Monster Beverage Corp. has a headache, while Chevy Volt gets a boost

A business recap of energy drinks, electric cars, and Mexican labour

by Tamsin McMahon

Jan-Philipp Strobel/Keystone Press

Energy drinks have courted controversy with a business model many see as based on pumping teenagers full of caffeine. But investors have largely tuned out those complaints. Monster Beverage Corp. has been the greatest beneficiary of the stock market’s love for energy drinks. Company shares more than doubled last year, topping $78 in June, as its oversized cans and provocative slogan—“unleash the beast”—made it the largest U.S. energy drink producer by volume.

That was until last week, when its shares plunged nearly 30 per cent on news the Food and Drug Administration is investigating reports five people have died since 2009 after consuming Monster drinks. The FDA said it has not yet linked Monster to any of the deaths, but the bad publicity sparked whispers that Coca-Cola is backing away from plans to buy the company. The stock market, it seems, is finally coming down off its buzz around energy drinks.

Bright Idea: Lube, oil and software fix

Last week, General Motors Co. announced a software update for its Chevrolet Volt, contacting about 4,000 owners of the plug-in hybrid over a glitch that could cause the electric motor to suddenly shut down, even while the car was moving. They were asked to bring their vehicles to a dealer for a fix, but in the future, more software updates might happen automatically and over the air—just like an iPhone.

Tesla Motors has already given it a try. In September, in what was a first for the industry, it rolled out an over-the-air software update for its Model S electric sedan. The 100 affected owners could choose a time for the update, when the car was parked and not in use. Other companies, like Mercedes-Benz and Chrysler, are reportedly working on over-the-air updates, too. Considering how powerful and ubiquitous on-board computers have become in cars, over-the-air car tuneups will soon be the norm. Other companies are already working to protect cars from computer viruses.

Trade Manufacturer Mecca

Mexico was feared as a key source of low-cost labour for American and Canadian companies when it signed NAFTA in 1994. Then along came China, with its ambitious central policy-makers and giant, low-paid workforce, and suddenly Mexico found itself playing second fiddle to the “world’s factory floor” in Asia.

But that may be about to change. As China’s workers increasingly demand better wages and planners in Beijing are pressured to allow the country’s currency to rise, Mexico has re-emerged as an attractive place for North American companies to do their manufacturing. Already, economists at JP Morgan suggest that Mexican labour may be just as cheap as China’s. Mexico also has the advantage of being close to the United States and sharing a long land border, which reduces shipping costs—particularly on big-ticket items like automobiles—in an era of high fuel prices.

The trend is only likely to gather steam over the next several years. “China’s cost advantage is shrinking, as labour and other input costs rise,” says a recent report by the Boston Consulting Group. “Between 2012 and 2016, manufacturing labour costs are expected to rise by at least 10 per cent annually, five times as fast as in many developed nations.”




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