Monster Beverage Corp.—based in Corona and with corporate roots in and senior executive connections to Orange County—bought Pacoima-based American Fruits and Flavors last week for $690 million.
Monster makes energy drinks and other beverage products.
American Fruits makes flavors, juices, concentrates, natural sweeteners and fruit-based products, and is a key supplier to Monster, which accounts for about 87% of American Fruits’ revenue.
That revenue has been growing at about 8% a year for the past four years, Monster said in a press release announcing the purchase. It said the deal brings key ingredients to the company’s success in-house.
“We secured the intellectual property of our flagship green energy drink and many of our other key flavors,” said Rodney Sacks, Monster’s chairman and chief executive, in the press release.
The deal “presents a unique opportunity for us to take ownership of our most important flavors,” said Hilton Schlosberg, Monster vice chairman and president.
Money in New Drinks
The Business Journal last year added Sacks and Schlosberg to its list of the wealthiest OC residents.
They each had an estimated worth of $1.1 billion based on their Monster Beverage holdings, estimated at the time to be about 16 million total shares. That was based on $143 per share; the stock traded recently at about $125 a share.
Sacks and Schlosberg got into the beverage business in Orange County in 1992 when the duo—recent immigrants from South Africa and the United Kingdom—bought Anaheim-based Hansen Natural Corp. for about $14 million.
Sacks had been an attorney, and Schlosberg had experience in packaging.
The “new age” beverage category was growing in popularity, and Hansen Natural grew steadily, eventually changing its name and moving to Riverside County.
Sweet Sales
Monster’s gross sales increased for the 23rd consecutive year in 2015 to $3.1 billion, up from $2.8 billion in 2014.
Net income for the year, excluding one-time items, was about $575 million, up from $488 million year-over-year but below Wall Street expectations.
The Coca-Cola Co. in June bought one-sixth of Monster for $2.2 billion—a stake now worth about $4 billion. The companies cemented their deal by exchanging brands when the stake sold, focusing Monster on energy drinks, and expanded their work together in other ways.
Monster’s market capitalization is about $27 billion.
Founders’ Future
Its corporate offices at 1 Monster Way are housed in a six-story building of 141,000 square feet. Its warehouse and distribution space in Corona totals 346,500 square feet.
Sacks and Schlosberg have owned homes in Laguna Beach and Big Canyon.
They also have invested in Orange County real estate. The partners in October joined with Irvine-based real estate investment and management firm PRES Cos. to pay about $42 million for the 10-story TriCentre office building at the intersection of the Santa Ana (I-5) and Orange (57) freeways in Orange.
Monster said the American Fruits acquisition will add $87 million of adjusted operating income this year.
The deal is expected to close in the first quarter.
The two companies have worked together for about 20 years.
Sacks and Schlosberg said the deal will help Monster develop new flavors and products.
Analysts were generally positive on the buy based on the research and development benefits; better margins from owning some flavor production; protecting intellectual property; and controlling more of its supply chain.
The acquisition, plus expanded international distribution through Coca-Cola’s network, could lead Monster to grow faster overseas, the analysts said.
