Q3 2020 Monster Beverage Corp Earnings Call
The Monster Beverage Corporation third quarter of 2020 conference call, all participants will be and listen only mode should you need assistance. Please take note conference specialists My Christmas Darcie, followed by zero.
After today's presentation, there will be an opportunity to ask questions to ask you. A question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then too I would like to turn the conference over to Mister Rodney sex Chairman and C. E. O. Please go ahead.
Good afternoon, ladies and gentlemen, thank you for attending this cool I'm Rodney sex Hilton Schlossberg I'll watch imminent president he's on the cold as he's Tom Kitty All executive Vice President of Finance come Kelly will now read the cautionary announcement.
Before we begin I would like to remind listeners that certain statements made during this call may constitute forward looking statements within the meaning of section twenty-seven a at the Securities Act of 1933 as amended and section 21 E of the Securities Exchange Act of 1934.
Four as amended and are based on currently available information regarding the expectations of management with respect to revenues profitability future business, you to revenge financial performance Ham trends as well as the future impact of the COVID-19 pandemic.
On the company's business and operations.
Management cautions that these statements are based on our current knowledge and expectations and are subject to certain risks and uncertainties. Many of which are outside the control with a company that may cause actual results to differ materially from the forward looking statements made during this call.
Please refer to our filings with the Securities and Exchange Commission, including our most recent annual report on form 10-K miles on February 28th 2020, and our most recent quarterly report on form 10-Q.
On August 6th 2020.
Including the sections contained therein entitled risk factors and forward looking statements.
<unk> discussion on specific risks and uncertainties that may affect our performance.
The company assumes no obligations to update any forward looking statements, whether as a result of new information future events or otherwise.
An explanation of the non-GAAP measure of gross sales and certain expenditures, which may be mentioned during the course of this call is provided in the notes and designated with Asterix and the condensed consolidated statements of income and other information attached steady earner earnings release dated November five.
2020.
Listen distributors to distribute our products as a result of the COVID-19 pandemic.
In addition, we are not experiencing significant raw material finished products shortages and our supply chain remains intact. We all continually addressing our aluminum can requirements given volume growth and the current supply constraints in the aluminum can industry.
14.1 million and decreased expenditures of 9.3 million for travel and entertainment each largely as a consequence of the COVID-19 pandemic the cost for certain postpone to reschedule events have been or may be deferred to future periods due to the uncertainty surrounding the COVID-19 pandemic that.
Throttled increased 2.4%. So I was a red bull increased 19.4%. So I was of Rockstar decreased bought 10.4% sales a five hour decreased 1.9% and sells a M decreased 11.1% V. P X Bang sales decreased 2%.
Fluffy Pussy energy drink category, which includes a Java months the line in the convenience and gas channel increased 14.8% over the same period. The previous your sales of Java Monster include doing Java months to 300 with 24.6% higher in the same period versus the previous yet so I was a Starbucks your energy was 17.
According to Nielsen in all major channels in Canada for the 12 weeks ended October 320, 20 energy drink category increase.
Increased 15.9% in dollars sales of the companies energy drink brands increased 19.7% versus a year ago. The market share of the companies energy drink brands was 39.7% up 1.3 points monsters Marketshare decreased 0.6 of a point to city, 4.8% nausea sales increased.
And while it remained flat at 36.6% in Greece and declined from 13.4 to 13 in the Czech Republic Nielsen.
It's the same period in the previous year. According to in charge in Japan, Munsters market share and value in the convenience store channel for the third quarter of 2020 increase from 51.2% to 55% as compared to the same period in the previous you with a gun pointed out that shouldn't market statistics that kind of a single month.
Seeland, Tahiti French Polynesia Caledonia, Papa in your Guinea, and Guam, net sales increased 38.1% in dollars and 35% he'd local currencies sales of the monster Brandon Oceana increased 54.7% in dollars and 50.3 per cent in local currency as compared with the same court.
2019.
That's in America, including Mexico, and the Caribbean net sales in the third quarter increased 6.1% in dollars and said he 1.9% in local currencies over the same period in 2019.
Profit in this region as a percentage of niche south was 42.9% compared to 44% over the same period in 2019 in Brazil knit sales for the and the quota increase boss that he 8.5% in dollars and 93% in local currency knit sales in Chile decreased 21 point.
1% in Dallas.
I sent in local currency in the quota.
I will now briefly discuss all litigation with vaudeville Pharmaceuticals, Inc. V. P X the maker of Bang energy drinks. Several proceedings are currently ongoing with V. P X, including claims for false advertising and trademark and trade dress infringement brought by the company you guys V P X and Bobby P X against the company the company is low.
Later in 2020 juice.
Juice Monster Mango Logica was launched in Namibia in July 2020, and Mozambique, and my yacht in August 2020, and is now available in 38 markets across EMEA. We are planning to launch juice Monster manga Lucker Mega locker in an additional seven markets in 2020.
And as you're dragging T along with Monster Green and ultra what.
Large parts of India still remain in national locked down due to the COVID-19 pandemic.
During the 20th 23rd quota no shoes were repurchased under the previously authorized repurchase program as of November 520, 20, approximately 441.5 million remained available for repurchase under the previous the authorized share repurchase program.
We estimate October 20th 20, gross sales to be approximately 14.8% higher than in October 2019 on a foreign currency adjusted basis October 2020 garage sales would it be in approximately 14.9% higher than comparable October 2019 gross sales.
2020 had one less selling day, then October 2019.
In this regard be cushion again that sales ever a short period of often disproportionately impacted by various factors such as for example, selling days days of the week in which holidays full timing of new product launches and the timing of price increases and promotions in retail stores distributor incentives as well as shifts.
And the timing of production in some instances, where I bought those are responsible for production and unilaterally determine their production schedules, which affects the dates on which we invoice such butler's as well as inventory levels maintained by our distribution partners, which they alter unilaterally for their own business reasons.
Reiterate that sales ever short period, such as a single month should not necessarily being Puget too well regarded as indicative of results for a full quarter or any future period. In addition, the COVID-19 pandemic remains a serious concern if the COVID-19 pandemic and related unfavorable economic conditions continue.
To intensify the negative impact on our sales, including a new product innovation launches could be prolonged and may become more severe.
In conclusion, I would like to summarize some recent positive points. The companies priority has been and remains the health and safety of employees currently the companies flavour manufacturing facilities, it's kopeck as warehouses and shipment facilities and buttons and distributors are all operating will continually addressing aluminum can requirements give.
[noise] volume growth and the current supply constraints in the aluminum can industry. We are pleased with the new additions to the monster energy portfolio well.
We are encouraged by the prospects for a rain total body feel high performance energy drinks and raining foot and the Majestic feel high performance energy drinks, we are planning for future launches about rain total body feel odd performance energy drinks in certain countries outside of the U S. We are pleased with the rollout of predator in Fury and are affordable energy drink port.
Yeah internationally, we are proceeding with plans for future launches of are affordable and as your brands outside of the United States.
Just bought the obstacles of the COVID-19 pandemic, we are pleased with the outperformance for the quarter and for the non month period end of September 30th 2020, I would like to open the floor to questions about the quota. Thank you.
[noise] and at this time, we will now begin the question and answer session to ask you. A question you impressed stars in one on your Touchtone phone.
You're using a speaker phone please pick up your handset before pressing the keys.
To withdraw your question. Please press starving to in the interest of time, we kindly ask please limit yourself to one question only.
And at this time, we'll pause momentarily to assemble the roster.
Yeah. My first question today will come from Dime Athenian with Morgan Stanley. Please go ahead.
Hey, good afternoon guys.
Neither.
So we've seen category growth come back it pretty healthy levels looking at the U S and Europe, you mentioned, the sequential and prevent within queue to obviously October seems solid. So I was just hoping you could give us a bit of your perspective on category growth here post Covid are you seeing more of a sustained pick up.
Perhaps people are substituting energy drinks coffee shop consumption or you know should we still expect sort of below pre covid growth levels with the consumer not back to full mobility, just really wanted to get some perspective on category growth and I'm thinking more longer term ex restrictions, but while you're on the subject <unk>, perhaps you could touch on the short.
Term rest from a second round of restrictions also thanks.
Alright, I'll I'll I'll take that I think that you know where we are in a an area of uncertainty I think everybody's guessing as to where the you know people are going to be switching from coffee too too energy I think what we do now is that the there. There is there are substantial channels with.
Luxury so even though people are at home in greater quantities than they've been before they drinking more energy drinks and they could very much as well drink coffee, which they doing which is obviously backup is cheaper than an energy drink. So.
I think you know we're not gonna go back to where we were before we go back to somewhere that's kind of in the middle of where we were and where we are now and so you know my color is and you know I didn't give guidance, we never give guidance, but if you know if if when thinking about the category in the category growth that has been.
Sustained in this time of Covid you know, it's that you can enjoy your own conclusions, but that's the kind of color that I I've been thinking of.
And our next question will come from Andrew a text here with J P. Morgan. Please go ahead.
Hi, good afternoon, and hold on as well can.
Can you help me.
T N as in the corner was that any leave now like we can is there anything you. Then three ahead of that in your fucking surprise such thing this lump nets in a certain amount of reason I guess not this time July that included in the last fall by the deceleration in August and September So heightened my business, but then.
Shopping we accelerated now in October.
And and just a follow up comment about yeah. What is your view of the impact of the of the locked out now and the curtains mobility as well. Thank you.
I didn't hear that very much of what you were saying it was very young too I don't know if you heard it he'll today, perhaps you yeah I think Andrea was talking about Red Bull is that correct.
No I, yeah, sorry for.
Technical issues, but I was just asking about the sales cadence in the quarter was that any reason why.
Ah Okay. So they lie and then yeah mhm, Okay. You told me about a cadence.
Yeah, you're qaeda yeah. So so what happened and you know we can go through the history on that but what happened was that Ah Butler's decreased inventories and we spoke about that and then you know there comes a time when they have to you know order too.
To to get the energies back to where they should be bearing in mind. The depletion. So there's been a steady.
Percentage growth.
Indications, which you know, we're not sort of matched by by orders and so what you've seen in the quota is a steady rebuild of inventories in the distribution system in order to support the growth at retail.
And also what happened in the quota was that many of Ah bought this we're back particularly in the U S and more full force. So they were covering the stores in a bit of frequency than they had in the past.
So that's where we saw that it that that acceleration.
And then you'll chicken question was about EMEA and you know I would refer you to what happened in the first and second quarters in EMEA, the third quarter, particularly in EMEA was you know it was really strong.
But the M. Yea gods felt there was still a lot of runway. So we know what October is we've spoken about October in November and December you know will you know it was again, we don't give we don't give guidance, but we don't know what the impact of you know.
The lock Johns are gonna be but you know we've got some sense for what happened earlier this year.
And our next question will come from Mark Astrakhan with Stifel. Please go ahead.
Hey, guys afternoon, all as well.
I guess just building on on one of the earlier questions on on the U S.
Not not.
Not in proving as.
And I'm like lessons mobility increases I'm more curious your thoughts.
About the still disconnected, we're seeing in the data between.
Your business and and Red Bull or evening Redbull share games versus the category. So you mentioned that you're doing a better job you talked about that last.
Ernest call about the coax system being back in the market I think.
Right around July or so the rebels now grown close to 20%. So what do you think you'd really contributing to to their outperformance in.
How do you think that and if it does go into next year. They in particular have the lap that and and you guys have the lap easier comparisons.
I think it is grateful probably going to start having a tougher time on comparisons, but I think what they what you can see is that I've got a lot of emphasis emphasis in the in the 12 ounce Ah. We think there's been some increase consumption cause a lotta rebels business was done in the bar.
And I think people, who are just not going to the bars, but I'll still using ridiculous mixes of property pulling them in the off premise channels and that's all I think.
Think it could be contributing to some of the increase as I think we sit on the law school I think that the Red Bull has a very dedicated and focused distribution system and I.
I think state in the field in in and had focus much much better than not only carpet pepsi's and and and every all of the bigger companies.
I think that we're still seeing the effects of that their execution has been good and and you can see that in comparison to some of the other competitors, who are or or or negative even though one would have expected some of them to a started.
Going into positive territory.
And and and so that's that's that's an issue, which we which we were addressing they had some good innovation, but they renovation is now sort of leveled off a little bit, but you're seeing a large guidance, particularly is listening to 12 months right across their whole line, including there some of the original product.
And I think that you know we're getting back we've gotten your products are introduced now I think we've got to get you know a little more focus in and and what we've done Israel now stepping up we have basically created in your division with a street dream, having good we've appointed Achee field X a.
Houston office out with a pretty did it get lost dedicated group of people under him to really focus I think we've probably been under performing that we've had.
Not enough attention in the independence, where you get trial and.
Reaction for and you know trough, particularly trough for your innovation. So we are gearing up with I worked for calling our street team Ah. So that's that's something you and that we are going to implement it's it's it's weird in the throes of it right now and it will be stopping fully operational in the next month or two and then as you get a gathering.
We are going to be expanded we think that will address a lot of the independent channel, where we think that.
We perhaps have you know fallen a little behind that being said, we are still obviously driving very nasty and it's a question of the the disparate disparate proportion between us and Red Bull, but if you look at the rest of the category. We're doing well if you look at Ryan it's drawing a it at about the same writers Red Bull.
And we think that for some of our new innovation that we've just launched it been really well received the the ultra watermelon and did you choose products. We have some good innovation coming next year once things settle down and we think that we will get.
Will be in a good position to to attack that differential.
And our next question will come from Peter Galbo with Bank of America. Please go ahead.
Hey, guys. Thanks, very much for taking the question and and maybe just to piggyback on on March question and talk a little bit about you know the innovation.
You know I I I guess, just with the introduction of a watermelon you know a a had that shipped at this point and maybe just talk to us a little bit about you know what you observe seasonality with that product and help us understand I guess in your own internal planning you know, how you're thinking about how big that line could be.
You know relative to say, an ultra paradise, or a fiesta or Rosa thanks very much.
It it it has shipped shipped at the beginning of October so it and it's it's it's had a very good reception, both from El Partyless and and from from retailers very initial indications of sales pointing some of the retail chains are showing that it's it's.
You know really doing well, it's it's it's a hate of of some of the others I mean, the Ultrafiche. There was a really good Ah launched earlier this year and he's continuing anything that that that was a little new product and that's continuing to grow and.
But this is actually starting to to opt to outpace the those ones off the three to four weeks, we're actually seeing a higher a higher rate of style Ah you know, but we you know we've lost it now we don't you know I think that you know like everything it's it does get affected by the winter months, but we think that Ah being as.
Calorie product it will help with the product and you know we we were caught you know optimistic for for Watermelon is is a really good opportunity. It's a really good product and the whole ultra law and is continuing to perform to perform really well.
Yeah. So you know the color on that Ah Hilton Yeah, Yeah, no. The only thing I would add is that you know it energy Jacquette degree is not as seasonal there's for example, sodas and Ah the surfing some beer.
And you know it is your academy, it's on and we've seen high rates of sales and some of our major retailers. So you know as we transition into you know the Gen reason the better for Ya months, it's really very much on trained.
And this will conclude our question and answer session I'd like to turn the conference back over to Mister Rodney faxed or any closing remarks.
So on behalf of Monster I'd like to thank everyone for their continued interest in the company we continue to.
Believe in the company into our growth strategy and remain committed to continuing to innovate development differentiate what brands and to expand the company both at home and abroad and in particular expand distribution of our products through the Coca Cola bottling system internationally, we believe that we will be able to navigate through the challenges ahead as a result of the COVID-19 penned.
Make and hope that this unfortunate situation will resolve itself in the not too distant future. We believe that'd be well positioned in the energy drink category and continue to be optimistic about our turtle portfolio of energy drink brands. We hope that you will stay safe and healthy. Thank you very much for your attendance.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Your lines. This time.
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