KO Coca Cola Company

By Dave Sebastian and Jennifer Maloney 

Coca-Cola Co. won an arbitration claim against Monster Beverage Corp., clearing the way for the soda giant to sell an energy version of Coke.

Monster had tried to stop the rollout of Coca-Cola Energy, which went on sale last year in Europe. A Coke spokesman declined to comment on when it may be released in the U.S.

The matter was a delicate one because of the companies' close relationship. Coke is Monster's distribution partner and a significant Monster shareholder. The ruling increases pressure on Monster as competitors take market share with new brands touting ingredients with health benefits.

Coke's energy drink, and its diet version, Coca-Cola Energy No Sugar, contain caffeine from naturally derived sources and guarana extract.

Monster last year accused Coca-Cola of violating a noncompete agreement the companies struck in 2015, when Coke bought a 16.7% stake in Monster and agreed to distribute the company's energy drinks in the U.S. and Canada. They later expanded the agreement to include distribution in other markets overseas. Coke also transferred ownership of its energy drinks business, including NOS and Full Throttle, to Monster.

The deal barred the soda giant from distributing competitive energy drinks but included an exception for products marketed under the Coca-Cola brand.

The two companies filed their dispute before the American Arbitration Association in October 2018.

The arbitrators ruled on June 28 that Coke is able to market the energy drink in areas where it has already been launched, as well as in additional global markets. Coca-Cola Energy products are an exemption to the noncompete provision, as they are marketed under the Coca-Cola brand, the arbitrators decided.

"The companies respect the arbitrators' decision and appreciate that the dispute was resolved amicably," Coke and Monster said, jointly announcing the agreement. "While there was a disagreement between Coca-Cola and Monster over contractual language, the companies value their relationship and look forward to their continued partnership."

Responding to increased competition, Monster in March launched a new brand called Reign, which contains coenzyme Q10, a dietary supplement taken for heart health. The company is also considering an expansion into alcohol and other nonalcoholic drinks, including cannabis-infused beverages, should they become federally legal, Monster has said.

Write to Jennifer Maloney at jennifer.maloney@wsj.com

(END) Dow Jones Newswires

July 01, 2019 12:29 ET (16:29 GMT)

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