My original premise for this blog was to share a variety of leadership and branding principles with the current generation of business leaders. With forty years in the saddle, hundreds of dusty trails and a few fistfights along the way, I have an oasis of management insight in which to draw. More than 60 blogs later, I remain of the view that the vast majority of the strategic tenets that guided me as a CMO and CEO remain valid today. Yet every so often, I come across a very successful exception to the rule.
Even though I am far removed from the energy drink target market, I’m a little embarrassed to admit my ignorance of the category and what makes it tick. Until last week, I thought the green Monster logo that appears on the hats and t-shirts of the rebellious youth represented the recruiting firm, monster.com. You can imagine my shock when I dug a little deeper and unearthed the size and scope of the Monster Beverage Corporation. Started just ten years ago, this company boasts sales of $1.95 billion (+ 31% vs. year ago) and an after tax profit of $286 million – almost 17% of sales. That’s a monster of a return.
Of course the brand started with a monster of an idea – cool brand name – intrusive logo – defiant imagery. The result is a brand that has achieved cult status by actually positioning itself as the anti-cult to the market leader, Red Bull. When your brand has cult status (as both brands do), you have the power to break a lot of rules. Monster has done just that.
The conventional business principle is to be first-in. We all accept that the early bird gets the worm, and Red Bull certainly enjoys the rewards. But in this case, the second mouse got a good bite of the cheese – the #2 position in an exploding market.
For brands that are not first-in, conventional wisdom suggests creating a better product than the leader. However, the energy drink category is not about product differentiation. It is about image and target group differentiation.
Pundits recommend specializing in one category and sticking to it. Monster takes the opposite view. I counted 20 sub-brands and over a hundred stock keeping units. On top of that, I found the Monster logo on an array of items ranging from apparel to condoms – so much for the branding principles in Al Reis and Jack Trout’s best seller, The 22 Immutable Laws of Marketing. An entire chapter is spent on avoiding the urge to “line extend” versus creating unique new products.
Controlling your own distribution is a no-brainer to most astute marketers. Monster doesn’t seem to give a damn about this principle, either. They use distributors, such as Anheuser-Busch to get their products to the stores. As for controlling quality with your own manufacturing facilities? I found no evidence of any manufacturing plants within the Monster world. Seemingly, they are content to have others co-pack their offerings.
In most industries, creating scale and leveraging that scale is the key factor for success. Coca-Cola and PepsiCo have benefited from this strategy for several decades. As it turns out, entries from Coke (Full Throttle) and Pepsi (AMP) enjoy considerable scale in manufacturing and distribution. Monster’s approach is completely contrary to this principle. And despite the marketing muscle of these giants, Monster is a far more successful energy drink enterprise.
And finally, good marketers never launch a premium brand concept at a low price. Ironically, Monster launched in 16 ounce cans at the same unit price as Red Bull’s 8.3 ounce size. Works for them.
So, even though the experts (including me) say zig, Monster zags. Today, they command a healthy 29% of the market, 13 points back of market leader, Red Bull. The third brand into the market was Rockstar, an independent that currently holds an 11% share. By the time the corporate giants got into the game, the territory was mapped out by these 3 independent entrepreneurs. Coke’s Full Throttle (7% share) and Pepsi’s AMP (4%) remain well back of the pack with the combined market share of Rockstar.
Notwithstanding the fact that Monster’s game-changing tactics shattered some of marketing’s most sacred laws, I recommend you don’t try them at home. Conventional marketers, like Coke and Pepsi, soon discover that their cultural artillery isn’t suited to the cult brand game. Unless you are extremely entrepreneurial and creative, you’d be wise to stick to your knitting and not get sucked into a war you cannot win.