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Why Coca-Cola will launch a global attack on energy drink king Red Bull

Brian Sozzi
Editor-at-Large

Can’t blame Cola-Cola (KO) for what it’s very likely to do next: declare war on the old guard down the energy drink section.

The soda giant logged an arbitration case win this week against energy drink king — and frenemy — Monster Beverage. Coca-Cola has battled Monster — which it has a more than 16% stake in — since 2018 as the latter said Coca-Cola selling an energy drink in the U.S. would violate its agreement.

With that win in the books, many around Wall Street expect Coke to bring Coke Energy to the U.S. soon. Coke Energy — an energy drink with a tame 80 milligrams of caffeine inside a slim Red Bull-like can —launched in select European markets and Australia earlier this year. Consumer response has been positive, says veteran Wells Fargo beverage analyst Bonnie Herzog after a recent meeting with Coke management. Herzog adds Coke Energy has quickly gained “significant” shelf space in Europe.

Both early takeaways suggest Coke could make a fast headway in the U.S. market for energy drinks.

“While we think it’s possible that Coca-Cola Energy cannibalizes some of Coke’s existing lineup, we think the opportunity to gain share in an entirely new category is too good of an opportunity for Coke to forego, and we ultimately expect sales of Coca-Cola Energy to be accretive to Coke’s total beverage share in Europe and beyond,” Herzog says.

A Coca-Cola spokesperson tells Yahoo Finance that plans for Coke Energy will be shared in the future.

“Overall, Coca-Cola Energy is a new energy product under the Coca-Cola brand and is more closely associated with classic Coke. We see Coke Energy as an addition to the category for a different energy drink audience,” the spokesperson says.

Indeed it makes sense for Coca-Cola to go after the energy drink market as it continues to see impressive growth. And hey, it’s just a big market with a lot of consumer interest that could easily support another entrant.

Energy drink sales for the 52-weeks ended May 25 topped $11.8 billion, up 8.9% year-over-year, according to Nielsen.

Coke is feeling caffeine this year

Clearly, Coke is all-in on caffeine in 2019. Coke said on its first quarter earnings call it’s expanding its test of coffee-infused soda to 25 markets this year. The company debuted Coke ‘Plus Cafe Espresso’ in Southeast Asia in 2018.

A Coke spokesman told Yahoo Finance at the time there are no plans to debut Coke Coffee in the U.S. But it will likely be here before you know it.

Coke is also poised to release ready-to-drink coffee products under the Costa brand shortly. No launch markets were shared.

CEO James Quincey said these more caffeinated coffee products — along with the new Coke Energy — take aim at people looking for a “pick me up” in the afternoon.

Brian Sozzi is an editor-at-large and co-host of ‘The First Trade’ at Yahoo Finance. Follow Brian Sozzi him on Twitter @BrianSozzi

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