McDonald's is testing sales of Monster energy drinks in about 20 of its restaurants in the United States, the company said Oct. 20.
The fast-food chain, which has around 14,000 locations in the country, did not say if it is planning to expand the testing, which started this summer across five states.
"We're always gathering feedback from customers on the food and beverages they'd like to be served at McDonald's and this is another example,'' said McDonald's.
A bigger distribution agreement with McDonald's would prove to be beneficial to Monster, as sales for the largest energy drink company in the United States would be boosted. Monster is ahead of its rival Red Bull in terms of sales volume in the country, with the industry expanding to a $10 billion category through a strong presence in locations such as convenience stores. Energy drink sales through restaurants, however, remain small.
Monster saw its share prices increase by as high as 7.4 percent after its sales tests in McDonald's branches were revealed, as a new growth area has potentially opened for its energy drinks. According to Evercore ISI analyst Robert Ottenstein, selling of Monster energy drinks in fast-food restaurants such as McDonald's could lead to additional revenue of as high as $1.5 billion in the United States alone for Monster.
Monster is not the only party that could stand to benefit from the partnership, as McDonald's is also looking to reverse a sales slump over the past three years. Monster energy drinks in the menu could attract additional customers, as most have grown tired of the traditional offerings of the fast-food chain.
McDonald's testing of Monster energy drinks in its menu could be partially spurred by the fact that the consumption of energy drinks in the United States increased by 6.4 percent last year, compared to a 1.0 percent decrease for soda.
McDonald's had has a long-standing contract with Coca-Cola, which acquired a 16.7 percent stake in Monster earlier in June for about $2.15 billion. The fast-food chain, which has been selling Coke products at $1 for any size in certain markets to boost sales, is test selling 16-ounce Monster cans for $2.29 or a pair of such cans for $4 in a few stores in Florida, Ohio, Illinois, Michigan and Georgia.
"McDonald's long-standing relationship with [Coke] suggests a strong endorsement from Coke and the possibility of spreading'' to other restaurants in the fast-food industry, Ottenstein noted.