Monster Beverage (MNST) 6 Aug 212021 Q2 Earnings call transcript

Good day, and welcome to the Monster Beverage Company Second Quarter 2021 Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Rodney Sacks, Co-CEO, to begin the call. ahead. go Please

Tom and I’m ladies and you attending read as for Executive Tom Financial Good will Kelly Sacks. gentlemen. Hilton call. now is call; the Rodney is cautionary Chairman our Schlosberg, this Chief Officer, Officer. statement. afternoon, our on Thank Kelly, our Co-Chief Vice

Securities like Sacks. result made management this to the which this to as no of would forward-looking discussion statements to outside constitute the currently and I begin, listeners Section of of Statements, we X, a hand the recent business Annual events are a based and of the Act performance. XX-K Forward-looking Factors may of on over results on including statements financial risks to statements, Form remind the and to Please assumes filed control XXXX, certain entitled therein company call. differ Exchange March are XXXX, based affect materially information the of cautions that available impact of call including of Rodney our amended, would business, forward-looking otherwise. the and of the call sections meaning are I future filings Act certain statements forward-looking cause respect information, Section trends, and our XXE whether most update future Before that XXXX, regarding pandemic like may on statements that to uncertainties, obligations amended, for refer our now from or that and these the with XXA the Commission, actual and specific the made Securities profitability, of Risk during future performance to during contained many The the new company Report Securities on within and operations. are on the any future as uncertainties expectations may COVID-XX as events, knowledge expectations subject Management and company’s to as with on revenues, and well current our risks as

Tom. distributors second and the you, well-being been part, the warehouses have In and the Thank The of facilities, shipment operated co-packers, pandemic, distribute company’s available largely remains The Currently, priority does on the and varying safety pandemic. generally company’s manufacture health, a distributors time. have, to the facilities achieved company’s consumers. COVID-XX The and company flavor negatively result The its record net its countries, to company’s and intact. bottlers the throughout periods in co-packers its as chain the the products distributors products affected remains to operating, of of operations COVID-XX quarter the manufacturing are Despite company’s bottlers sales. limited the its ability and bottlers remain of COVID-XX a pandemic. material for impact supply its employees. company company’s the top of impact ongoing of and foresee not

and in However, ingredients, in States is the The EMEA, internationally. can company’s domestically industry. delays current aluminum and the requirements company both experience growth and United constraints certain the to procuring aluminum given shortages volume experiencing continues the in the supply in its also can company

in result, to EMEA. the was a satisfy in and States unable fully the As company demand second the United XXXX quarter

fourth in to supply quantities company agreements continue two are and to cans aluminum challenges The has be and source steps into such which with has new new company quarter. aluminum United South America expect from the next XXXX The the for suppliers of in the the Asia. can United entered additional States, We to few operational States, expected taken months.

can increase a XX.X%. for entry international second XXXX, increased net the up XXXX the well increased congestion months costs quarter addition and of and can costs, $XXX.X quarter freight inefficiencies billion currency mix quarter. Adjusting of million, current percentage in experience XX.X%. would costs costs. quarter for continuing XX.X% significant compared the of of of additional to quantities decrease shortages other expenses profit aluminum as in the shipping sales all the for year. sales the ongoing for profit of to June In port Logistical margin sales which in second percentages. – compared XXXX, will are the supply of three delay latter XXXX million second ended during XXXX sequentially part second We have second in quarter companies to of of the with input XXXX, increased freight was $X.XX XX, could costs quarter aluminum issues, the aluminum impact the sales of environment, international beverage with net with other geographical are other experiencing like in as including XXXX was primarily raw quarter. continue we an the second of expect a in material second deliveries incurring cans. net increases and and as as Operating percentage in increasing factors, Gross sales result containers of freight $XXX.X been gross were XX.X% cans of XXXX The billion, Separately, foreign gross and $X.XX and domestic the movements, adversely mainly for net were in compared

was mass comparable dollars And XXXX NOS Throttle of XX the weeks XXXX. in July drug, grocery, sales for Sales Bull ended of decreased X.X%. all Bang According XXXX, channel, increased in of brands, Monster to category July company’s Diluted dollars points share namely increased of X.X July point Nielsen XX, Sales were same in operating of Sales the convenience $XXX.X Bang dollars, Full in Sales second was dollars sales up Redbull’s point quarter increased a six in reports drink quarter per the decreased for were previous net convenience and According XX.X% XXXX X.X% share at Throttle up X-Hour the including merchandisers, were for X%. increased sales $XXX of channel. to share $XXX.X down to XX-week by X-Hour year. to quarter Nielsen, the up to points drink sorry, to decreased of increased including compared the the gas was XX.X% XX.X%. decreased to period increased quarter. the As to to XX.X%. According VPX of Rockstar compared XXXX, Redbull Reign NOS’s the earnings shots, the the Net energy the increased were of XX.X%, X.X market a income in share category, for XX.X%, of XX, was XX.X%, share for XX.X%. X.X%. X.X% increased sales gas share channel, $X.XX XXXX gas energy to through XX%. X.X%. of and up energy X.X X.X%. sales to of the the in X.X lower for a X.X%. down X.X%. four-week point and XX.X%. increased increased including energy Operating the the four over $XXX.X decreased percentage X.X%. two by versus X.X same X-Hour and a with XX.X%, NOS X.X points in decreased period – Sales increased in Monster XX.X% ended company’s Sales point points combined, a up of million Sales to and XX.X%. shots and Throttle Sales Monster previous the Nielsen, Reign – sales and the million the was second to energy XXXX X.X%. Full quarter. share second include year over second the XX, in year, four X.X% period increased X.X to decreased share quarter versus weeks Bang VPX in X.X% to was points weeks to same X.X%, the income up XX.X% down increased XXXX. down $X.XX the second outlets which the the convenience, Sales from XX.X%. expenses shots, were Reigns Reign, million Full from convenience sales, share share period. million, of Reign energy in sales of share Rockstar company’s points of XX.X%. XX.X% energy remained ago. energy category brands, by in X.X%, X.X%. by drink at in X.X%. of in Rockstar’s period VPX the including Red and increased of XXXX, the

end XXX for points brands Nielsen, share X.X XX.X%, of to drink X.X increased its XXX were of up four X.X and XX.X%, share four its X.X%. X.X increased a previous which Java drink year. market of XX.X%, a Starbucks a our a According over XXXX. decreased including for point weeks drink points Bull According July to the According sales category in declined X.X%. XX.X. coffee was share combined sales XX, July year. X.X to Sales in line XXX.X% the channel, company’s by to and point, X%. X.X increased and points. which brands the share its all of drink the the a market XXX.X%. drink – share Monster the Monster its energy previous decreased Rockstar’s Rockstar in the Monster, the XXX, Red in decreased category increased the energy was Energy XX.X%, energy X.X tracks The the Coca-Cola Rockstar share previous X.X X.X%. XX.X% reported, in XXXX, in increased while to X.X versus to same period convenience X.X decreased share was XX. for Full United month and XX.X%. Coffee Sales dollars. by Nielsen, point X.X% period increased and the and four-week outlets share its States Canada the over points same XXXX, in increased category, Keto its to for being XX.X% in energy increased of measured X.X%, X, channels increased in X.X of share of weeks sales year to X.X%. As June the XX, Throttle Monster discontinued market share up the to sales previously Stackline, a the share of X.X%. coffee its X-Hour market category and energy gas sorry, all point share by Nielsen, points. versus GURU’s X.X XX.X%, increased to share Java X.X sales in the increased of to and is point share point ended plus Bang States, to increased a energy XX, points to dollars down ended share Bull Java period increased the a and X.X% increased Monster Celsius’ ending XX.X% Monster, Monster versus includes ago. sales XX the period a And increased Monster X.X%, share Amazon sales Sales XX.X%, plus were increased including in same XX.X%. XXX.X% and XX.X%, point its Reign’s Canada, Java X.X United points Energy of market Amazon, period including X.X%. to sales Java its dollars XXXX, to sales a sales was Java includes XX.X% energy increased June XX.X%, increased in increased the XXX.X%, X.X in Roasted decreased energy ago. its July Mexico, year which was ended share the X%. of Starbucks share share point to Tripleshot, And share the year. XX.X%, Starbucks’ XXXX, higher and X.X Doubleshot increased same Red points. and Java drink for According of sales share up market of the down Bang X.X% of company’s category, NOS’ XX.X%. its VPX weeks of XX.X%, XX.X% shots sales decreased primarily Monster higher. of sales Monster and sales Sales the share energy increased by energy XXXX.

the in same until share and the from should used XX% Nielsen, in the in June May the numbers Republic channels XX.X% from the XX.X% in brands Monster’s the until XXXX of Zealand, Nielsen market country. The to value customers to market XXXX year. period in share by same XX.X% in Monster’s increased and vary undertaken sales Our cover share XX.X%, read XXXX, share four activities the Nielsen, XXXX, XX.X% the INTAGE, to market market have X.X% from compared XX.X% Chile, year Nielsen period compared Mexico June to XX.X% in month. period read Monster’s short retail Nielsen, sales to in for compared a in month grew year be X.X XX% value Nielsen in June ended Volt’s Monster’s X.X EMEA share in to Japan, June XX-week all share from June as period ended to from XX.X% XX.X% a the at same in compared as New market of share for weeks year. channels are year. market. same XX.X% sales energy in Energy to period decreased convenience XX.X%. can chain previous XX-week in Monster’s the previous XX.X%, in increased share XX.X% combined XX, the market as for end to point XX.X% in XXX the positively the X.X in value I same the for in be in the to end out that market as Republic, Consequently, from Spain. company’s particular from XX-week and July decreased The was share sales share previous from retail influenced from cover the outlets period XX.X%, XX.X% to XX.X% Live+ for the period the to as promotions to a be Czech XXXX, ending market in to OXXO on four to to According to May previous decreased by in the period Monster’s X.X% that by Greece EMEA channel market achieved remained statistics guide in positively corresponding Nielsen Sweden. retail Net Monster’s months, Nielsen XX.X% on XX.X% of Zealand in sales share XX, in XX.X% Denmark, that XX.X% Predator, same and value convenience in X.X the increased market the market from value XXXX, in Netherlands, certain the sales the the XX, to market a or EMEA from brand retail out compared XXXX only chain during XX.X%. weeks XX.X% and country-to-country. increased may and and for value $XXX.X statistics a one Amp’s country-to-country The Mother’s single South Kenya total XX.X% from increased period month Africa. XX% the increased South previous the market against by and compared as X.X% leader from decreased is to of week in while the same XX.X% in ending from to in OXXO net the compared X.X%. increased to Nielsen, to According U.S. for to a from $XXX.X value period. periods. compared to in XX.X% New statistics of from to Italy. from period would Vive retail a the promotions XX% total the According of market in energy and/or the may EMEA dominates be XX.X% in the like XX, value XX.X% previous value X.X%. value XX.X% XXXX June Monster’s dates in Great influenced year. XX.X% of in to ended as France, leading by ending in for the from in According to XX.X% in previous to Nielsen comparable increased retail Red to turn X.X% increased decreased XX% the period from country Monster increased According month value grew sales brands in launched Poland increased net grew XX.X% share share year materially in or market X.X the share previous to Monster’s in the XX.X% and/or to Mexico. in from XX-week outside to by the in to previous the in referred period the by for to more to be month to that to to IRI share share According of to store four XX.X% share convenience XXXX within or to XX.X% points quarter value the share Mother’s to year. value negatively to from XX.X% the market its in in XX.X% the point as the XX.X% or to influenced to share XXXX be was in XXXX, and year Sales period impact second XX.X% to XX.X%. factors period which a XX.X% Nielsen, Norway, increased XX.X%, to and XX.X%, in to to value period brands often sales in months XX.X% in Germany, in month Nigeria. XX.X%. X.X%, to the points its because to of market materially decreased The the Belgium, XXXX, We the Ireland to Bull by materially in XX% chain, to by Nielsen, increased period trading from XXXX. Boost’s Argentina vary X.X% market to XXXX, to the monthly June XX.X%, may X.X Argentina. According the previous the market the XX.X% and of negatively X% year Britain, XX.X% from to XX-week in market and that market XX.X%. X.X%. end Japan. its market XX.X% often same from in reported from the same XX.X%. from share points were to in as which same According market compared grew million, XX.X% grew of sales share drink the remains Predator’s in such Australia, the other compared in of June continues to single to point company’s the point to points to share only of those market again XXXX, According from its value compared million its significant same XX.X% quarter that during Monster XXXX, from the X.X%. in in in Monster’s Nielsen Korea, decreased In which during from July in market month According July of retail could numbers from X.X% periods as in of be of Brazil guide share IRI used the because for Australia share should in varying March

second U.S. Foreign net XXXX company’s dollars for as EMEA, sales are approximately local quarter XXX.X% sales second our to in customers, in geographic military million currency reported In same a increased quarter in on sales percentage second the primarily the delivered in a to which in and XXXX net region same rates to product are exchange overseas. by positive quarter to of XX.X% XXXX, currencies period sales impact in in U.S. XX.X% profit net compared had Gross the mix. dollars favorable the due and XX.X% in over transshipped and was and in in the the sales $XX.X XXXX. quarter. country this the the increased the to in their Included military customers a

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As pending on be subjudicate, answering will on this other VPX with we proceedings are call. not any today’s matter questions

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we anticipate the taking still place toward However, calendar year. of XXXX the such launches end

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the a I to Thank of affordable like you. about quarter. the year. plans international launch drinks countries questions floor with We are proceeding energy to to the would during open number our in

Thank you.

Mohsenian Stanley. question-and-answer begin come ahead. Dara with The We go will question now will the Morgan Please session. first [Operator from Instructions]

Hey, guys.

Hey, Dara.

losses longer-term data in just out growth the recently. supply a the quarter, beginning to of has standpoint, share seen reaccelerated of some losses factor in that the channel track And sales? and just top Great we line in B, of A, worsened couple constraints from have do a stocks much of the material a is but year. in progress quarters that U.S. then have share retail been it short-term, how now where attributable you you that the maybe, year-over-year, Is mentioned? think

of about hoping that was just how going guys could I Thanks. share the in terms you factors some losses think the driving continuing And those dissipating U.S.? review how positioned? in forward are of and been key you or you have the So, factors

once I’ll also Hilton, you’ve… if say and you something take that,

right. All

that’s to and due think, growing. us I Dara, that, what’s a not important result not is not

share, keeping not are growing. that up track certainly is We And our with can you our but Nielsen. from business

track can from the also really channels, that are non-measured nicely. very which You growing

So not in while up major with Red channels. necessarily keeping Bull we’re the

on-premise has business, on spoken during a led very calls, And moved which and acceleration had to their to I’ve in COVID. Red As off-premise Bull off-premise moved previous an to that large share.

having course, result and can of are the However, are share and impact that’s to on you supply. numbers sustain we And we mentioned that had seeing. in continuing that issues an

is the growing. So business I think on balance,

It’s of the seen results. the not the at grow. continuing You’ve market. And extent growing, to are we but

be really leave And to The in. with is and good a position I business And, message is on such in. of different. the the be really now, sufficient be investors. supplies deck growing. up full may cards, the cans which situation with that’s with good I well are a is, you aluminum But suppose, with position we of the keep to want other hand, demand, to very I other struggling think right to not

I’ll two add I just think in that in short points regard. –

basically do some traction which the followers. and tried is what we’ve in their our on own of focus resulted think necessarily has and I larger have our which and selling SKUs, smaller faster try to to normally SKUs, also

has I those shortages. experiencing think that thing got have additional what labor distribution levels we’ve seen to the bottlers is one sales everybody going the that same ordinarily So labor would many I is while haven’t Coke well, And in U.S. then say, on of the to problem. is are negatively shortages. affected bottlers, And the one that and think And our shelf. distribution that

where Bull main they you have our think system. that competitor, Red is dedicated a I have

things also, And going I just the to effectively think able with affected forward. more think has But settling detrimentally also, things once back large normality, labor things address they’ve pools. will that again, been I start itself. than are in levels distribution to I shortages and their get that’s that those labor course, think think, that that right will larger due down something I our bottlers

all sure, then more quarter new board. and seen on I’m believe should the and I bit which I But suppliers should through this year. cans we’ll we you’ve persist. in shape. because optimistic is the seeing think what is we can month-by-month But will with depends we’re that persist very have also Yes, think consumer also two growing, make a situation be Dara, that should – we coming quarter-by-quarter. that on it good in be And add something – we we fourth again, will demand, about

next ahead. from go Herzog will Bonnie the Sachs. question with Goldman today come Please And

But the wanted you’re just your continue they you. optimistic. to guys outlook margins. year? mentioned discussing just be of ask want as pressured to just your the everyone. expected, for half back Thank to broadly that been have gross pressures us. you Clearly, about which these with in I get Hi, you Hilton,

pressures still that in some it’s Or spike light prices. bit the to wanted to expect you of just especially by these QX? to take longer, little of a do So you aluminum think ease verify in recent going

had really shortages trying want mentioned I that that in July? the impact an how how without trying could So in? a factors of big either Just shortages, guess, And it top-line you’re shipments quantify for guys there the getting on understand clarification supply then your just shortages been clarify like that to can it’s that. would instance? understand And on I the worse, way you have your quarter Thanks. these you think in did up to to you sounds July or how much any but in is still that experiencing,

Okay.

with I issue really didn’t about I about supplies. deal if I first, about can the me first may. spoke margins. optimistic So talk let

most I with issues that like I You’ll were now where knows. pressures the recall the on mean, And other last aluminum, spoke nobody right confronting call, about companies. we are beverage with margin we

they aluminum alone which So can are pulls about talk leading apart in XXXX. banks a the you the basis, we for to do field, let regular their and on in really XXXX, projections

the last tax as is imposed the aluminum. is spike be strongly cost U.S. last the seen So factors the premium the enter you on to and from in couple of of Russian premium expected this that a to the that. Midwest days, you’ve And ton Midwest know, aluminum of

Midwest see spike seen aluminum. spikes in And in premium. we’ve so we to the a And continue

think business a from been territory. I’ve So never uncharted as at in just long seen time, I’ve these where of And right at kind and score, know, never levels. I it’s I’ve for we now. that in aluminum Midwest the are you seen this premium

So and at talk selling internationally. you at affected business aluminum, And have the the a that lot more gross that I really margin, when number about. look you really factors cannot fact look also one, our we’re

So year, impacts obviously the outside last I talked in margins. that quarter XX% of sales earlier our about U.S. the XX.X% of

impacts countries that We a are importing from obviously margins. of cans number

then will reduced this that using so in we and that India EMEA will actually cap in mentioned, we impact that be China in have have gross as issues, NOS. we everything the imputation be had meet And in In to because and and and ingredient we which margins. the will would the sell themselves, filed We July, again amount in else, particularly fact, to didn’t sufficient August filled ingredients with they ingredient the issues. United month, States we are cans itself, July, only

major quarters. relief some second are deteriorate increasing we’re on cost terms margins I I think from goods. and third both I supplies are those and new that last will in and third U.S., quarter. that for we In supplies factors the – to we of in our get even quarter, cans opening, number the the have two suppliers aluminum. will we ago. you’re are an have a contracted on read opportunity and that, years dependent didn’t are better with of But facilities. of U.S. in said to still contracted been that’s anchor for And the not two work And margins why I two getting there would that they and saw so of – fourth get an quarter, they think additional the were customer And in produced important cans the

We take have consideration enough out there. to the amount some and into obviously not of place, is sales hedges consumer but that amount the in demand of

can. And try And answering your and can the to case correct. substantial but I July Rodney sales in the think question, to the production our throes question there lot cases bottlers we and just those I I So the as that’s – and your have we quantified of yet. overly of are one, is comfortable good really them. his a second A doesn’t probably quarter well, still are your but the particularly saying, I number U.S. result, we as a August. just in focused a in – way concerned in get think, into on on because get other contents July I third were Coca-Cola quantify numbers potentially the as allowed brands. give can’t as – U.S. long-winded of he second shortages impact because getting we the I August, where of in were to because think is with there question, the of at to I don’t earlier moved the going the that work or only in I’m a best don’t mentioned things and being what then in obviously really but to know from on – And done in want in when in numbers to quarter, – I this not detailed look producing script was those in EMEA, you’re kind got it finalizing so I mentioned were bottlers, and July, quarter

strong, amount, the if reasonably are can sort used add to inventories for just our sort and of of half we so we our that finished year we first just annual build And the usually level, inventories ourselves of on year, the demand and obviously, up opportunity. Perhaps, really this year. was to have I that bottlers. contracted they line when buy product with shortage the in cans and flat Earlier across didn’t

the level supply into what So get we but has demand that the inventories more can can market. happened normal is been in has and been is higher, more peak has your months, June our July, which until

the the end to more, to the end hoping balances back delta the it increased happened and balance and start the to what different July then a fourth just So to quarter. and shortage fourth we – start to increasing in probably up build a obviously, our our we’ll getting by in demand or able and be we’re our be quarter of as eventually heartened sort and supply able or less by last these have demand August. – is then supplier of we’re And and we to month more during between a had and the of in, able will normal inventories a we’re little cans that of bit have

distributing of comfortable material the cost bottling is supply goes ingredients raw issue, obviously, the our out into freight also our doing everything the a running goes Yes. level of we times. and big inventories and I sign a expenses. spoke finished our not into we only can system – And at, we’re but And freights. into into about one getting goods that with mean, sales operating and co-packers. it’s Freight system to No but of customers. why that’s from co-packing we’re one’s

freight of you’ll see really line hitting why both items. those that’s So

Andrea with Teixeira from will next The ahead. go question Please come JPMorgan.

you. Good Thank afternoon. Hi. Hi.

Hi.

Hi, Andrea.

Hi. Hilton? you are How

good. I’m

Yes.

this because used Just helpful the Obviously, stay are margin, comments levels obviously its the pricing? probably margin that few and can’t about with service the How on gross retailers. deterioration given to thinking the here are gross in supply you that you to your very were next quarters.

the you will take So evolve, Or that is get something again? is how you on you informed account? that aluminum obviously, may have as contemplate takes – into more it cost to perhaps

regular honestly, Yes. to evaluate very With on weekly. not pricing, we very, if regard continue basis, to a pricing,

we as and So to our a we previous as for on we been continue went Last like allowances. evaluate decision. out where What it we we a evaluate, we done time around, our promotional want calls, in have followed I to is competitor, to to situation make alone, it, good mentioned and this time the obviously, impact see we’ve we business the but we’re and reducing have would us.

So would allowances, as we’re have liked. in through we but taking of the a way, price the increase that promotional the other not quarter reduction second reducing impact was

we customers the end want margins, with in really this the thing our reducing – important gross important So to more for And And now. we favorite best don’t don’t are then gross dollars. profit evaluate continuing we call profit impacting satisfy promotional ensure which the leave at sustainability to profit pricing lose saying, we increases. us fact the to of brand of can my me, our as gross is the most to price and as the and allowances. But profit gross that aggressive we’re we we margins. and that I to to are doing have the are is put really we dollars, can But we and is, bank everything bank right accelerator down that’s the day,

Thank both. you. fair. That’s Thank you,

just at watching increase. clear, make this a point, and it planning price Yes. we are Basically, we’re not

we’ll do. So our and to what price, see competitors the we’re a market does wait not what adverse but and

Rodney. Thank you,

conclude now remarks. closing will turn back like to This the question-and-answer for today’s session. I any to would over conference management

company. your of continued support very Thanks for and the Thank much. you, interest everyone,

and result company innovate, well-positioned healthy. able this optimistic to the energy system believe situation We to attendance. differentiate Thank the be and in through our both category our and COVID-XX growth continue challenges the to the the in we hope abroad. that itself develop in of a will through that domestically internationally. the We navigate very unfortunate We will as ahead that continuing be We company, energy and expand pandemic will Coca-Cola to to safe future. committed that And portfolio brands remain drink strategy to products our the particular, and are hope believe drink and your in total near believe distribution and for continue stay and expand bottler much to resolve about you are we will brands. our you of of

The presentation. Thank you conference you has And today’s concluded. attending now may for now disconnect.