MNST Responds to Court Verdict

Monster Beverage Corporation (MNST) recently responded to the U.S court’s dismissal of its lawsuit against San Francisco City Attorney Dennis Herrera on Dec 16. The company claimed that Monster Energy Drinks are safe for consumption.

Monster Beverage had filed a lawsuit against San Francisco City Attorney Dennis Herrera to stop the City Attorney from conducting investigation and statewide litigation against the company for marketing highly-caffeinated energy drinks to children. The dismissal of Monster’s lawsuit will allow the state to proceed with the litigation against the company.

According to the City Attorney, pediatric studies indicate that highly caffeinated energy drinks are harmful for children. The attorney also claimed that the company needs to change its marketing strategy as it should not target young children or athletes.

However, Monster Beverage claimed that the health impact of its energy drinks can be best judged by the Food and Drug Administration (:FDA). In fact, it is FDA’s primary jurisdiction to check if energy drinks are safe for consumption. Also, the company stated that the performance enhancing slogans on the products are justifiable through valid scientific literature and are not actionable.

Earlier this month, Monster Beverage claimed that leading energy drinks contain half the amount of caffeine compared to coffee from companies such as Starbucks Corporation (SBUX).

Monster Beverage has been facing several legal issues related to the impact of its energy drinks on consumer health.

We note that, in June, the American Medical Association (:AMA) House of Delegates proposed a ban on marketing of energy drinks.

In Aug 2012, according to The Wall Street Journal, New York's attorney general initiated a probe to determine whether leading energy drink makers have misled their consumers about the ingredients and nutritional value of energy drinks manufactured by them. The investigation asked for information from three large companies, namely, PepsiCo Inc. (PEP), Monster Beverage and Living Essentials LLC. The investigation was intended to check the amount of caffeine and other artificial ingredients added to the drinks such as fruit flavors, vitamins B, taurine and ginseng.

Monster Beverage Corporation carries a Zacks Rank #4 (Sell). The WhiteWave Foods Company (WWAV) is a better-ranked company in the beverage sector, carrying a Zacks Rank #2 (Buy).

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