New York Attacks More Consumer Drinks
Earlier this year, New York Mayor Michael Bloomberg announced plans to restrict sales of sugary soft drinks to no more than 16 ounces throughout the city’s restaurants, movie theaters and stadiums. Now, the state is taking aim at another category of drinks.
New York Attorney General Eric Schneiderman issued subpoenas last month to three companies that make energy drinks. The firms involved include PepsiCo (NYSE:PEP), the maker of AMP, Monster Beverage (NASDAQ:MNST) and Living Essentials, the maker of the 5-Hour Energy shot. The investigation is aimed at the firms’ marketing practices and disclosure of caffeine levels. The concern is that companies overstate the benefits of energy drinks, while not giving enough credit to the role of caffeine.
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One Wall Street analyst does not appear to be worried about the action. Mark Astrachan, an analyst at Stifel Nicolaus, explained in a research note, “We think changes to labeling and marketing related to source of stimulant are unlikely to materially impact energy drink sales,” according to Reuters.
U.S retail sales of energy drinks grew by double digit percentage points last year and totaled nearly $9 billion. Shares of Monster Beverage closed almost 1 percent in the red on Tuesday, while PepsiCo edged 0.07 percent lower. Shares of Coca-Cola (NYSE:KO) fell 0.45, but the company was not involved in the recent round of subpoenas.
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