Monster Beverage says state AG investigating flagship drink, ads

Thu Aug 9, 2012 9:03pm EDT

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Aug 9 (Reuters) - Monster Beverage Corp on Thursday said a state attorney general has begun investigating the ingredients and advertising of its flagship, namesake energy drink.

Monster said the probe is at an early stage, and that it did not know whether it would lead to any action or materially hurt its financial results or operations.

Shares of the Corona, California-based company, one of the largest makers of energy drinks in the United States, dropped 4.8 percent in after-hours trading, extending a decline that followed Wednesday's release of weaker-than-expected second-quarter results.

In its quarterly report filed Thursday afternoon with the U.S. Securities and Exchange Commission, Monster said it had received a subpoena in July from an unspecified state attorney general "in connection with an investigation concerning the company's advertising, marketing, promotion, ingredients, usage and sale of its Monster Energy brand of energy drinks."

Judy Lin Sfetcu, a company spokeswoman, declined to elaborate.

On Wednesday, Monster said second-quarter profit rose 30 percent from a year earlier to $109.8 million, or 59 cents per share, while revenue increased 28 percent to $592.6 million.

Analysts polled by Thomson Reuters I/B/E/S, however, on average expected profit of 61 cents per share on revenue of $596.1 million. Monster also said gross margins fell.

The company did not mention the subpoena in a conference call with analysts late Wednesday discussing results, according to a transcript provided by Thomson Reuters StreetEvents.

Major distributors of Monster drinks include Coca-Cola Co and Anheuser-Busch InBev SA.

U.S. regulators have investigated other caffeinated drinks in the past.

In 2010, Phusion Projects LLC agreed to remove caffeine and other stimulants from its beverages, including the energy drink Four Loko, after the U.S. Food and Drug Administration warned it and some rivals that made so-called "blackout in a can" drinks combining alcohol and caffeine, were unsafe.

Shares of Monster fell $2.94 to $58.26 in after-hours trading on Thursday. They closed the regular trading session down $6.57, or 9.7 percent, at $61.20.

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