That's exactly what Monster Beverage did.
• 1:52
  Siem: Our story starts in 1935 with a company called Hansen's Natural Corp Back then Hansen, so now Monster Beverage sold fruit juices and natural sodas Pretty basic.
• 2:07
  Siem: But fast forward to the 1980s and the company had bitten off more than it could chew Overexpansion, a few too many costly mistakes and boom bankruptcy in 1988.
• 2:20
  Siem: Not a promising start, and for many companies this would be the end, but not for Monster.
• 2:28
  Siem: Enter Rodney Sachs and Hilton Schlossberg, two lawyers from South Africa with no prior experience in beverages.
• 2:38
  Siem: After going bankrupt, the company was acquired by them.
• 2:41
  Siem: At first, the company just floated along, dabbling in sodas and juices, and it wasn't until the late 1990s when Red Bull started taking over Europe and this gave them an idea why not try this energy drink thing?
• 3:00
  Siem: And the first attempt Hansen's energy didn't exactly set the world on fire and, let's be honest, the name sucks and it surely didn't help.
• 3:10
  Siem: But this is where it gets interesting.
• 3:12
  Siem: They listened, they learned and in 2002 they rebranded that forgettable drink into what we now know as Monster Energy.
• 3:22
  Siem: And this is where the real story begins.
• 3:28
  Siem: What made Monster Energy such a success?
• 3:31
  Siem: I mean, how can these old dudes from South Africa with no prior experience become the best performing stock over the past 30 years?
• 3:41
  Siem: Stock over the past 30 years?
• 3:48
  Siem: First of all, the fact that the company nearly went bankrupt and was worth less than 20 cents at one moment is one of the reasons.
• 3:52
  Siem: And it makes sense, right?
• 3:54
  Siem: They were worth just a few hundred thousand dollars at one point, and to grow 200,000% from that point is still impressive't get me wrong, but it's possible because they were worth so little at one point.
• 4:08
  Siem: Imagine a fast-growing company, say palantir.
• 4:12
  Siem: This company is already worth 170 billion on the stock market and if this company were to do 200 000, the company would be worth more than the entire global economy.
• 4:24
  Siem: It's just not possible.
• 4:26
  Siem: So the fact that monster beverage went bankrupt, was worth barely anything and then turned it around with exceptional management and strategy means they were able to become the best performing stock over this past 30 years.
• 4:40
  Siem: So how did they do this?
• 4:44
  Siem: What is their say secret ingredient, if we might call it that?
• 4:48
  Siem: We believe it comes down to three key ingredients Marketing, competition and clustering.
• 4:57
  Siem: First, the branding ingredient.
• 5:00
  Siem: Monster doesn't just sell energy drinks.
• 5:03
  Siem: They sell an attitude, a feeling, perhaps even a bit of a lifestyle.
• 5:10
  Siem: Red Bull positions itself as the go-to energy drink for young professionals and extreme athletes, focusing on a sleek, sophisticated image.
• 5:20
  Siem: But Monster took the opposite approach, targeting a more rebellious crowd.
• 5:25
  Siem: And while Red Bull went for polished just look at the clean, small can Monster went bigger, bolder and wilder.
• 5:34
  Siem: Just look at all the different sizes of cans, colors and bold designs.
• 5:38
  Siem: Hence the unleash the beast slogan.
• 5:42
  Siem: The fact that they gave consumers a can twice as large for the same price as red bull got them in in the first place.
• 5:50
  Siem: People liked the fact they got more bang for their buck pretty smart marketing.
• 5:56
  Siem: But there's more to this marketing strategy and it's very unorthodox.
• 6:00
  Siem: They sue companies like, like, like a lot and by a lot I mean like a lot and monster goes far, very far, with their marketing.
• 6:10
  Siem: They got their nickname, the trademark bully, for a reason.
• 6:14
  Siem: When it comes to competition or protecting their brand, monster doesn't hold back.
• 6:20
  Siem: They see a threat, they sue.
• 6:22
  Siem: They don't even care if they lose.
• 6:24
  Siem: Most of the time, the message is loud and clear Don't mess with us.
• 6:29
  Siem: It's like they've turned the legal system into their own bizarre version of a marketing instrument, and there are plenty of examples.
• 6:36
  Siem: Monster once sued Monsta Pizza of Wendover yes, a small pizza shop because of the word Monsta.
• 6:45
  Siem: They also went after Red Lipstick Monster, a beauty influencer, for daring to use Monster in her name.
• 6:52
  Siem: And, spoiler alert, they lost that one because, surprise, surprise, their brand wasn't harmed by lipstick.
• 6:59
  Siem: But here's a twist they did win a case in Bulgaria against luxury fashion brand Moncler.
• 7:05
  Siem: Why?
• 7:06
  Siem: Because Monster somehow convinced the court people might confuse energy drinks with high-end jackets.
• 7:12
  Siem: Moncler, monster yeah, pretty crazy, right.
• 7:17
  Siem: And then there's the big move with Bang Energy, and this one is straight out of a movie.
• 7:22
  Siem: Bang's parent company, vital Pharmaceuticals, had just lost a lawsuit to Pepsi and was struggling financially.
• 7:28
  Siem: And Monster knew this and swooped in with their own lawsuit over false advertising, won and basically pushed Bang into bankruptcy.
• 7:38
  Siem: Now guess what happened six months later, bang being worth barely anything from what it used to be, monster bought Bang Energy for 362 million.
• 7:49
  Siem: Talk about being ruthless.
• 7:52
  Siem: So what's the lesson here?
• 7:54
  Siem: If your company has the word monster in it, you're screwed.
• 7:57
  Siem: Well, maybe not that crazy, but if it contains the word monster or rhymes with it, I mean you better watch out.
• 8:05
  Siem: Monster doesn't just unleash the beast, they are the beast, and thank God we are not called the Dutch Monster investors, right?
• 8:14
  Siem: No, but seriously, the suing of other companies is just part of their image and marketing.
• 8:20
  Siem: Now here's the part I love most Monster isn't really in the beverage business.
• 8:26
  Siem: Yes, they sell sell energy drinks but at its core, monster is a sales and marketing and branding powerhouse.
• 8:35
  Siem: Monster didn't rely on traditional TV ads or glossy magazine spreads.
• 8:40
  Siem: Instead, they hit the ground running literally by sponsoring extreme sports, music festivals and gaming tournaments, shoeing companies being in the news.
• 8:52
  Siem: Think about it.
• 8:53
  Siem: How different are monsters drinks from red bull or any other energy drink?
• 8:58
  Siem: Not much.
• 9:00
  Siem: And if we're being honest, what sets them apart is how they sell it.
• 9:03
  Siem: They have mastered the art of branding.
• 9:06
  Siem: They don't just slap their logo on events.
• 9:09
  Siem: They created a monster culture.
• 9:12
  Siem: They're targeting extreme sport folks think dirt bikers, but also esports professionals and gamers, but also rock concerts.
• 9:21
  Siem: And if you've ever seen their logo at a dirt bike rally or a skate park, that's not coincidence either.
• 9:29
  Siem: Monster poured millions into building a brand that felt like movement.
• 9:33
  Siem: Monster poured millions into building a brand that felt like a movement.
• 9:38
  Siem: They want people to connect with the brand and feel a part of it.
• 9:43
  Siem: Yes, there's a lot more going on than people usually think or make it out to be.
• 9:47
  Siem: But there's more to the monster story.
• 9:50
  Siem: The second ingredient, clustering.
• 9:54
  Siem: And to understand this concept we need to look at Coke and Pepsi, who mastered the art of creating duality.
• 10:00
  Siem: Everybody knows them and either likes Coke or Pepsi.
• 10:06
  Siem: Decades of competition have made them a household name.
• 10:09
  Siem: But here's the weird thing their rivalry didn't just hurt each other, it helped each other in a way.
• 10:17
  Siem: Research has shown that instead of asking should I drink soda, consumers started asking am I team Coke or team Pepsi?
• 10:26
  Siem: And they actually did an experiment.
• 10:29
  Siem: What they did was place a vending machine in a busy mall which only sold coke, and after 24 hours they went to the vending machines and counted how many cans were sold Around 50 cans.
• 10:41
  Siem: They then replaced the coke for a pepsi, left it in there for 24 hours and sold around 50 cans also.
• 10:48
  Siem: The third day they placed another vending machine next to it, in the first one filled with cans of Coke, the other one being fully stocked with cans of Pepsi.
• 10:58
  Siem: Guess what happened?
• 10:59
  Siem: By placing them next to each other, they actually sold around 200 cans each.
• 11:05
  Siem: So each vending machine doubled their sales.
• 11:08
  Siem: By competing, they actually increased each other's sales.
• 11:13
  Siem: In marketing, we call this coopetition, a blend of cooperation and competition.
• 11:19
  Siem: It became a two-horse race or duopoly.
• 11:23
  Siem: Now this same clustering effect has been observed in other markets.
• 11:29
  Siem: Think about iOS versus Android, or the recent Barbie and Oppenheimer phenomenon in cinema, or the recent Barbie and Oppenheimer phenomenon in cinema.
• 11:39
  Siem: Knowing all this, nobody in their right mind would consider going head-to-head with Coke or Pepsi.
• 11:44
  Siem: It's just way too costly and difficult.
• 11:47
  Siem: So how did Red Bull create a 200 billion dollar market against competition like Coca-Cola and Pepsi?
• 11:53
  Siem: Well, marketing expert Rory Sutherland said this, and I quote If you wanted to compete with Coke, you would think you need a soft drink that tastes nicer than Coke, costs less than Coke and comes in a really big can.
• 12:08
  Siem: No one succeeded with that approach.
• 12:11
  Siem: The most successful attempt to compete with Coke by miles is Red Bull.
• 12:16
  Siem: It costs a fortune.
• 12:17
  Siem: To compete with Coke by miles is Red Bull.
• 12:21
  Siem: It costs a fortune, tastes disgusting and comes in a tiny can.
• 12:23
  Siem: First of all, a hilarious quote, but it's true.
• 12:25
  Siem: It's a prime example of counter positioning.
• 12:28
  Siem: This is what Red Bull and Monster did against the established soda companies like Coca-Cola and Pepsi, while also working together.
• 12:36
  Siem: First there was water, coffee and tea.
• 12:39
  Siem: This then expanded to sodas and, instead of going head-to-head with Pepsi and coke, monster and Red Bull decided to create their own market the energy drinks market.
• 12:50
  Siem: We have a third and final ingredient we call partnerships.
• 12:54
  Siem: Back in 2014, monster struck gold when Coca-Cola bought nearly 70% of the company.
• 13:01
  Siem: This wasn't just about cash for either company.
• 13:04
  Siem: This was a power move for both Coca-Cola and Monster.
• 13:08
  Siem: Coca-cola wanted to become part of the growing energy drink sector and Monster knew setting up their own distribution network would be near impossible, so they teamed up.
• 13:18
  Siem: By teaming up with Coke, monster got access to one of the best global distribution networks on the planet.
• 13:24
  Siem: Suddenly, their cans weren't just popping up at your local gas station, they were everywhere, from small town grocery stores to big supermarkets across the globe.
• 13:35
  Siem: And here's where it gets even more interesting.
• 13:37
  Siem: Monster doesn't actually make their own drinks.
• 13:41
  Siem: They outsource all the production, which means no factories, no equipment headaches and way more time to focus on what they do best Marketing, branding and making you think I need that can of caffeine in my life.
• 13:57
  Siem: Pair that with Coca-Cola's global reach and experience and it was like a rocket fuel for their growth.
• 14:03
  Siem: The deal was a win-win Monster went from being pretty big to unstoppable and Coca-Cola got a slice of the booming energy drink markets without competing with their own soda empire.
• 14:15
  Siem: They showed that the right partnership is the ultimate energy boost.
• 14:20
  Siem: The incentives for both companies are now aligned and they rely on each other and both want each other to succeed and do well.
• 14:28
  Siem: Man investing is just such a fascinating world.
• 14:31
  Siem: There is something new to be learned every day.
• 14:33
  Siem: Love it, and we go even deeper into monster beverage in our premium fundamental analysis over on the dutchinvestorcom, if you're interested.
• 14:42
  Siem: So what are the key takeaways from monster success story we can learn from as an investor?
• 14:48
  Siem: The lesson I took away from this story would be to find your uniqueness instead of trying to compete with competition in an already established market or product.
• 14:58
  Siem: Be different.
• 14:59
  Siem: A business should be unique.
• 15:01
  Siem: If it's not unique, why would consumers choose your service or product?
• 15:05
  Siem: Is it the brand?
• 15:07
  Siem: Is it the quality?
• 15:08
  Siem: Is it the service?
• 15:09
  Siem: Whatever it is, be unique and deliver on what you preach.
• 15:13
  Siem: Monster didn't try to compete or go head to head with coke, pepsi or redbull.
• 15:18
  Siem: Instead, they carved out their own niche edgy, rebellious and in your face.
• 15:23
  Siem: Branding your product is important, but don't forget about your brand.
• 15:27
  Siem: Monster's relentless focus on aligning with its audience made them the second most powerful energy drink company in the world without making their own energy drinks.
• 15:39
  Siem: For me, another big lesson as an investor is this Finding successful businesses isn't just about having a great product I mean, most of the time these energy drinks taste horrible, they are not healthy and they are just a shot of caffeine but it's about how they position it, market it and connect with the right audience.
• 16:01
  Siem: This is a story of reinvention, resilience and about being ruthless.
• 16:06
  Siem: That proved that branding and marketing, when done right, can transform even a commodity into the best performing stock in 30 years.
• 16:16
  Siem: Thank you for listening.
• 16:18
  Siem: Have a beautiful week and unleash the beast.