New York's attorney general has 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 requires information from
three large companies --
Monster Beverage Corp
) and Living Essentials LLC. As investigation progresses,
more companies may be asked to furnish additional information about
The ingredients and nutritional value of the energy drinks, and
their marketing by the concerned companies will be reviewed. The
investigation will check the amount of caffeine and other
artificial ingredients added to the drinks such as fruit flavors,
vitamins B, taurine and ginseng. It may also be noted that the term
"energy drink" is an ill-defined marketing term, which is not
included under any FDA regulation.
The energy drinks industry, worth $8.9 billion, grew at a
double-digit rate in fiscal 2011. The authority has been planning
to impose restrictions on the sale of soda beverages and the
present probe will be an addition to the move.
This investigation may impose further restrictions on beverage
companies. As a result, the companies may not be able to capitalize
on the increasing demand for energy drinks among young adults.
MONSTER BEVERAG (MNST): Free Stock Analysis
PEPSICO INC (PEP): Free Stock Analysis Report
To read this article on Zacks.com click here.
Given the rise in lifestyle diseases, more people are concerned
about the nutritional value of packaged food. As a result, most of
the companies are now focusing on increasing the health quotient of
their food products. The stress is on producing food products
with simple natural ingredients with minimum preservatives and
Net revenue of PepsiCo's beverage segments, PepsiCo Americas
Beverages, slipped 5% year over year (organically up 2%) to $5.35
billion in the second quarter of 2012. Any further regulation and
restriction on beverages will act as significant headwinds for the
We currently have a Neutral recommendation on both PepsiCo Inc. and
Monster Beverage Corp. and both the stocks carry a Zacks #3 Rank
(short-term Hold rating).