February 25, 2016

Monster Beverage Corporation has announced that it has agreed to acquire its main and long-term flavor supplier, American Fruits & Flavors (AFF) for $690 million.

In such a highly competitive segment, the strategic acquisition will give Monster the advantage over its rivals of having complete control of its flavor development and the intellectual property of its key flavors in perpetuity. The acquisition will give Monster the added benefit of having an in-house flavor department which will result in reduced development and production costs and higher flexibility in regard to innovation.

"It is with great pleasure that we announce the acquisition of AFF as it marks a tremendous step in the continuing evolution of Monster," said Rodney C. Sacks, Chairman and Chief Executive Officer of Monster in a company statement. This transaction provides Monster a unique opportunity to leverage new flavor technologies and differentiate ourselves from our largest competitors who do not have these capabilities."

The two companies have had a close working relationship, developing new taste profiles and new products since the 1990s. With Monster as AFF’s main customer, representing 87% of the company revenues for last year, AFF has seen an average 8% organic revenue compounded annual growth rate (CAGR) over the past four years. Because of this joint history, both companies expect a smooth integration after their anticipated closing in the first quarter of 2016.

For AFF, the transaction represents an opportunity for growth as well, as Monster will be able to use its existing international supply chain to more profitably market AFF’s flavor keys and intellectual property.

“It is important to acknowledge this transaction represents much more than the acquisition of AFF," said Fred Farago, Founder and President of AFF. "We view today's announcement as the integration of two companies that have enjoyed a tremendously symbiotic relationship over many years. We look forward to joining the highly respected and experienced Monster team to help the company further enhance its position as a global leader in the industry.”