(FROM THE WALL STREET JOURNAL 5/27/15) 
   By Mike Esterl 

It took Coca-Cola Co. years to decide to buy a stake in Monster Beverage Corp. Now as it prepares to assume 16.7% of the edgy energy-drink company early next month, it's easy to see why.

Last month, Monster settled two wrongful-death lawsuits, and another suit involving the death of a 14-year-old could reach a jury this summer. It faces at least five product-liability lawsuits.

The Food and Drug Administration is investigating whether energy drinks are riskier than other caffeinated products. A civil case against Monster by the San Francisco city attorney is scheduled for trial in February. The New York state attorney general has alleged in an ongoing investigation that Monster paid college "ambassadors" to encourage underage freshmen to mix Monster with alcohol and supplied company-branded funnels for rapid consumption.

Monster says its drinks, which also contain the amino acid taurine, and other ingredients, are safe. It says the lawsuits lack merit; it doesn't expect any material impact. At least three lawsuits accusing Monster of misleading marketing have been dismissed since 2013.

Coke says it did due diligence on the Corona, Calif., company's legal proceedings and that energy drinks have been consumed world-wide for more than 20 years.

Still, the legal challenges highlight the business risks dogging the $10 billion U.S. energy-drink market just as Coke prepares to take part ownership of Monster. They also raise questions about how energy drinks will fit with Coke's apple-pie image. Coke's $2.15 billion deal announced last August is expected to close in early June.

Coke weighed buying Monster for several years, attracted to Monster's rapid growth as soda sales slowed. When Coke opted last year for the minority stake, it was "about protecting the [Coke] brand and the image of the company," said a person close to Coke.

An August trial is scheduled in the civil case of 14-year-old Anais Fournier, who died of cardiac arrest in 2011 after drinking two Monsters within 24 hours, according to the complaint. The Maryland teen had gone with friends to the mall where she bought Monster at a candy store before coming home Dec. 17 and collapsing around 9 p.m. She never regained consciousness.

Monster said the lawsuit, filed by the family, "is completely unfounded" and that Miss Fournier had serious health problems. The teen's mother, Wendy Crossland, confirmed her daughter had been diagnosed with Ehlers-Danlos syndrome, a connective tissue disorder, and mitral valve prolapse but said she didn't have physical restrictions and hadn't missed school.

Ms. Crossland believes her daughter would be alive if energy drinks had better warnings. Her daughter was "obsessive" about reading labels, she said.

Monster isn't the only energy drink drawing fire. Red Bull GmbH, the global top-seller, agreed to pay more than $13 million last year to settle allegations that it misled consumers by exaggerating the lift gotten from the drink. It says its drinks are safe and denies wrongdoing. Living Essentials LLC, the distributor of 5-Hour Energy, has been sued by five state attorneys general over marketing. It also defends the safety and marketing of its energy shots.

Monster, whose black can features a neon-green claw-ripped "M," had a leading 38.9% share of the U.S. market by volume last year, according to industry tracker Beverage Digest. Its revenue rose 9.7% to $2.46 billion in 2014.

The FDA is reviewing about 300 "adverse event" reports received since 2004 allegedly linked to energy drinks, including 31 deaths and heart problems or convulsions. Of those, 142 were filed between October 2012 and April 2015, according to the FDA, responding to a Freedom of Information Act request. Eighty-nine reports involved 5-Hour Energy; Monster was named in 40 reports; seven involved Red Bull.

In 2013, the American Medical Association warned that high levels of caffeine may cause heart problems and supported banning energy-drink marketing to those younger than 18. The drinks typically contain 10 milligrams of caffeine per ounce, roughly three times more than cola but half that of an ounce of Starbucks. Less is known about the combined impact of other ingredients found in energy drinks, although there is no evidence they are dangerous on their own.

Monster cans caution the product is "not recommended for children, pregnant women or people sensitive to caffeine" and have carried warning labels since launching in 2002. It says reaction to caffeine is a function of weight, not age.

The company has toned down marketing in recent years. It still touts "a smooth easy drinking flavor" on its website, for instance, but no longer says consumers can "really pound down" the product. It began listing the amount of caffeine on cans in 2013.

Monster says it doesn't promote mixing alcohol with energy drinks. It says college ambassadors are required to contractually agree to written guidelines, including making sure a system is in place to adhere to minimum drinking-age laws.

The company also says it doesn't market to children, which it defines as younger than 13. Yet, in a court filing last month in San Francisco, that city's attorney alleges Monster has sponsored sports competitions for children as young as four and that its social-networking website had more than 2,400 members younger than 13 before the company restricted access in 2013.

For 2014, Monster reported $43.8 million in professional service expenses, including accounting and legal costs, up from $38.7 million in 2013 and $19.7 million in 2012.

Monster has settled three civil lawsuits, two alleging wrongful death. The other case, settled last August, involved Jason Hamric, who suffered a non-fatal heart attack in 2011, when, as a 16-year-old, he collapsed at an Oklahoma church after drinking at least one can of Monster, according to his family. Monster argued there was no evidence linking its drink. Neither side would discuss settlement details.

Access Investor Kit for The Coca-Cola Co.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US1912161007

Access Investor Kit for Monster Beverage Corp.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US6117401017

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

Coca Cola (NYSE:KO)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more Coca Cola Charts.
Coca Cola (NYSE:KO)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more Coca Cola Charts.