Dive Brief:
Monster Beverage is expected introduce a new brand of alcoholic seltzer beverage to retail in 2021, according to Stifel analyst Mark Astrachan.

Astrachan estimates if this product launch could achieve a 3.3% market share in the hard seltzer category, as Monster’s Reign brand managed in the energy drink space, it would generate $76 million. That could make up 2.6% of Monster’s estimated 2020 U.S. sales. He noted the company would likely distribute the beverage through a large beer network.

Additionally, the analyst said the energy drink giant is likely to launch a non-alcoholic sparkling water that it would distribute under its Monster brand.

Dive Insight:
As the market for its signature beverages becomes more competitive, Monster is looking to energize its portfolio. Last year, the company’s CEO Rodney Sacks announced that the company is working to expand into categories outside of energy drinks, including alcoholic beverages and cannabis creations. Now, it appears the energy drink giant may have settled on hard seltzer as its first step into the sector.
Seltzer has been a disruptive entrant into the alcohol space. Hard seltzer accounted for 21% of millennial alcoholic beverage consumption in the last year, according to Bank of America Merrill Lynch’s global beverage survey. UBS expects the category balloon to $2.5 billion in sales by 2021, which would mean a 66% annual growth rate, according to analysis cited by Markets Insider.
While seltzer is a trendy beverage, it is also one that is prompting a waterfall of competition to pour into the space. Since hard seltzer sales grew nearly 200% during the last year, according to Nielsen data, big alcohol companies like Constellation Brands and AB InBev have launched their own hard seltzer brands to keep up. Monster would be the latest entrant into a category where it has limited experience.
Although Stifel suggested that the energy drink company would work with a large beer network for distribution purposes and would spin off a new brand to sell this product, that still leaves Monster to master the market of a whole new subset of consumers. However, although alcoholic beverages are unfamiliar territory, Monster is not one to be scared by innovation.
The company has leaned into innovation as a strategy to boost its sales, and it seems to be working so far. The company launched a new energy drink called Reign, which after 14 months climbed to take the title of the fifth-largest U.S. energy drink brand, according to Stifel data. Monster also debuted an oat milk-based vegan energy drink called Java Monster Farmer’s Oats last fall. It launched a Dragon Tea line, a white tea with hints of dragonfruit and açai flavors. The innovation appears to have paid off with the company’s first quarter net sales rising 12.3% to $1.06 billion.
While the company’s sales continue to do well, Monster Beverage faces growing competition as the energy drink space becomes more saturated and the company remains under pressure to innovate in order to stand out. Energy drinks are another fast-growing category. Energy drink and shot sales in the U.S. rose 29.8% from 2013 to 2018, CNBC reported, citing data from Mintel. 
As a result of its growth, many big names are getting into the increasingly competitive energy drink market, including Amazon’s private label energy drinks, Keurig Dr Pepper’s partnership on Adrenaline Shoc, PepsiCo’s $3.85 billion acquisition of Rockstar and Coca-Cola’s own branded energy beverage.
It is clear that Monster is going to need to work hard to continue to fight off the competition for market share. Alcohol may present an avenue for success for the company. Studies have shown millennials and Gen Zers don’t have much loyalty to legacy brands and are willing to try trendy alcoholic beverages, like craft spirits and low-calorie drinks. If Monster is able to tap into that demographic as it looks to launch into the hard seltzer space, it could help the company keep an edge over its growing competition in the beverage space.