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Monster (MNST) Lower as NY AG Issues Subpoenas Over Energy Drink Marketing Practices

August 28, 2012 10:32 AM EDT
Monster Beverage (Nasdaq: MNST) is less energized Tuesday amid new reports that the New York attorney general, Eric Schneiderman, is investigating possible deception coming from the energy drink segment.

According to the WSJ, Schneiderman sent subpoenas to Monster, 5-Hour Energy maker Living Essentials, and Amp maker PepsiCo (NYSE: PEP) in July. The subpoenas aimed to gather more information on the marketing and advertising practices of the companies for their energy drink products.

The products contain caffeine -- which is the fun part of coffee, aside from the scalding heat -- but don't specify how much caffeine is contained in the beverage.

Scientists say humans can safely consume 400 milligrams of caffeine per day and some of the exotic ingredients, such as guarana and taurine, are simply a marketing gimmick (current U.S. law bans the use of more than one source of caffeine in a beverage). Additionally, overconsumption of caffeine can lead to "heart problems." Given that the heart is largely believed to be one of the more important organs in the body, this has clearly raised some red flags.

Data has pieced together the following caffeine amounts in the three main energy drinks: Monster has 160 millingrams per 16-ounce serving, Amp is also at 160 millingrams per 16-ounce can, and 5-Hour Energy is at 207 milligrams per 2-ounce "shot." By comparison, an 8-ounce cup of generic brewed coffee contains 95 to 200 milligrams.

So, should the energy drink makers be found to have violated marketing practices, the companies could face fines, new labeling requirements, and other penalties.

Notably, research shows that McDonald's (NYSE: MCD) brewed coffee has about 100 milligrams per 16-ounce serving and Starbucks (Nasdaq: SBUX) Starbucks Pike Place brewed has 330 milligrams per 16-ounce serving, according to the Mayo clinic. That might explain the cost.

Monster first disclosed the probe in its 10-Q filing on August 9th.

Shares of Monster are down 0.8 percent while Pepsi is also lower on the session.


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