The Henry Fund Henry B. Tippie College of Business Willow Miller [[email protected]]

Monster Beverage Corp. October 19, 2020 Consumer Staples – Energy Drinks Stock Rating BUY Investment Thesis Target Price $90-$95 Monster Beverage Corp. (Monster) is a BUY because we see an upside of Henry Fund Adjusted DCF $80 12.5% between our target price ($90) and the market price ($80). Henry Fund DDM $97 Consequently, we believe that Monster’s price to earnings premium Relative Multiple $57 (39.5x) is warranted given the attractive nature of the company’s Price Data business model, debt structure, profitability, and growth prospects. Current Price $80.8 52wk Range $50.6 – $87.1 Drivers of Thesis Consensus 1yr Target $88 • We project topline to grow by a 10% 5 year CAGR, which is stronger Key Statistics than industry (7.3% 5 year CAGR9) growth, since we believe Monster’s Market Cap (B) $43.2 “healthy” product launches and continued international expansion, Shares Outstanding (M) $527.6 combined with dominating international market share, will drive long Institutional Ownership 65.7% term growth Beta 0.98 • Monster has a more attractive business model, compared to its public Dividend Yield 0.0% peer group, with asset light operations and zero long term debt, Est. 5yr CAGR Growth 8.0% which enables strong cash flows Price/Earnings (TTM) 39.5 • Soft beverage branded energy drinks have failed to capture Price/Earnings (FY1) 33.5 significant market share from Monster, and we expect this trend to Price/Sales (TTM) 8.3 continue since consumers develop brand loyalty Price/Book (mrq) 8.2 Risks to Thesis Profitability • Demand for Monster beverages in convenience stores and gas Operating Margin 33.9% stations lower than anticipated due to the COVID-19 pandemic Net Profit Margin 26.6% • Long term growth challenged if international growth declines as a Return on Assets (TTM) 22.9% result of international preferences in previously unexposed to Return on Equity (TTM) 28.5% countries MNST Industry Sector • Long term growth challenged if the FDA passes age restriction 50

regulations on the energy industry, in response to recent legislation 40 Sources: Bloomberg, FactSet on highly concentrated caffeinated products due to safety concerns 39.5 30 28.0 Earnings Estimates 20 26.5 26.3 24.6 Year 2017 2018 2019 2020E 2021E 2022E 20.1 18.3 10 16.5 15.0 Consensus $1.40 $1.81 $2.03 $2.26 $2.55 $2.90 HF est. $1.40 $1.81 $2.03 $2.30 $2.56 $2.98 0 Growth 17.6% 29.2% 12.2% 13.3% 11.3% 16.4% P/E ROE EV/EBITDA 12 Month Performance Company Description MNST S&P 500 60% Monster Beverage Corp. was founded on

40% April 25, 1990 and is headquartered in Corona, CA. Monster Beverage Corp.1 20% engages in the development, marketing, sale and distribution of energy drink beverages. It 0% operates through the following segments: -20% Monster Energy Drinks, Strategic Brands and Other. -40% O N D J F M A M J J A S

Important disclosures appear on the last page of this report.

COMPANY DESCRIPTION 10.27% 5 year CAGR for the monster energy drink segment. See the figure below for the forecasted segment. Monster Beverage Corp. manufacturers and distributes flavored energy products on a global level to third parties Monster Energy Drink Brands who bottle and distribute Monster’s energy drinks. Monster is primarily exposed to the Americas and 8,000 produces most of its revenue in the United States. The 6,000 company derives revenue from Monster Energy Drinks, Strategic Brands, and Other segments. The Monster 4,000

Energy Drink segment generates approximately 90% of the Millions ($) 2,000 revenue for the company, while the Strategic Brands 0 1 generate 9% of the revenue. 2017 2018 2019 2020 2021 2022 2023 2024 Years Monster Energy Drinks

The Monster Energy drink segment is comprised of Source: Model Monster Energy products and Reign Total Body Fuel products, and has domestic and international exposure. Strategic Brands Overall, we believe that this segment is the most important component of Monster since it is profitable and The Strategic brand segment was more impacted by the houses the company’s growth potential. The Monster COVID-19 pandemic than the Monster Energy drinks energy drinks segment was adversely impacted by the segment. Net sales for the company’s strategic brands pandemic, as discussed later in the “COVID-19 Impact” segment, which includes brands acquired from The Coca- Cola Company in 2015,8 decreased by 24.7% to $59.6 section. For Q2 2020, the Monster energy drink segment 2 only increased by 0.8% to $1.03 billion.2 Prior to the million in the 2019 second quarter. Management cites pandemic, this segment experienced YTD quarterly double that this segment’s international exposure was the reason digit growth. for the sharp decline in sales due to extended lock downs. However, we see that this segment has been Consequently, we assume that the Monster energy drink underperforming since the 2015 acquisition and was an segment will return to strong quarterly growth past opportunistic sale on Coca-Cola’s part. FY2020, driven by case volume sales and average sales price per case. We forecast seasonal case volume growth, As a result, we forecast adverse effects of COVID-19 between 1% and 4% each quarter. We also expect pandemic in the latter half of FY2020 and the beginning management to hike the sales price of each case, each half of FY2021. We price in the combined adverse effects fourth quarter by 3% to 4%, based on historical price of the pandemic and historical underperformance (-6% to increases. Within these growth rates, we roughly price in -3.5%) in the case growth driver for the next two forward international expansion at a granular level in both the years. Past FY2023, the segment decreases at a quarter volume growth section and the average case sale section, rate between -1.4% to -1%, in line with historical decline. since we assume that growth will resemble the past few Additionally, we price in that the average price of the years as Monster has expanded internationally. strategic brands, which includes Monster’s “affordable” product line, are under half the price as the Monster Lastly, we choose not to price in the anticipated launch of Energy drink segment.1 Our assumptions produce a -2.31% a hard seltzer beverage, which management hinted at in 5 year CAGR for the strategic brands segment. See the the 2Q earnings call, as we do not have enough figure on the next page for the forecasted segment. information at this time. But, we assume that a launch of a hard seltzer or even a collaboration based partnership, with an established hard seltzer brand, will inspire growth similar to the successful 2019 launch of Reign and previous new product launches.7 Our assumptions produce a

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historically decreased as a percentage of sales. We believe Monster Strategic Brands that operating expenses have decreased as Monster 400 Beverage Corp. has scaled up and has benefited from its distribution partnership with Coca-Cola Company.8 We 300 forecast operating expenses growing by -0.74% each 200 quarter between Q3FY2020 and Q4 2024. Below is a table that shows the impact of the decreases expenses as a

Millions ($) 100 percentage of sales on net profit margin. 0 2017 2018 2019 2020 2021 2022 2023 2024 Year Net Profit Margin Years 2020 28.89% 2021 30.51% Source: Model 2022 30.67%

2023 30.80% Cost Structure Analysis 2024 30.83% Monster Beverage Corp. has two main expense accounts: Source: Model cost of sales and operating expenses. Cost of sales includes cost of raw materials as well as in-house handling and Balance Sheet Analysis shipping fees. Operating expenses include distribution, We believe that Monster Beverage has a strong balance marketing, and other operating expenses. We expect that sheet between zero long term debt and substantial as Monster Beverage gains economies of scale, in liquidity. As a result, even if the company is more adversely international markets, the company’s international per impacted by the COVID-19 pandemic than management unit costs will decrease and be at the level as domestic per 1 guidance/expectation, we believe that the company will unit expenses. Note, management does not provide have little problem servicing extra and unexpected granular details for each segment’s per unit costs; they expenses. merely cite that international costs for both segments are more expensive than domestic costs, at this point. Two Monster has zero long term debt. The company uses its scenarios where we believe that costs can decrease cash balance working capital line of credit that is similar to include the company’s 2019 acquisition of a an interest-bearing liability but not treated as leverage for manufacturing plant in Ireland, as discussed in the accounting purposes. According to the 2019 annual report, “International Expansion” subsection, which should lower the line of credit has a $15.0 million cap. At December 31, global shipping costs. Additionally, we expect that the 2019, the interest rate on borrowings under the line of strategic brands segment will continue to underperform credit was 5.5%.1 Currently, the company had no amounts and decrease as a percentage of revenue, and thereby outstanding on this line of credit. drive margin expansion since costs per case in the strategic brands exceed cost per case in monster energy drinks Besides debt, liquidity looks good for Monster. As of the segment. company last Q2 earnings release in June 30, 2020, the company had $921.3 million in cash and cash equivalents, We price in this story by assuming that most of the cost $250.8 million in short-term investments and $2.1 million decreases related to in-house handling and shipping, at in long-term investments.2 Management does not expect the international level, have been captured in the last this liquidity to be tapped into due to the COVID-19 couple quarters, so we use FY2020 Q1 and Q2 data to pandemic. forecast FY2020 Q3, FY2020 Q4, FY2021, FY2022, FY 2023, and FY 2024 costs of sales.. Consequently, we forecast Company Analysis costs as a percentage of sale as increasing 0.28% each quarter. Marketing with Sponsorships

As for operating expenses, we use a 3 year quarterly Monster markets its products through sponsorships with historical negative growth average, since the account has sporting events, gaming events, and music events, as well

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as individuals. We believe that this marketing/influencer domestic distribution center in Rialto, California, and its strategy targets a variety of demographics, especially (2019) international manufacturing plant in Kildare, young adults, and enables market share success, since Ireland.1 Overall, we think that Monster’s asset light many established and new customers become loyal business model is an advantage over all of its competitors customers.4 Other main players like Red Bull and Rockstar who have more PPE and lower margins due to the variable use a similar marketing/sponsorship strategy. This is in costs associated with PPE. See the “Peer Comparison” contrast to large soft beverage conglomerates like Coca- subsection for more details on operating strategies and Cola and PepsiCo, who use traditional marketing fundamental outcomes. strategies. We are unable to compare ad spend between competitors since both the private and public companies International Expansion do not provide transparency on their marketing expenses. Monster is growing its international expansion through Coca-Cola Partnership sales and manufacturing exposure, which we think is good since the international market has an appetite for We think that Monster’s partnership with Coca-Cola American style energy drinks. provides Monster with a competitive advantage over the company’s public peer group since the company was able Another aspect that is important to Monster is its to scale up (9.1% 5 year CAGR) in a very short time as the international exposure. As of 2020, 33% of sales are in partnership enabled the company to expanded in the international markets, which represents a 5% increase 1 international market.1 over the last 3 years.

In 2014, Monster Beverage Corporation and Coca-Cola Monster Beverage Exposure company entered into a partnership, where Coca-Cola Company received just under 20% of Monster in exchange for Monster to use its extensive worldwide bottling partnership system and distribution infrastructure.8 We expect the partnership to be on-going and continue to benefit Monster’s growth strategy even though Coca-Cola Source: 2019 Annual Report tried to take market share from Monster with its Coca-Cola energy, last year. As of 2020, Monster products are distributed in approximately 153 countries and territories worldwide.1 Asset Light Business Management states in the 2019 annual report that a main We believe that Monster is better positioned than most of goal of Monster Beverage is to continue expanding its its public peer group since the company does not have in- operations internationally into a variety of new markets, house operations for bottling and distributing product. including launches in China and various African and Middle Eastern countries. Moving forward, Monster will Between the Coca-Cola partnership and other third-party manufacture its international products in house at its contracts, Monster does not own its operations or own recently purchased in in Kildare, Ireland based plant very many facilities. Monster just supplies the instead of shipping them from California. The company will manufacturing plants with its ingredients. As a result, continue to use its Coca-Cola network as well as other Monster does not take on the burden of a lot of PPE. This third party bottlers and distributors. leads to zero initial capital investments and zero maintenance costs. Additionally, Monster’s contracts with We believe that the international expansion into new third party services have long horizons (20 years), so the markets, such as China, is important, since large markets, fixed costs are enabling strong bottom line growth.1 like China, demand energy drinks. According to Daxue Consulting, statistics show that the retail sales value of The only PPE Monster has is for its manufacturing of its canned energy drinks in China increased from 9 billion flavors operations. Most of the company’s PPE assets yuan (USD 1.3 billion) in 2009 to 87.5 billion yuan (USD comprise of its corporate campus and laboratory in 12.9 billion) in 2019. That is, energy drink sales increased Corona, California, its 1 million square foot warehouse and ninefold in just 10 years in China.11 Consequently, we think

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that the international energy drink market is a catalyst for Energy drink products now make up 20.8% of the domestic growth and we think that Monster’s international growth market share, whereas various Red Bull products makes up initiatives are good, so we price it into our model. 30.5% of the market share, based on the top five most sold energy drinks in the United States.12 We are unable to effectively, that is with great precision, price in future international expansion since the company Domestic Energy Drink Market Share does not release enough data. However, we assume that in the next five years the company will continue to grow topline as it has in the past with some increases in cost of goods sold since international operations have higher associated costs.

Product Mix

We believe that Monster’s diverse selection is a benefit to the company because Monster products appeal to more consumers by providing more options:

Company Product Count Source: Statista and Beverage Industry Magazine Monster 59 Red Bull 13 As seen in the figure, competitors like Rockstar Energy do Bang 19 not make the list and the growing brand, Bang has just Rockstar 28 over a quarter the amount of market share as Monster. Coca-Cola 4 We believe that Monster should be able to grow their PepsiCo 9 market share since Red Bull has a 0.67% 5 year CAGR5 1 Dr. Pepper 16 compared to Monster’s 9.06%. Though Bang could

National Beverage 28 challenge Monster’s market share growth. Source: Company Websites On an international level Monster’s Market share per We believe that multiple products and different flavors country is larger than domestic market share in many cater to customers’ various tastes and thereby build countries: customer loyalty. International Region 2020 Market Share Market Share Brazil 30.4% Chile 44.9% Monster is positioned well within the energy drink Denmark 25.6% industry in the United States, in terms of market share. United Kingdom 24.8% However, we believe that Monster is even better Norway 24.9% positioned on an international level, as the company is Sweden 13.8% growing its market share aggressively in tens of countries Spain 34.8% and captures up to 53.3% of the market outside of the Greece 35.2% United States. Poland 17.7% South Africa 17.7% Since 2017, Monster’s domestic market share has grown Czech Republic 13.2% by 3%, based on the top five sold energy drink products in Germany 15.1% the United States..13 In contrast, Red bull has lost about 3% Italy 16.8% of market share in the last 3 years, while Bang Energy has Australia 25.2% gained 6.6% of market share. According to Beverage Industry Magazine - July 2020 edition, multiple Monster New Zealand 10.4%

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South Korea 53.3% home and so consume more food at home, which partially Japan 51.1% off sets decreases in convenience store purchases. Source: Q2 Earnings Call Lawsuit We believe that Monster’s growing market share in these countries and combined with the market share in Monster Energy Corp. and Vital Pharmaceuticals Inc., countries, it is about to expand into, such as China and which owns the Bang brand are in a complicated lawsuit, 16 Egypt will fuel long term value for the company. We think where both parties have sued one another. We do not this because Monster has been successful in its previous expect that the lawsuits will result in unmanageable costs. international expansions and is a trailblazer in the global Monster initially sued Vital last September, alleging it was energy drinks market size, which is anticipated to reach “deceiving the public about the product’s ingredients and 17 USD 84.70 billion by 2026, growing at a CAGR of 7.3% from the benefits of consumption. ” In retaliation, Vital sued 2018 to 2026.14 Overall, we believe that Monster is Vital this week sued Monster, claiming trademark positioned well in terms of domestic market share and infringement over the brand name “REIGN” and knock-off even better in terms of international market share. packaging.

RECENT DEVELOPMENTS Q2 Earnings

On August 4 after the close, Monster reported adjusted 2Q20 earnings of $0.59 per share, $0.10 above consensus and up from $0.53 in the prior-year period.2 The company reported quarterly sales of $1,094 million, which is a -0.9% year over year, but surpassed the consensus at $1,007 million. Besides beating consensus, the company $300,000 worth of shares and authorized a new $500 million program. We factor these results, as well as Q1 results into our income statement and balance sheet projections. We were unable to factor in guidance for Source: Law.com FY2020, because the company did not offer any. The dispute is ongoing, and we believe that an outcome in COVID-19 Impact or against Monster’s favor will not terribly impact Monster, since as of July 2020, a ruling concluded that VPX The COVID-19 pandemic has negatively impacted registered its “REIGN” trademark after Monster had Monster’s sales, but we believe this impact is restricted to already launched its Reign products. In turn, we do not the short term. Monster management does not anticipate believe Monster will incur extensive costs from re- a material impact on supply as well as the ability of its co- branding its products. packers to bottle and distribute its products as a result of the COVID-19 pandemic.2 We think this is very important INDUSTRY TRENDS and will contribute to sales recovery, as the company can easily scale up sales once foot traffic in convenience and More FDA Regulations (Anticipated) gas station channels increase following global wide lockdowns. In the meanwhile, other channels such as Currently, the FDA does not have a specific category or eCommerce, warehouse stores, and grocery stores have specific regulations for energy drinks.21 However, as April experienced increase consumer demand as people stay at 2018, it regulates highly concentrated energy products that contain thousands of milligrams of caffeine, to fatal dose to adults.22 Since the FDA passed the 2018 regulation of highly concentrated caffeine products, the organization

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could choose to extend regulation to energy drinks if it eCommerce (Anticipated) deems energy drinks as a public health risk. We think this because energy drinks contribute to alarming statistics. We believe that the decrease in foot traffic at convenience stores will lead to an increase in demand for energy drinks According to a study published in the American Journal of from online stores. We think that consumers will still want Preventive Medicine, energy drink consumption in the a convenient way to buy the drinks that is in response the United States has increased substantially over the past COVID-19 pandemic. Most recent statistics on this decade among adolescents, young adults, and middle- anticipated trend include a 239.4% increase in Monster 18 aged adults. In some demographics, such as young sales on Amazon, during Q2.3 Since some channels are adults, consumption is up 6%. Additionally, hospital visits willing to ship heavy energy drinks via mail, we expect this 19 are increasing as a result of caffeine overdoses. And channel to become more popular moving forward for all according to the University of California's Nutrition Policy energy drink companies since the pandemic will continue Institute, up 40% of young people ages 12-17 consumer to negativity impact in-person store foot traffic in the short 20 energy drinks on a regular basis. We believe that the term. popularity of traditional energy drinks, plus the growing popularity of “healthy” energy drinks, discussed in the MARKETS AND COMPETITION subsection below, may cause the FDA to regulate the energy drink industry due to safety concerns. If this were The energy drink industry is in a high growth stage, to happen, we believe that regulations would include age although it is minorly impacted by the COVID-19 pandemic restrictions (18+ to purchase), capping energy drink in the short term, since the market is expected to caffeine levels, creating a public education campaign, and temporarily slow growth to 3.67% in 2020, due to the increasing regulatory scrutiny regarding the manufacture decreased foot traffic in convenience stores as a result of and labeling of energy drinks.23 At this point, these the COVID-19 pandemic.27 However, following 2020, the regulations could be inevitable considering that energy global energy drinks market size is anticipated to reach drinks are “healthy” now. USD 84.70 billion by 2026 growing at a CAGR of 7.3%.9 “Healthy” We believe that this growth is fueled by consumer demand on a domestic and mostly international level. Energy drinks Traditional processed and sugar filled energy drinks are are a relatively new way to consume caffeine and appeal still popular in the world wide, but have a questionable to a wide demographic ranging from students to new reputation from bad press about hospitalizations and parents to graveyard shift workers to etc. Even more, the deaths relating to energy drink consumption. As a result, industry is marketing energy drinks with natural the industry as seen a shift to holistic health and wellness. ingredients, consistent with American youth culture, More brands are developing “healthy” energy drinks with which has led to a surge in demand for energy drinks, as organic and natural ingredients that are perceived as well as an increase in new entrants wanting a “piece of the better-for-you to the consumer.24 Better-for-you pie.” ingredients include: caffeine, vitamins, herbal supplements, and natural sweeteners.9 Food & Beverage Over the last decade, demand has led to new entrants; Insider and Grandview Market Research expect that however, barriers to entry are rising between the high natural and organic energy drinks sales will reach $32 costs of development and production of energy drinks as billion by 2025, which would account for nearly 40% of the well as the necessary infrastructure to bottle and 9 U.S. market.34 In the last year, Monster has launched a distribute the energy drinks. These barriers to entry have plant based and vegan energy drink called Java Monster contributed to an intensely competitive market that is Farmer Oats and Reign Total Body Fuel, a zero sugar, zero highly concentrated, with the four largest companies calories and zero artificial flavors energy drink that (Monster, Red Bull, Rockstar, Bang) accounting for over contains added vitamins and amino acids.25 We believe 75.0% of the market. We anticipate that this concentration that both Monster and other key industry players will will continue to make it difficult for new entrances to be continue to adopt the “Healthy” energy drink trend to successful on a large scale even through competition is continue attracting consumer demand. extreme.

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Monster Beverage Corporation cites that it has well over Unfortunately, we are unable to compare how much of 50 brands it competes with at a domestic and international each company’s revenue is attributed to energy drinks level.1 For the purposes of this report, we focus only on because Coca-Cola, Pepsi, Dr. Pepper, and National caffeinated and carbonated drinks that are a part of Beverage do not break out energy drink specific data. All publicly traded brands: we know is that these companies have failed to capture significant market share from the energy drink industry • Coca-Cola Company (KO) which owns Coca-Cola after recently entering it in the last few years. Energy and many caffeinated soft drinks • PepsiCo, Inc. (PEP) which owns Pepsi Max, In relation to the public peer group, Monster is in the Mountain Dew, Mountain Dew Kickstart and middle of the pack in terms of stock price, market cap, Mountain Dew Amp Game Fuel and various revenue, and net income, as it is a smaller company caffeinated soft drinks relative to soft beverage giants. • Keurig Dr Pepper, Inc. (KDP) which owns A SHOC and Venom Energy and various caffeinated soft Company Stock Price Market Revenue Net drinks (10/19/20) Cap (B) (M) Income • National Beverage Corp. (FIZZ) which owns Rip It (M) and caffeinated soft drinks MNST 80 44 4201 1108 KO 50 215 37266 8985 As a result, we acknowledge that pure play energy drink PEP 142 196 67161 7314 brands like Red Bull, Rockstar, and Bang pose more of a KDP 30 42 11120 1254 threat to Monster; however, it is difficult to include these FIZZ 82 3.9 1000 130 names in a competitive analysis since these companies are Source: FactSet private. The other competitors such as Coca-Cola, PepsiCo, and Dr. Peer Comparisons Pepper are mass conglomerates with greater product mix and business mix. The only mid-cap competitor, National The Coca-Cola Co. (KO) is the nonalcoholic beverage Beverage, is like Monster in that it focuses on less company, which engages in the manufacture, market, and products. Like Monster, National Beverage has zero debt: sale of non-alcoholic beverages which include sparkling soft drinks, water, enhanced water and sports drinks, Company Total Debt-to- juice, dairy and plant-based beverages, tea and coffee and EBITDA (5 year) energy drinks (Coca-Cola Energy).9 MNST 0.0

PepsiCo Inc. (PEP) is one of the largest food and beverage KO 4.0 companies in the world. Pepsi operates in the Energy Drink PEP 2.7 Production industry primarily through its Mountain Dew KDP 4.2 Amp Energy brand. Like Coca-Cola, Pepsi has struggled to capture significant market share from the largest energy FIZZ 0.0 drink companies.9 Source: FactSet

Keurig Dr Pepper, Inc. engages in the production and We think that National Beverage having zero debt is marketing of non-alcoholic beverages. Its Packaged interesting considering it has 100% in-house operations Beverages segment offers finished beverages and other (production, manufacturing, bottling, distribution, and products, including own brands and third-party brands. marketing)30 like, PepsiCo32, and Dr. Pepper.31 The company owns two energy brands. A SHOC and Venom.31 This is important because an in-house operations strategy, as opposed to a third party partnership strategy, results in National Beverage Corp. engages in the development, higher costs. From an operation perspective, Monster manufacture, market, and sale of flavored beverage using third party services boosts the company’s net profit products. The company owns Rip It energy drink brand.30 margin and return on assets. The same affect is

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demonstrated by Coca-Cola, which has a combination of Monster’s business strategy also impacts fundamentals in-house operations and third party partnerships.29 We like valuation and growth metrics: believe this suggests that business models like Monster are more profitable. Company P/E TTM 5 Year CAGR EV/EBITDA Growth Company Net Profit ROIC ROE ROA MNST 39.5 26.5 11.3% Margin (BB) KO 23.5 21.9 -4.2% MNST 26.6 30.0 28.5 22.9 PEP 25.6 17.3 0.2% KO 23.9 12.8 49.6 10.5 KDP 27.9 15.6 12.7% FIZZ 29.8 16.6 9.1% PEP 10.8 17.4 49.9 9.4 Source: Bloomberg

KDP 11.3 4.0 5.5 2.6 With the exception of Keurig Green Maintain merging with Dr. Pepper in 2018,31 growth for the larger conglomerate FIZZ 12.9 30.1 33.2 23.6 soft beverage companies are lower relative to Monster Source: FactSet and Bloomberg and National Beverage. Additionally, companies with lower historical growth, trade at a lower price to earnings That is, asset light business models enable fixed costs and ratio. Therefore, the growth does come at a cost: provide an advantage over competitors who have in-house operations and therefore have lower margins due to the Company Forward 5 FY1 FY2 variable costs associated with PPE. For example, a Year CAGR EV/EBITDA EV/EBITDA competitor called the National Beverage Company (FIZZ) MNST 10.00% 25.17 22.74 experienced a 38% decrease in margins, in 2019, due to KO 1.70% 22.69 20.39 capital projects disrupting production and the price of PEP 3.50% 17.38 15.83 30 aluminum increasing by 7.7%. This is a scenario that KDP 3.20% 14.89 13.72 Monster would never experience, as even though the FIZZ 6.00% 16.01 15.38 company pays higher per unit manufacturing costs Source: Bloomberg and FactSet (relative to in-house strategized competitors), the company does so up front and does not incur capitalized Above are forward looking growth (5-year CAGR) maintenance costs. estimates and forward looking enterprise estimates for Monster’s public peer group. With the exception of Coca- Monster has peer group leading margins but has the Cola (far left point), there exists a relationship between lowest FCF yield with enterprise value and dividend yield high growth and high valuation: in the industry. We believe this is because the company is in a high growth phase and chooses to reinvest its cash into the company to grow and use share buybacks to return Forward Growth vs. EV/EBITDA cash to shareholders. Additionally, the company does not 30 use debt to fund its operations, so it taps into its cash piles, 25 which decreased FCF. Consequently, we believe that 20 Monster’s business strategy causes Monster to have a 15 lower FCF yield than its public peer group: 10 5 1FY EV/EBITDA Company FCF Yield with EV Dividend Yield 0 MNST 2.5 0.0% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% KO 3.5 3.3% Forward 5 Year CAGR PEP 2.6 2.9% KDP 3.9 2.0% Source: Bloomberg and FactSet FIZZ 4.2 0.0% Source: Bloomberg Monster (far right point) has the highest projected growth and valuation. As a result, we think that Monster is the

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best positioned in the energy drink industry relative to the effect may not be prevalent until a widely distributable public peer group: Coca-Cola Company, PepsiCo Inc., vaccine is available for mass consumptions. Keurig Dr Pepper, Inc., and National Beverage Corp. We think Monster has an advantage over the peer group since VALUATION the company is 100% exposed to energy drinks, which is a high growth industry. This will enable the company to Assumptions unlock value between new product launches and further IS: international expansion. Additionally, Monster’s business model (zero debt and asset light) enables higher net profit For discussion relating to our revenue, expenses, and margins. Therefore, we believe that Monster’s premium is profit margin story, see section “Company Description” warranted. section.

ECONOMIC OUTLOOK BS: Unemployment Rate We assume that Monster will continue not to access long term debt to fund operations ore investments. Operations According to Bloomberg, the current unemployment rate will continue to be funded by cash reserves and the net (7.9%) is elevated to 2008 recession levels.28 We believe working capital line of credit. unemployment effects Monster because energy drinks are Management states that international expansion and arguably discretionary products. As a result, elevated growth is a current focus of Monster. The company does unemployment could translate into decreased sales for not provide guidance on capital expenditures. Since the Monster. Regardless of the pandemic and decreased company started expanding internationally in the last few travel, less people working translates into less people years, we use the 3 year average dollar amount of capex stopping as gas stations before work to pick up their daily as the starting point for out projection. Since sales are energy drink. growing rapidly, we grow the account at consistent with COVID-19 Cases how operations expand to maintain the sales growth: Daily COVID-19 cases are at an all-time high according to Capex John Hopkins University Corona Virus Research Center.33 150

100

50 Millions ($)

0 2017 2018 2019 2020 2021 2022 2023 2024 Years

Source: Model Source: John Hopkins University The last major assumption on the balance sheet is the We believe this is an important indicator for Monster company’s share repurchase program. We use guidance because the company derives a significant level of sales to from the FY2020 Q2 report to forecast the share convenient stores and gas stations, which have repurchases. Monster authorized a $500 million share buy experienced lower traffic due to the COVID-19. pandemic back program and we assume the company exhausts the Consequently, we believe the elevation in cases, both program in under five years like it did with its last program. domestically and internationally, will continue to However, we assume that the company will take longer to adversely impact Monster sales for the foreseeable future exhaust its share repurchase program as the COVID-19 until the daily COVID-19 new cases plateaus. This plateau

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pandemic adversely effects operations. We think this Other aspects we chose not price in are eCommerce because the company only bought back $0.3 million worth growth as well as potential FDA regulations, since we are of share last quarter, which is much lower than the speculating that these two things may impact Monster. quarterly $200 million+. Each year, we grow the cost of Additionally, it is difficult to price in eCommerce growth share by the cost of equity (7.23%). Lastly, we assume that the way Monster breaks out its data and it is difficult to Monster will continue to use share buy back programs as scenario test how FDA regulation would impact Monster’s the main way it returns cash to shareholders. operations. Lastly, any long term tension from Coca-Cola’s Management has not indicated it intends to establish a Coca-Cola Energy Drink launch is not priced in, as we do dividend, so we do not believe that Monster will change not think the partnership will disintegrate unless it does, the way it allocates its cash allocation. which would be very difficult to price in.

What’s Priced In EPS

As discussed in the “Company description” section, we We are within EPS consensus since we assume costs will price in topline growth growing at a 10% 5 year CAGR. We stay fairly constant for Monster as it expands assume that topline growth will be similar to the past internationally since we believe that as the operations recent years, as Monster continuously released new mature, per unit costs will decrease due to fixed costs. products and expanded its geographic exposure. We Other analysts believe a similar margin story or a strong factor in the decrease as a percentage of sales of the top line growth story given that we are under the high end Strategic Brand segment, since it continues to of EPS consensus. underperform without the Monster brand label. We price in that cost of sales will grow less fast as a percentage of EPS FY2020 FY2021 FY2022 sales each quarter at a rate of 0.28% since we think that FactSet $2.16- $2.34- $2.58- Monster will increase efficiency as its international Range $2.32 $2.69 $3.08 operations mature. Additionally, we include that operating Henry Fund $2.30 $2.56 $2.98 expenses will decrease at a rate of -0.74% based on Source: FactSet and Model historical data and management noting that it does not anticipate that operating expenses will increase in the 2Q Models factored into target price release. In consequence, we anticipate net margin To determine a fair price for Monster, we do not use the expansion between strong topline growth and slower relative valuation model or DDM model since the company growing expenses. trades at a premium relative to its public peer group and What can’t effectively be priced in does not payout a dividend. We use the DCF model for the target price. However, due to the low inflationary We are unable to price in many catalysts for growth with environment, we decide to use a December 2019 10-year great precision since Monster management does not treasury note (2%), so our model yield’s realistic results. provide in-depth data. As a result, we were unable to price in international expansion at a granular level with much Sensitivity Testing precision since the company does not provide case volume Since we adjusted the WACC input by using a pre- and average case sales, each quarter, at the international pandemic (December 2019) risk free rate (2%), our WACC level. vs. CV Growth (4%) sensitivity table is important. As discussed in the “Company Description” section we chose not to model product releases like the hard seltzer that management mentioned on their Q2 earnings call. If the company decides to enter the alcoholic beverage space, we expect this to be a positive to Monster. We believe the same with other product launches that Source: Model management has not announced yet.

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In the sensitivity table, we include the WACC (7.23%) that thesis, such as the pandemic’s impact on Monster’s sales we calculated, as well as a WACC rates ranging from 6.48% and FDA regulations on the energy drink industry, should to 7.98% and long term growth rates. Lastly, we include a be monitored too. variety of long term growth values ranging from 3.25% to 4.75% to get insight on the sensitivity of CV growth. REFERENCES

Since growth assumptions are important to our model, as 1. 2019 Monster Annual Report we believe Monster will continue to grow, we sensitivity 2. Q2 Monster Report test both the CV growth in case volumes of both of 3. Q2 Monster Earnings Call Monster’s main segments, Monster energy drinks and 4. Monster Company Website strategic brands: 5. Statista 6. Food Business News 7. BeverageDailey.com 8. Monster Partnership with Coca-Cola Report 9. IBISWorld 10. FactSet 11. Daxue Consulting 12. Beverage Industry Magazine - July 2020 edition 13. Beverage Industry Magazine - July 2017 edition Source: Model 14. Research and Markets 15. Business Insurance Overall our DCF model is not too sensitive to average case 16. Law.com sale price hikes, so we assume that our model is more 17. LA Times sensitive to our cost assumptions. As a result, we 18. IFT sensitivity test our cost assumptions. We compared CV 19. SAMHSA cost of sales and CV operating expenses. In our model, we 20. Chicago Tribune assume a CV cost of sales as a percentage of sales at 21. FI 40.22% and a CV operating expenses as a percentage of 22. FDA sales as 20.1%: 23. NCBI 24. Food & Beverage Insider 25. Beverage Industry 26. Food Business News 27. Food Navigator

Source: Model 28. Bloomberg 29. KO 10-k Overall, as costs as a percentage of sales increase, the 30. FIZZ 10-K share price increases, as expected. 31. KDP 10K 32. PEP 10-K KEY ITEMS TO MONITOR 33. John Hopkins Corona Virus Research Center 34. Grand View Research Overall, we believe that Monster’s valuation premium is warranted given the advantages of its business model, DISCLAIMER debt structure, profitability, and growth prospects. Consequently, we think that Monster is a BUY since our Henry Fund reports are created by graduate students in estimated fair price of $90-$95, represents a 12.5% upside the Applied Securities Management program at the from the market price, as of 19 October 2020 ($80). University of Iowa’s Tippie College of Business. These reports provide potential employers and other interested Moving forward, we believe that Monster’s new product parties an example of the analytical skills, investment launches, as well as entrances into new international knowledge, and communication abilities of our students. markets should be monitored. Additionally, risks to our Henry Fund analysts are not registered investment

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advisors, brokers or licensed financial professionals. The investment opinion contained in this report does not represent an offer or solicitation to buy or sell any of the aforementioned securities. Unless otherwise noted, facts and figures included in this report are from publicly available sources. This report is not a complete compilation of data, and its accuracy is not guaranteed. From time to time, the University of Iowa, its faculty, staff, students, or the Henry Fund may hold an investment position in the companies mentioned in this report.

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Monster Beverage Corp. Revenue Decomposition Cyclic 2nd and 3rd Q's sell the msot cases…since monster sales dominate grow by ALL cases Fiscal Years 1Q FY2017 2Q FY2017 3Q FY2017 4Q FY2017 FY2017 1Q FY2018 2Q FY2018 3QF Y2018 4Q FY2018 FY2018 1Q FY2019 2Q FY2019 3Q FY2019 4Q FY2019 FY2019 1Q FY2020 2Q FY2020 Net revenue by segment Monster energy drinks revenue 668.57 815.26 827.69 736.10 3,047.60 780.51 929.44 935.15 853.34 3,498.43 870.38 1,019.11 1,061.38 953.20 3,904.03 992.45 1,027.69 Growth - 21.94% 1.52% -11.07% - 6.03% 19.08% 0.61% -8.75% 14.79% 2.00% 17.09% 4.15% -10.19% 11.59% 4.12% 3.55%

Strategic brands revenue 68.04 85.63 76.59 69.60 299.84 65.76 79.81 74.44 65.82 285.84 70.29 79.14 66.33 59.20 274.93 64.54 59.57 Growth - 25.86% -10.56% -9.12% - -5.52% 21.37% -6.73% -11.58% -4.67% 6.78% 12.60% -16.19% -10.75% -3.82% 9.02% -7.70%

Other revenue 5.54 6.17 5.20 4.70 21.61 4.66 6.62 6.57 5.07 22.92 5.32 5.79 5.86 4.90 21.87 5.11 6.64 Growth - 11.46% -15.78% -9.62% - -0.91% 42.22% -0.75% -22.91% 6.09% 5.01% 8.83% 1.19% -16.38% -4.60% 4.18% 30.15%

Net revenue 742.15 907.07 909.476 810.355 3369.045 850.921 1015.873 1016.16 924.229 3807.183 945.991 1104.045 1133.577 1017.206 4200.819 1062.097 1093.896 Growth - 22.22% 0.27% -10.90% - 5.01% 19.39% 0.03% -9.05% 13.00% 2.35% -71.00% 19.83% -7.87% 10.34% 4.41% 2.99%

Monster Case Sales 72.06 87.39 87.53 78.61 325.61 84.68 100.69 102.19 90.00 377.56 93.19 110.39 114.09 99.36 417.06 108.02 109.88 Case Volume - - - - 289.11 - - - - 338.88 - - - 84.72 377.55 98.26 99.42 Case growth 11.41% 15.98% 1.18% Average sales per case 9.21 9.27 9.40 9.31 9.36 9.17 9.17 9.09 9.43 9.27 9.29 9.18 9.25 9.55 9.36 9.14 9.30 Average sales per case growth - 0.65% 1.40% -0.96% 1.63% -1.50% -2.03% -0.87% 2.84% -1.00% -1.48% -0.89% -0.43% 4.00% 1.03% -4.29% -1.00%

Strategic Brands 7.33 9.18 8.10 7.43 32.04 7.13 8.65 8.13 6.94 30.85 7.53 8.57 7.13 6.17 29.37 7.02 6.37 Case volume - - - - 70.01 - - - - 72.01 - - - 18.00 71.55 17.34 17.54 Case growth -0.63% -3.68% -5.00% Average sales per case 9.21 9.27 9.40 9.31 9.36 9.17 9.17 9.09 9.43 9.27 9.29 9.18 9.25 9.55 9.36 9.14 9.30 3Q FY2020 4Q FY2020 FY2020 1Q FY2021 2Q FY2021 3Q FY2021 4Q FY2021 FY2021 1Q FY2022 2Q FY2022 3Q FY2022 4Q FY2022 FY2022 1Q FY2023 2Q FY2023 3Q FY2023 4Q FY2023 FY2023 1Q FY2024 2Q FY2024 3Q FY2024 4Q FY2024 FY2024

929.05 947.73 3,896.92 953.04 971.98 1,000.97 1,061.83 3,987.81 1,080.35 1,115.37 1,157.09 1,221.59 4574.41 1250.26 1298.32 1348.22 1444.22 5341.01 1486.06 1543.95 1607.96 1726.63 6364.60 -9.60% 2.01% -0.18% 0.56% 1.99% 2.98% 6.08% 2.33% 1.74% 3.24% 3.74% 5.58% 14.71% 2.35% 3.84% 3.84% 7.12% 16.76% 2.90% -71.09% 8.20% 11.83% 19.16%

75.92 73.61 273.63 69.84 67.41 65.06 65.29 267.59 64.15 63.35 62.56 63.63 253.69 62.74 61.83 60.97 62.52 248.06 61.58 60.91 60.24 61.86 244.59 27.45% -3.04% -0.47% -5.12% -3.49% -3.49% 0.36% -2.21% -1.75% -1.25% -1.25% 1.71% -5.19% -1.40% -1.45% -1.40% 2.54% -2.22% -1.50% -75.45% -2.19% 1.57% -1.40%

5.53 5.53 22.13 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 -16.73% 0.00% 1.21% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

1010.503434 1026.869492 4192.681927 1,022.88 1,039.38 1,066.02 1,127.12 4,255.40 1,144.51 1,178.72 1,219.65 1,285.23 4,828.10 1,313.00 1,360.15 1,409.19 1,506.74 5,589.07 1547.64 1604.86 1668.20 1788.49 6609.18 -7.62% 1.62% -0.19% -0.39% 1.61% 2.56% 5.73% 1.50% 1.54% 2.99% 3.47% 5.38% 13.46% 2.16% 3.59% 3.61% 6.92% 15.76% 2.71% 3.70% 3.95% 7.21% 18.25%

100.91 101.92 400.50 103.70 106.29 110.01 112.21 432.22 114.46 118.46 123.20 126.28 482.40 129.44 134.62 140.00 144.20 548.26 148.5 154.5 161.0 166.3 630.3 1.50% 1.00% 6.08% 1.75% 2.50% 3.50% 2.00% 7.92% 2.00% 3.50% 4.00% 2.50% 11.61% 2.50% 4.00% 4.00% 3.00% 13.65% 3% 4.00% 4.25% 3.25% 14.96% 9.21 9.30 9.24 9.19 9.14 9.10 9.46 9.22 9.44 9.42 9.39 9.67 9.48 9.66 9.64 9.63 10.02 9.74 10.01 10.00 9.99 10.38 10.09 -1.00% 1.00% -1.34% -0.50% -0.50% -0.50% 4.00% -0.14% -0.25% -0.25% -0.25% 3.00% 2.77% -0.15% -0.15% -0.15% 4.00% 2.71% -0.10% -0.10% -0.10% 4% 3.65%

16.49 15.83 67.21 15.20 14.74 14.30 13.80 58.04 13.59 13.46 13.32 13.16 53.53 12.99 12.82 12.66 12.48 50.96 12.31 12.19 12.07 11.91 48.48 -6.00% -4.00% -6.07% -4.00% -3.00% -3.00% -3.50% -13.64% -1.50% -1.00% -1.00% -1.25% -7.78% -1.25% -1.30% -1.25% -1.40% -4.80% -1.40% -1.00% -1.00% -1.25% -4.87% 9.21 9.30 9.24 9.19 9.14 9.10 9.46 9.22 9.44 9.42 9.39 9.67 9.48 9.66 9.64 9.63 10.02 9.74 10.01 10.00 9.99 10.38 10.09 Monster Beverage Corp. Income Statement (Millions) Fiscal Years Ending Dec. 31 1QFY-2017 2QFY-2017 3QFY-2017 4QFY-2017 FY-2017 1QFY-2018 2QFY-2018 3QFY-2018 4QFY-2018 FY-2018 1QFY-2019 2QFY-2019 3QFY-2019 4QFY-2019 FY-2019 1Q FY2020 2Q FY2020 Net sales 742.15 907.07 909.48 810.36 3,369.05 850.92 1,015.87 1,016.16 924.23 3,807.18 945.99 1,104.05 1,133.58 1,017.21 4,200.82 1,062.10 1,093.90 Cost of sales 261.27 323.57 339.77 306.75 1,231.36 335.66 395.62 408.50 372.03 1,511.81 372.46 442.76 460.58 406.44 1,682.23 424.90 434.43 Deprecation and amortization 19.81 19.81 Gross profit 480.87 583.50 569.71 503.61 2,137.69 515.26 620.26 607.66 552.20 2,295.38 573.53 661.28 673.00 610.77 2,518.59 637.20 659.47 Operating expenses 196.71 233.26 233.54 237.00 938.90 228.34 257.14 253.99 245.69 985.14 251.37 281.99 277.56 293.42 1,115.65 272.17 252.01 Operating income 284.16 350.24 336.17 266.61 1,198.79 286.92 363.12 353.67 306.51 1,310.24 322.16 379.29 395.44 317.05 1,402.94 365.03 407.46 Interest and other income / expense, net 0.66 -2.55 4.00 0.73 2.84 1.81 0.48 2.99 4.38 9.65 2.74 2.97 3.12 4.19 13.02 0.87 0.87 Income before provision for income taxes 284.82 347.69 340.17 267.35 1,201.62 288.72 363.60 356.66 310.90 1,319.89 324.90 382.26 398.56 321.23 1,415.96 365.90 405.67 Provision for income taxes 93.47 124.86 108.63 66.52 394.43 67.27 87.98 77.75 71.79 300.27 54.58 89.49 99.64 66.28 308.13 87.03 94.10 Net income 191.35 222.83 231.54 200.82 807.19 221.45 275.62 278.91 239.11 1,019.62 270.32 292.77 298.92 254.95 1,107.83 278.88 311.57 Earnings Per share Basic 0.33 0.39 0.40 0.35 1.40 0.39 0.49 0.50 0.43 1.81 0.49 0.53 0.55 0.47 2.03 0.52 0.59 Weighted average shares 566.8 557 526.9 Basic 582.03 578.02 578.37 575.04 578.36 574.13 566.35 559.96 556.67 564.28 548.27 548.22 548.42 541.25 546.54 540.52 531.19 ADD DEPREC. EXPENSE

3Q FY2020 4Q FY2020 FY2020 1Q FY2021 2Q FY2021 3Q FY2021 4Q FY2021 FY2021 1Q FY2022 2Q FY2022 3Q FY2022 4Q FY2022 FY2022 1Q FY2023 2Q FY2023 3Q FY2023 4Q FY2023 FY2023 1Q FY2024 2Q FY2024 3Q FY2024 4Q FY2024 FY2024 1010.50 1026.87 4192.68 1022.88 1039.38 1066.02 1127.12 4255.40 1144.51 1178.72 1219.65 1285.23 4828.10 1313.00 1360.15 1409.19 1506.74 5589.07 1547.64 1604.86 1668.20 1788.49 6609.18 388.07 395.47 1642.87 395.05 402.55 414.04 439.00 1650.64 447.03 461.70 479.07 506.26 1894.06 518.66 538.80 559.80 600.24 2217.51 618.28 642.95 670.21 720.57 2652.01 19.81 19.81 79.25 20.02 20.02 20.02 20.02 80.09 20.34 20.34 20.34 20.34 81.34 21.33 21.33 21.33 21.33 85.34 23.07 23.07 23.07 23.07 92.28 622.43 631.40 2549.81 627.83 636.83 651.99 688.12 2604.76 697.47 717.03 740.57 778.97 2934.04 794.34 821.35 849.39 906.49 3371.56 929.36 961.91 997.99 1067.92 3957.18 231.08 233.10 988.35 230.48 232.48 236.69 248.41 948.06 250.39 255.98 262.92 275.02 1044.29 278.89 286.78 294.94 313.03 1173.65 319.17 328.53 338.99 360.76 1347.45 391.35 398.30 1561.46 397.35 404.35 415.30 439.71 1656.70 447.09 461.05 477.66 503.95 1889.74 515.45 534.56 554.45 593.46 2197.92 610.19 633.38 659.00 707.16 2609.73 0.88 0.88 3.50 0.89 0.89 0.90 0.91 3.59 0.91 0.92 0.92 0.93 3.68 0.94 0.94 0.95 0.96 3.78 0.96 0.97 0.97 0.98 3.89 392.23 399.18 1564.96 398.24 405.24 416.20 440.61 1660.29 448.00 461.97 478.58 504.88 1893.42 516.38 535.51 555.40 594.41 2201.70 609.23 632.41 658.02 706.18 2605.84 85.51 87.02 353.65 86.82 88.34 90.73 96.05 361.94 97.66 100.71 104.33 110.06 412.77 112.57 116.74 121.08 129.58 479.97 132.81 137.86 143.45 153.95 568.07 306.72 312.16 1,211.31 311.42 316.90 325.47 344.56 1,298.35 350.33 361.26 374.25 394.82 1,480.66 403.81 418.77 434.32 464.83 1,721.73 476.42 494.54 514.57 552.23 2037.77

0.59 0.61 2.30 0.61 0.62 0.64 0.68 2.56 0.70 0.73 0.76 0.80 2.98 0.83 0.86 0.90 0.97 3.55 1.00 1.04 1.09 1.18 4.31

515.98 515.23 515.23 512.31 509.39 506.48 503.56 503.56 500.64 497.72 494.81 491.89 491.89 488.97 486.05 483.14 480.22 480.22 477.30 474.38 471.47 468.55 468.55 Monster Beverage Corp. Common Size Income Statement

Fiscal Years Ending Dec. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E Net sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Cost of sales 36.55% 39.71% 40.05% 39.18% 38.79% 39.23% 39.68% 40.13% Deprecation and amortization 0.00% 0.00% 0.00% 1.89% 1.88% 1.68% 1.53% 1.40% Gross profit 63.45% 60.29% 59.95% 60.82% 61.21% 60.77% 60.32% 59.87% Operating expenses 27.87% 25.88% 26.56% 23.57% 22.28% 21.63% 21.00% 20.39% Operating income 35.58% 34.41% 33.40% 37.24% 38.93% 39.14% 39.33% 39.49% Interest and other income / expense, net 0.08% 0.25% 0.31% 0.08% 0.08% 0.08% 0.07% 0.06% Income before provision for income taxes 35.67% 34.67% 33.71% 37.33% 39.02% 39.22% 39.39% 39.43% Provision for income taxes 11.71% 7.89% 7.33% 8.43% 8.51% 8.55% 8.59% 8.60% Net income 23.96% 26.78% 26.37% 28.89% 30.51% 30.67% 30.81% 30.83% Monster Beverage Corp. Balance Sheet (Millions) Fiscal Years Ending Dec. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E ASSETS Cash and cash equivalents 528.62 637.51 797.96 1267.53 1794.47 2401.72 3149.58 4105.14 Short-term investments 672.93 320.65 533.06 533.70 534.34 534.98 535.63 536.27 Accounts receivable, net 449.48 484.56 540.33 544.09 552.23 626.55 725.30 857.68 Inventories 255.74 277.70 360.73 384.90 417.65 506.59 626.94 792.58 Prepaid expenses and other current assets 40.88 44.91 54.87 51.70 52.47 59.53 68.91 81.49 Prepaid income taxes 138.72 38.83 29.36 68.37 68.37 68.37 68.37 68.37 Total current assets 2086.38 1804.17 2316.31 2850.29 3419.52 4197.74 5174.73 6441.54 Investments 2.37 0.00 12.91 12.91 12.91 12.91 12.91 12.91 Property and equipment, net 230.28 243.05 298.64 301.79 306.52 321.58 347.74 380.22 Deferred income taxes 92.33 85.69 84.78 93.67 95.87 109.33 127.13 150.46 Goodwill 1331.64 1331.64 1331.64 1331.64 1331.64 1331.64 1331.64 1331.64 Other intangible assets, net 1034.08 1045.88 1052.10 1044.43 1040.01 1035.60 1034.49 1034.48 Other assets 13.93 16.46 53.97 29.78 30.22 34.29 39.70 46.94 Total assets 4791.01 4526.89 5150.35 5664.51 6236.69 7043.08 8068.33 9398.19

LIABILITIES Accounts payable 245.91 248.76 274.05 284.50 288.75 327.61 379.25 448.47 Accrued liabilities 87.47 112.51 114.07 115.54 117.27 133.05 154.02 182.13 Accrued promotional allowances 138.00 145.74 166.76 146.41 140.44 154.69 173.85 199.60 Deferred revenue 43.24 44.04 44.24 44.24 44.24 44.24 44.24 44.00 Accrued compensation 35.00 39.90 47.26 43.79 43.93 50.61 59.49 71.43 Income taxes payable 10.65 10.19 14.72 22.51 30.69 46.64 72.26 113.95 Total current liabilities 560.35 601.15 661.10 656.97 665.32 756.84 883.11 1059.58 Deferred revenue (different than other one) 334.35 312.22 287.47 238.25 200.80 189.18 181.86 178.58 Other liabilities 1.10 2.62 30.50 30.50 30.50 30.50 30.50 30.50 Total liabilities 895.80 915.99 979.07 925.73 896.62 976.53 1095.47 1268.67

SHAREHOLDERS' EQUITY Common stock and additional paid-in capital 4153.77 4241.32 4400.69 4491.61 4582.52 4673.43 4764.34 4855.25 Retained earnings 2928.23 3914.65 5022.48 6233.79 7532.13 9012.79 10734.52 12772.29 Accumulated other comprehensive loss / income -16.66 -32.86 -32.39 -32.39 -32.39 -32.39 -32.39 -32.39 Common stock in treasury, at cost -3170.13 -4512.21 -5219.50 -5954.22 -6742.20 -7587.28 -8493.61 -9465.63 Total stockholders' equity 3895.21 3610.90 4171.28 4738.78 5340.07 6066.56 6972.86 8129.52 Total liabilities and stockholders' equity 4791.01 4526.89 5150.35 5664.51 6236.69 7043.08 8068.33 9398.19 Monster Beverage Corp. Common Size Balance Sheet

Fiscal Years Ending Dec. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E ASSETS Cash and cash equivalents 15.69% 16.75% 19.00% 30.23% 42.17% 49.74% 56.35% 62.11% Short-term investments 19.97% 8.42% 12.69% 12.73% 12.56% 11.08% 9.58% 8.11% Accounts receivable, net 13.34% 12.73% 12.86% 12.98% 12.98% 12.98% 12.98% 12.98% Inventories 7.59% 7.29% 8.59% 9.18% 9.81% 10.49% 11.22% 11.99% Prepaid expenses and other current assets 1.21% 1.18% 1.31% 1.23% 1.23% 1.23% 1.23% 1.23% Prepaid income taxes 4.12% 1.02% 0.70% 1.63% 1.61% 1.42% 1.22% 1.03% Total current assets 61.93% 47.39% 55.14% 67.98% 80.36% 86.94% 92.59% 97.46% Investments 0.07% 0.00% 0.31% 0.31% 0.30% 0.27% 0.23% 0.20% Property and equipment, net 6.84% 6.38% 7.11% 7.20% 7.20% 6.66% 6.22% 5.75% Deferred income taxes 2.74% 2.25% 2.02% 2.23% 2.25% 2.26% 2.27% 2.28% Goodwill 39.53% 34.98% 31.70% 31.76% 31.29% 27.58% 23.83% 20.15% Other intangible assets, net 30.69% 27.47% 25.05% 24.91% 24.44% 21.45% 18.51% 15.65% Other assets 0.41% 0.43% 1.28% 0.71% 0.71% 0.71% 0.71% 0.71% Total assets 142.21% 118.90% 122.60% 135.10% 146.56% 145.88% 144.36% 142.20%

LIABILITIES Accounts payable 7.30% 6.53% 6.52% 6.79% 6.79% 6.79% 6.79% 6.79% Accrued liabilities 2.60% 2.96% 2.72% 2.76% 2.76% 2.76% 2.76% 2.76% Accrued promotional allowances 4.10% 3.83% 3.97% 3.49% 3.30% 3.20% 3.11% 3.02% Deferred revenue 1.28% 1.16% 1.05% 1.06% 1.04% 0.92% 0.79% 0.67% Accrued compensation 1.04% 1.05% 1.13% 1.04% 1.03% 1.05% 1.06% 1.08% Income taxes payable 0.32% 0.27% 0.35% 0.54% 0.72% 0.97% 1.29% 1.72% Total current liabilities 16.63% 15.79% 15.74% 15.67% 15.63% 15.68% 15.80% 16.03% Deferred revenue (different than other one) 9.92% 8.20% 6.84% 5.68% 4.72% 3.92% 3.25% 2.70% Other liabilities 0.03% 0.07% 0.73% 0.73% 0.72% 0.63% 0.55% 0.46% Total liabilities 26.59% 24.06% 23.31% 22.08% 21.07% 20.23% 19.60% 19.20%

SHAREHOLDERS' EQUITY Common stock and additional paid-in capital 123.29% 111.40% 104.76% 107.13% 107.69% 96.80% 85.24% 73.46% Retained earnings 86.92% 102.82% 119.56% 148.68% 177.00% 186.67% 192.06% 193.25% Accumulated other comprehensive loss / income -0.49% -0.86% -0.77% -0.77% -0.76% -0.67% -0.58% -0.49% Common stock in treasury, at cost -94.10% -118.52% -124.25% -142.01% -158.44% -157.15% -151.97% -143.22% Total stockholders' equity 115.62% 94.84% 99.30% 113.03% 125.49% 125.65% 124.76% 123.00% Total liabilities and stockholders' equity 142.21% 118.90% 122.60% 135.10% 146.56% 145.88% 144.36% 142.20% Monster Beverage Corp. Historical Cash Flow Statement (Millions) Fiscal Years Ending Dec. 31 2017 2018 2019 Cash Flow Net cash used in / provided by operating activities 987.7 1,161.9 1,113.8 Net income 820.7 993.0 1,107.8 Adjustments to reconcile net income to net cash provided by / used167.1 in operating168.9 activities 5.9 Depreciation and amortization 48.9 57.0 64.8 Loss / gain on disposal of property and equipment -1.2 -0.8 -0.3 Gain on sale of Monster Non-Energy 0.0 - - Stock-based compensation 52.3 57.1 63.4 Loss / gain on put option 0.0 - - Gain / loss on investments, net 0.0 - - Deferred income taxes 67.9 -0.5 1.3 Excess tax benefit from stock-based compensation - - - Effect on cash of changes in operating assets and liabilities -0.9 56.1 -123.3 Accounts receivable 11.8 -48.4 -66.4 TCCC Transaction receivable 125.0 0.0 0.0 Distributor receivables 4.7 10.0 6.5 Inventories -88.9 -26.1 -85.2 Prepaid expenses and other current assets -2.4 -6.7 -13.8 Prepaid income taxes -71.3 98.7 9.5 Accounts payable 29.6 9.9 28.8 Accrued liabilities -4.5 18.1 -14.3 Accrued promotional allowances 21.1 11.7 21.9 Accrued distributor terminations -8.2 -0.1 0.3 Accrued compensation 4.5 5.5 7.2 Income taxes payable -3.6 1.9 8.1 Other liabilities 1.1 1.5 -1.0 Deferred revenue -19.9 -20.0 -24.9 Net cash used in / provided by investing activities -531.5 273.0 -326.7 Maturities of held-to-maturity investments 0.0 0.0 - Sales of available-for-sale investments 533.2 1,181.5 851.4 Sales of trading investments 0.0 - - Proceeds from transfer of distribution rights to TCCC 0.0 - - Proceeds from the sale of Monster Non-Energy 0.0 - - Purchases of AFF Assets, net 0.0 0.0 - Purchases of held-to-maturity investments 0.0 0.0 - Proceeds from sale of property and equipment 1.4 4.3 1.2 Purchases of available-for-sale investments -971.8 -826.1 -1,067.7 Purchases of property and equipment -83.4 -61.9 -101.7 Increase / decrease in intangibles -9.7 -13.0 -8.7 Increase / decrease in other assets -1.2 -11.8 -1.3 Net cash provided by / used in financing activities -311.1 -1,316.1 -628.5 Principal payments on debt -2.6 -1.9 -13.6 Excess tax benefit from stock-based compensation - - - Issuance of common stock 52.6 27.9 92.4 Purchases of common stock held in treasury -361.2 -1,342.1 -707.3 Effect of exchange rate changes on cash and cash equivalents 6.0 -9.8 1.9 Net increase / decrease in cash and cash equivalents 151.0 108.9 160.4 Cash and cash equivalents, beginning of period 377.6 528.6 637.5 Cash and cash equivalents, beginning of period 528.6 637.5 798.0 Supplemental disclosure Cash paid during the period for Interest -0.1 -0.1 -0.3 Income taxes -389.5 -200.8 -293.8 Monster Beverage Corp. Forecasted Cash Flow Statement

Fiscal Years Ending Dec. 31 2020E 2021E 2022E 2023E 2024E Net Income 1211.31 1298.35 1480.66 1721.73 2037.77 Depreciation Expense

Cash flows from operating activities: Inventories -24.17 -32.74 -88.94 -120.35 -165.64 Accounts receivable -3.76 -8.14 -74.32 -98.75 -132.38 Prepaid expenses and other current assets 3.17 -0.77 -7.06 -9.38 -12.58 Prepaid income taxes -39.01 0.00 0.00 0.00 0.00 Deferred income taxes -8.89 -2.20 -13.46 -17.80 -23.34 Other assets 24.19 -0.45 -4.07 -5.40 -7.25 Accounts payable 10.45 4.26 38.86 51.64 69.22 Accrued liabilities 1.46 1.73 15.78 20.97 28.11 Accrued promotional allowances -20.36 -5.97 14.26 19.16 25.75 Accrued compensation -3.47 0.14 6.68 8.88 11.94 Income taxes payable 7.79 8.19 15.95 25.62 41.70 Deferred revenue -49.22 -37.45 -11.62 -7.33 -3.28

Cash flows from investing activities: Property and equipment, net -3.15 -4.74 -15.06 -26.16 -32.48 Other intangible assets, net 7.67 4.43 4.40 1.11 0.01 Short-term investments -0.64 -0.64 -0.64 -0.64 -0.64

Cash flows from financing activities: Common Stock 90.91 90.91 90.91 90.91 90.91 Common Stock Repurchased =>Treasury? Vs. Retained-734.72 Earnings Impact-787.97 -845.08 -906.33 -972.02

Net increase (decrease) in cash & equivalents 469.58 526.94 607.25 747.86 955.56586 Beginning of year cash 797.96 1267.53 1794.47 2401.72 3149.58 End of year cash 1267.53 1794.47 2401.72 3149.58 4105.14 Monster Beverage Corp. Weighted Average Cost of Capital (WACC) Estimation

Cost of Equity: ASSUMPTIONS: Risk-Free Rate 2.00% 10-year treasury bond Beta 1.02 3-year, weekly beta Equity Risk Premium 5.15% Henry fund consensus Cost of Equity 7.25%

Cost of Debt: Risk-Free Rate 2.00% 10-year treasury bond Implied Default Premium 3.50% Pre-Tax Cost of Debt 5.50% HSBC Bank (China) Company Limited, Shanghai Branch consisting of a non-collateralized working capital line of credit Marginal Tax Rate 22% After-Tax Cost of Debt 4.30%

Market Value of Common Equity: MV Weights Total Shares Outstanding 527.39 Current Stock Price $80.51 MV of Equity 42,460.17 99.31%

Market Value of Debt: Short-Term Debt 274.05 Current Portion of LTD - Long-Term Debt - PV of Operating Leases 20.47 MV of Total Debt 294.52 0.69%

Market Value of the Firm 42,754.69 100.00%

Estimated WACC 7.23% Monster Beverage Corp. Value Driver Estimation (Millions) Fiscal Years Ending Dec. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E

NOPLAT: EBITDA Net sales 3369.05 3807.18 4200.82 4192.68 4255.40 4828.10 5589.07 6609.18 Cost of sales and depreciation and amortization 1231.36 1511.81 1682.23 Cost of sales less depreciation and amortization 1642.87 1650.64 1894.06 2217.51 2652.01 Depreciation and amortization 79.25 80.09 81.34 85.34 92.28 Operating expenses 938.90 985.14 1115.65 988.35 948.06 1044.29 1173.65 1347.45 Implied interest on operating leases 0.80 0.71 1.11 1.13 1.14 1.20 1.30 1.42 Equals EBITDA 1199.59 1310.95 1404.05 1483.33 1577.76 1809.60 2113.88 2518.86

Tax Shield Marginal tax rate 0.22 0.22 0.22 0.22 0.22 0.22 0.22 0.22 Provision for taxes 394.43 300.27 308.13 353.65 361.94 412.77 479.97 568.07 Interest and other income / expense, net -0.62 -2.10 -2.84 -0.76 -0.78 -0.80 -0.82 -0.85 Implied interest on operating leases 3.16 2.81 4.42 4.46 4.53 4.76 5.14 5.62 Adjusted Taxes 396.98 300.98 309.71 357.35 365.69 416.72 484.29 572.85

Change in deferred taxes -67.22 -6.65 -0.91 8.89 2.20 13.46 17.80 23.34

NOPLAT: 735.38 1003.33 1093.44 1134.87 1214.26 1406.34 1647.39 1969.35

Invested Capital (IC): Working Capital Accounts receivable, net 449.48 484.56 540.33 544.09 552.23 626.55 725.30 857.68 Inventories 255.74 277.70 360.73 384.90 417.65 506.59 626.94 792.58 Prepaid expenses and other current assets 40.88 44.91 54.87 51.70 52.47 59.53 68.91 81.49 Prepaid income taxes 138.72 38.83 29.36 68.37 68.37 68.37 68.37 68.37

Accounts payable 245.91 248.76 274.05 284.50 288.75 327.61 379.25 448.47 Accrued liabilities 87.47 112.51 114.07 115.54 117.27 133.05 154.02 182.13 Accrued promotional allowances 138.00 145.74 166.76 146.41 140.44 154.69 173.85 199.60 Deferred revenue 43.24 44.04 44.24 44.24 44.24 44.24 44.24 44.00 Accrued compensation 35.00 39.90 47.26 43.79 43.93 50.61 59.49 71.43 Income taxes payable 10.65 10.19 14.72 22.51 30.69 46.64 72.26 113.95

Long Term Asset and Liabilities Property and equipment, net 230.28 243.05 298.64 301.79 306.52 321.58 347.74 380.22

Other intangible assets, net 1034.08 1045.88 1052.10 1044.43 1040.01 1035.60 1034.49 1034.48 Other assets 13.93 16.46 53.97 29.78 30.22 34.29 39.70 46.94 Operating Leases 14.51 12.91 20.26 20.47 20.79 21.82 23.59 25.79

Deferred revenue 334.35 312.22 287.47 238.25 200.80 189.18 181.86 178.58 Other liabilities 1.10 2.62 30.50 30.50 30.50 30.50 30.50 30.50

IC: 1281.92 1248.32 1431.20 1519.80 1591.63 1697.79 1839.58 2018.89

Free Cash Flow (FCF): NOPLAT 735.38 1003.33 1093.44 1134.87 1214.26 1406.34 1647.39 1969.35 Change in IC -62.19 -33.60 182.88 88.60 71.84 106.16 141.78 179.32 FCF 797.58 1036.93 910.56 1046.27 1142.43 1300.18 1505.60 1790.03

Return on Invested Capital (ROIC): NOPLAT 735.38 1003.33 1093.44 1134.87 1214.26 1406.34 1647.39 1969.35 Beg. IC 1344.11 1281.92 1248.32 1431.20 1519.80 1591.63 1697.79 1839.58 ROIC 54.71% 78.27% 87.59% 79.30% 79.90% 88.36% 97.03% 107.05%

Economic Profit (EP): Beg. IC 1344.11 1281.92 1248.32 1431.20 1519.80 1591.63 1697.79 1839.58 x (ROIC - WACC) 47.48% 71.04% 80.37% 72.07% 72.67% 81.13% 89.80% 99.83% EP 638.24 910.67 1003.21 1031.43 1104.42 1291.30 1524.68 1836.39 Monster Beverage Corp. Discounted Cash Flow (DCF) and Economic Profit (EP) Valuation Models

Key Inputs: CV Growth of NOPLAT 4.00% CV Year ROIC 107.05% WACC 7.23% Cost of Equity 7.25% Noplat terminal 1969.34782 1836.39 EP Terminal Fiscal Years Ending Dec. 31 2020E 2021E 2022E 2023E 2024E

DCF Model: Free Cash Flow (FCF) 1046.27 1142.43 1300.18 1505.60 1790.03 Continuing Value (CV) 58736.95 PV of FCF 975.75 993.61 1054.59 1138.90 44430.98

Value of Operating Assets: 48593.83 Non-Operating Adjustments Debt -274.05 PV Operating Leases -20.26 ESOP -664.10 Value of Equity 47635.42 Shares Outstanding 527.39 Intrinsic Value of Last FYE 90.32 Implied Price as of Today 95.56

EP Model: Economic Profit (EP) 1031.43 1104.42 1291.30 1524.68 1836.39 Continuing Value (CV) 56897.38 PV of EP 961.91 960.55 1047.39 1153.33 43039.45

Total PV of EP 47162.63 Invested Capital (last FYE) 1431.20 Value of Operating Assets: 48593.83 Non-Operating Adjustments Debt -274.05 PV Operating Leases -20.26 ESOP -664.10 Value of Equity 47635.42 Shares Outstanding 527.39 Intrinsic Value of Last FYE 90.32 Implied Price as of Today 95.56 Monster Beverage Corp. Sensitivity Tables

Beta 95.56 0.92 0.94 0.96 1.02 1.00 1.02 1.04 Avg. Case Sale Price Growth 95.56 4.85% 126.88 121.97 117.43 105.58 109.26 105.58 102.13 2.00% 95.03 4.95% 122.22 117.56 113.24 101.96 105.47 101.96 98.68 3.00% 95.29 5.05% 117.88 113.45 109.34 98.58 101.93 98.58 95.44 4.00% 95.56 5.15% 113.83 109.61 105.69 95.41 98.61 95.41 92.40 5.00% 95.83 5.25% 110.05 106.02 102.27 92.43 95.50 92.43 89.55 6.00% 96.10

Risk PremiumRisk 5.35% 106.50 102.65 99.06 89.63 92.57 89.63 86.86 5.45% 103.18 99.49 96.04 86.99 89.81 86.99 84.33

WACC 95.56 6.48% 6.73% 6.98% 7.23% 7.48% 7.73% 7.98% last year's wacc 3.25% 98.84 91.36 84.89 79.23 74.24 69.81 65.85 3.50% 106.34 97.71 90.32 83.92 78.33 73.40 69.03 3.75% 115.21 105.12 96.59 89.29 82.97 77.45 72.58 4.00% 125.88 113.89 103.91 95.49 88.27 82.03 76.57 4.25% 138.93 124.42 112.58 102.72 94.40 87.27 81.10 CV Growth CV 4.50% 155.28 137.32 122.99 111.29 101.55 93.32 86.28 4.75% 176.35 153.48 135.74 121.58 110.01 100.39 92.26

CV Terminal Year grwoth CV Operating Expenses as a % of Sales 95.56 12.67% 15.17% 17.67% 20.17% 22.67% 25.17% 27.67% 32.79% 134.46 128.13 121.80 115.48 109.15 102.83 96.50 35.29% 127.94 121.61 115.28 108.96 102.63 96.30 89.98 37.79% 121.42 115.09 108.76 102.44 96.11 89.78 83.46 95.56 40.29% 114.89 108.57 102.24 95.92 89.59 83.26 76.94 -1.55% 42.79% 108.37 102.05 95.72 89.39 83.07 76.74 70.42 -1.45% 45.29% 101.85 95.53 89.20 82.87 76.55 70.22 63.89 -1.35% CV Cost of Sales as a % of Sales of % a as Sales of Cost CV 47.79% 95.33 89.01 82.68 76.35 70.03 63.70 57.37 -1.25% -1.15% -1.05%

CV Strategic Brands Case Volume growth Volume Case Brands Strategic CV -0.95% Fiscal Years Ending Dec. 31 2017 2018 2019 2020E 2021E 2022E 2023E 2024E

Liquidity Ratios: Working Capital (Current assets - Current liabilities) 324.56 244.86 324.19 392.08 425.40 504.19 606.42 740.54 Current Ratio (Current assets / Current liabilities) 1.58 1.41 1.49 1.60 1.64 1.67 1.69 1.70 Quick Ratio ((Cash + Marketable securities + Accounts receivable) / Current liabilities) 2.55 2.67 2.84 3.59 4.36 4.83 5.21 5.49

Asset-Management Ratios: Inventory Turnover Ratio (Costs of Goods Sold/Average Inventory) 5.90 5.67 5.27 4.41 4.11 4.10 3.91 3.74 Receivables Turnover Ratio (Sales/Average Account Receivables) 7.50 7.86 7.77 7.71 7.71 7.71 7.71 7.71 Account Payable Turn Over Ratio (Costs of Goods Sold/Average Account Payables) 5.61 6.11 6.44 5.88 5.76 6.15 6.27 6.41 Cash Conversion Cycle (365/Inventory Turnover Ratio + 365/Receivables Turnover - 365/Account45.51 Payable Turnover)51.14 59.49 68.15 72.72 77.03 82.48 88.09 Total Asset Turnover (Sales/Total Assets) 0.70 0.84 0.82 0.74 0.68 0.69 0.69 0.70

Financial Leverage Ratios: Debt Ratio (Total Liabilities/Total Assets) 0.19 0.20 0.19 0.16 0.14 0.14 0.14 0.13 D/E Ratio (Total Liabilities/Total Equity) 0.23 0.25 0.23 0.20 0.17 0.16 0.16 0.16

Profitability Ratios: Gross Margin (Sales-Cost of Goods Sold/Sales) 173.60% 151.83% 149.72% 155.20% 157.80% 154.91% 152.04% 149.21% Operating Margin 38.61% 34.41% 33.40% 37.24% 38.93% 39.14% 39.33% 39.49% Net Profit Margin (Net Income/Sales) 23.96% 26.78% 26.37% 28.89% 30.51% 30.67% 30.81% 30.83% ROA (Net Income/Total Assets) 19.43% 22.52% 21.51% 21.38% 20.82% 21.02% 21.34% 21.68% ROE (Net Income/Shareholder's Equity) 20.72% 28.24% 26.56% 25.56% 24.31% 24.41% 24.69% 25.07% Type Company Name Here First Valuation of Options Granted under ESOP

Current Stock Price $80.51 Risk Free Rate 2.00% Current Dividend Yield 0.00% Annualized St. Dev. of Stock Returns 33.80%

Average Average B-S Value Range of Number Exercise Remaining Option of Options Outstanding Options of Shares Price Life (yrs) Price Granted Range 1 1,741,000 $ 16.88 3.20 $ 64.70 $ 112,641,394 Range 2 1,852,000 $ 22.92 4.10 $ 59.65 $ 110,475,654 Range 3 12,000 $ 36.05 5.00 $ 49.98 $ 599,777 Range 4 1,457,000 $ 42.06 6.40 $ 47.86 $ 69,736,099 Range 5 1,925,000 $ 43.99 6.20 $ 46.42 $ 89,363,622 Range 6 2,002,000 $ 45.10 5.50 $ 44.68 $ 89,454,413 Range 7 1,621,000 $ 47.60 7.40 $ 46.19 $ 74,866,509 Range 8 382,000 $ 55.85 8.80 $ 44.38 $ 16,954,913 Range 9 2,371,000 $ 58.73 8.20 $ 42.18 $ 100,006,233 Total 13,363,000 $ 40.88 6.01 $ 48.05 $ 664,098,615 Monster Beverage Corp. Effects of ESOP Exercise and Share Repurchases on Common Stock Account and Number of Shares Outstanding

Number of Options Outstanding (shares): 13,363,000 Average Time to Maturity (years): 6.01 Expected Annual Number of Options Exercised: 2,223,938

Current Average Strike Price: $ 40.88 Cost of Equity: 7.25% div/ yield Current Stock Price: $80.51

Fiscal Years Ending Dec. 31 2020E 2021E 2022E 2023E 2024E Increase in Shares Outstanding: 2,223,938.02 2,223,938.02 2,223,938.02 2,223,938.02 2,223,938.02 Average Strike Price: 40.88 40.88 40.88 40.88 40.88 Increase in Common Stock Account: 90,912,020.01 90,912,020.01 90,912,020.01 90,912,020.01 90,912,020.01

Change in Treasury Stock 734,720,000.00 787,971,403.52 845,082,388.89 906,332,692.81 972,022,326.89 Expected Price of Repurchased Shares: Cost od equity - div yield = that is how52.88 you get that 56.71 60.82 65.23 69.96 Number of Shares Repurchased: 13,894,099.85 13,894,099.85 13,894,099.85 13,894,099.85 13,894,099.85 13.89 13.89 13.89 13.89 Shares Outstanding (beginning of the year) 526,900,000.00 515,229,838.17 503,559,676.34 491,889,514.52 480,219,352.69 Plus: Shares Issued Through ESOP 2,223,938.02 2,223,938.02 2,223,938.02 2,223,938.02 2,223,938.02 Less: Shares Repurchased in Treasury 13,894,099.85 13,894,099.85 13,894,099.85 13,894,099.85 13,894,099.85 Shares Outstanding (end of the year) 515,229,838.17 503,559,676.34 491,889,514.52 480,219,352.69 468,549,190.86