The Coca-Cola Company (KO), PepsiCo, Inc. (PEP): Will Regulations Stall Growth of Energy Drinks?

The other side of the story

By now you must be thinking that energy drinks are ‘the’ sector to bank on but wait a minute. Let me bring you up-to-date with what’s happening at Monster (remember I told you it is your only way to get into this sector!). Monster’s image took a beating over the unfortunate death of the teenager from Maryland in December whose parent brought over a lawsuit over the company. In October 2012 the FDA reported that it is investigating as many as five deaths that may have linkages with Monster’s energy drink. While it has not been proved that any of the deaths are a directly due to Monster drinks it has brought the company under the regulatory scanner. There have been quite a lot of developments since then. Currently in news is the monthly the newsletter published by Dr Deborah Kennedy warning kids to stay away from energy drinks and Monster’s hugely criticized sharp retaliation to that. To improve its image Monster has made a big decision. It has announced that henceforth it will label its products as beverages and not dietary supplements and disclose nutritional facts of all its ingredients.

The bottom line

I believe the energy drinks sector (read Monster) should be approached with a hint of caution. It is true that this is a growing sector and carries tremendous potential. As more and more of the American public get conscious over drinking their soda alternate beverages like energy drinks, teas, etc. will gain grounds. However given the volatility that is emerging from the constant health campaigns and lawsuits against the energy drink makers, investors might wait a little before making their decision. If any of the lawsuits go against Monster or any other energy drink maker for that matter it can have a Hey huge negative impact. And things will be much worse if any legal restriction is imposed. So while having a Monster drink once in a while will surely not hurt it is better to be a little cautious with investing in this sector.

The article Will Regulations Stall Growth of Energy Drinks? originally appeared on Fool.com and is written by Eshna De.

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