Magazine

Hansen Natural


Health nuts know Hansen Natural Corp. (HANS) as a maker of wholesome beverages such as preservative-free natural sodas and low-carb peach smoothies. But these days Hansen is blowing through beverage aisles with an entirely different product. Hansen's Monster Energy drinks offer giant doses of caffeine and sugar in big black cans adorned with neon-colored claw marks. The scary packaging, plus a bevy of extreme-sports sponsorships, positions Monster as an edgy alternative to Red Bull in the fast-growing, $2 billion a year energy-drink market. Monster's slogan: ``Unleash the beast.''

EARNINGS

$20.4

million

SALES

$180.3

million

RANKING

#26

LOCATION

Corona, Calif.

WHAT'S HOT

An energy drink called Monster that's flying off the shelves. Its sales rose 162% last year.

Monster has certainly energized Hansen. The company has seen its sales more than double since it introduced the brand in April, 2002. Last year, Hansen earned $20 million on sales of $180 million, up from just $3 million of profits on sales of $80 million in 2001. Sales nearly doubled, while profits quadrupled, in this year's first quarter. Those results helped Hansen earn the No. 26 spot on BusinessWeek's annual ranking of Hot Growth Companies.

Hansen owes its transformation to two South African businessmen, Rodney C. Sacks, 55, the company's chairman and chief executive, and Hilton H. Schlosberg, 51, president and chief financial officer. After raising $6 million from family and friends, the pair bought control of a publicly traded shell company in 1990 and began searching for a business to buy. Through an investment banker, they learned of Hansen, a maker of natural sodas and juices, which dates back to one founded by Hubert Hansen in 1935. In 1992, Sacks and Schlosberg paid $14.5 million for the company, which was doing about $17 million a year in sales.

MONSTER HIT

The business chugged along, producing decent if unspectacular growth, with products such as fruit-flavored ice teas. ``There wasn't a real point of difference,'' Sacks admits. Then the pair decided to take on Red Bull, which they had observed starting up in Europe. In 1997, the same year Red Bull was launched in the U.S., Hansen's Energy hit shelves. The drink was carbonated, slightly citrusy, and heavy on the sugar and caffeine. But unlike Red Bull -- which sampled its product aggressively at sporting events and on campuses -- Hansen's Energy failed to strike a chord with core energy-drink consumers, such as college kids, truck drivers, and action sports fans.

So Sacks and Schlosberg went back to the drawing board, mixing up a new beverage with even higher levels of sugar and caffeine. They launched the product under the new Monster label and packaged it in 16-ounce cans -- twice the size of Red Bull. By selling the concoction to local beverage distributors at costs comparable to Red Bull, they ensured that consumers would pay roughly the same price (about $1.99 a can) but get double the volume.

Hansen has jolted the Monster brand with a dose of guerrilla marketing. Teams of Monster ``ambassadors'' give out samples of the product at concerts, beach parties, and other events. The company also sponsors motocross, surfing, and skateboarding competitions. Hansen representatives in black Monster vans supplement the company's network of 300 independent distributors by assembling store displays and restocking specially designed racks in convenience store coolers. ``A lot of companies say they will do that; [Hansen] really delivers,'' says Daniel R. Perry, senior vice-president of All-American Bottling Corp., a Monster distributor based in Oklahoma City.

Hansen now owns an 18% share of the energy-drink category, according to the trade publication Beverage Digest. While Red Bull remains the leader with nearly half of the market, Hansen's energy-drink sales increased 162% last year -- more than three times Red Bull's growth rate. ``A small subset of consumers is going wild over these drinks,'' says Beverage Digest editor and publisher John Sicher. ``Hansen is really riding a tiger.''

CROWDED SHELVES

It's a jungle out there, though. Coca-Cola Co. (KO) is promoting its new Full Throttle energy drink. PepsiCo Inc. (PFE) is marketing energy drinks under its SoBe and Mountain Dew brands. And independent entrepreneurs have elbowed their way in with products such as Rockstar and FUZE Mega Energy. ``Every month we pick up a new product or two,'' says George Kalil, who runs an independent bottling company in Tucson.

Sacks estimates that the energy-drink category is growing 50% a year and that there's room in the market for everybody. ``These are the new soft drinks of the world,'' he declares. Sacks and Schlosberg are fending off the attack by diversifying. They've launched Joker, an energy drink sold exclusively in Circle K convenience stores, and Rumba, a caffeine-laced juice drink designed to be a morning pick-me-up. And they introduced Monster Assault, which comes in a black-and-gray camouflage can that says ``Declare war on the ordinary!'' It's a slogan that could describe the juiced-up strategy of this formerly sleepy beverage player. By Christopher Palmeri in Corona, Calif.


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