Monster Beverage gets sued for ads aimed at kids

San Francisco is taking the energy drink maker to court over possible health consequences of children consuming caffeine.

By Jonathan Berr May 7, 2013 3:48PM
Cans of Monster Beverage Corp. energy drinks (© David Paul Morris/Bloomberg via Getty Images)Monster Beverage (MNST), maker of Monster Energy, X-Presso Monster and Monster Rehab energy drinks, is under fire for its marketing practices yet again.

The city of San Francisco has filed suit against the Corona, Calif.-based company, alleging that it's marketing caffeinated drinks to children who might suffer adverse health effects from them, according to The New York Times. Monster denies any wrongdoing and has raised questions about whether City Attorney Dennis J. Herrera has the legal authority to pursue his claim, the paper says. A spokesperson for Monster couldn't immediately be reached for comment.

In his suit, Herrera accused Monster of marketing its beverages to children as young as 6 despite scientific evidence that they may cause "significant morbidity in adolescents," according to a press release. He had been in talks with Monster to change its youth marketing practices when Monster sued him in federal court in April 29.

Herrera and San Francisco have at least one fan. "We are pleased as much to see them doing it," Steve Gardner, the litigation director for the Center for Science in the Public Interest, which is considering taking a similar action but hasn't done so, told MSN Money. "The snowball is getting bigger. It's not melting."
 
Wall Street appeared to be shrugging off the news. Shares of Monster were higher in afternoon trading. They've gained nearly 8% since the start of the year. The average 52-week price target on the stock is $60, about 5% higher than its recent price. Nonetheless, the stock may have a cloud over it for a while.

The Food and Drug Administration last year began investigating reports of death and injury among people who drank products labeled "energy drinks" and "energy shots." Following the success of these energy drinks, food companies are starting to roll out other caffeinated products such as Wrigley's Alert Energy gum from Mars, Cracker Jack'd snack from PepsiCo.'s (PEP) Frito Lay and Kraft's (KRFT) MiO Energy water. Monster and its rivals have argued that coffee sold by Starbucks (SBUX) contains more caffeine than their products.

Moderate doses of caffeine of about 200 to 300 milligrams -- about two to four cups of coffee aren't harmful to adults, though some people are more sensitive to the stimulant than others, according to MayoClinic.com. But as the Center for Science in the Public Interest, notes, the American Academy of Pediatrics discourages children and adolescents from consuming caffeine and other stimulants.

Heavy consumers of caffeine -- 500 to 600 milligrams per day -- may experience nervousness, irritability and insomnia. In some cases, heavy caffeine consumption can cause rapid heartbeat and seizures that need to be treated in an emergency room.

"While the FDA has regulations governing caffeine in cola-type beverages, those regulations did not anticipate the widespread caffeination of the food supply," according to CSPI.

Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.


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