Q1 2021 Monster Beverage Corp Earnings Call

Total Ceos. Please go ahead.

Thank you good afternoon, ladies and gentlemen, thank you for attending this call I'm Rodney sacks, Hilton Schlosberg, Vice Chairman and co Chief Executive Officer is on the call as he is Tom Kelly, Our Chief Financial Officer, Tom 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 27, a of the Securities Act of 1933 as amended and section 21 E of the Securities Exchange Act of 19.

34, as amended and are based on currently available information regarding the expectations of management with respect to revenues profitability future business future events financial performance and trends as well as the future impact of the COVID-19 pandemic on the company.

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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 of the 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 filed on March one 2021.

Including the sections contained therein entitled risk factors and forward looking statements.

Our 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.

I would now like to hand, the call over to Rodney sacks.

Thank you Tom.

Company's top priority remains the health safety and well being of its employees.

Companies flavor manufacturing facilities, it's co Packers warehouses and shipment facilities have operated throughout the COVID-19 pandemic.

Companys bottlers and distributors are operating and the company's products remained generally available to consumers.

<unk> countries the operations of the company's bottlers distributors have in part b negatively affected for varying periods of time.

The ongoing impact of the COVID-19 pandemic the company achieved record first quarter net sales currently the company does not foresee a material impact on the ability of its co packers to manufacturer and its bottlers and distributors to distribute its products as a result of the COVID-19 pandemic.

Company supply chain remains largely intact. However, the company is experiencing shortages and its aluminum can requirements in North America, and Europe, given the company's volume growth and the current supply constraints in the aluminum can industry. The company has taken steps to source additional quantities of aluminum can.

From South America, and Asia, However, logistical issues, including Ocean freight and port of entry congestion could realize such supply low.

It just took all issues in relation to the importation of certain other raw materials and ingredients could impact future supply. Furthermore, we all continuing to experience freight inefficiencies and like other beverage companies are incurring increased aluminum can and other costs in the current environment.

In the first quarter of 2021 net sales were 1.24 billion compared to 1.16 billion in the first quarter of 2020, an increase of 17, 1% adjusting for foreign currency movements net sales for the 2020, one first quarter would have been up 16, 2%.

Gross profit as a percentage of net sales for the 'twenty 'twenty. One first quarter was 57.5 per cent compared with 60% in this 2021st quarter. The decrease in gross profit as a percentage of net sales for the three months ended March 31, 'twenty 'twenty. One was primarily the result of increased input costs.

Mainly increased raw material freight in costs geographical sales mix and higher promotional allowances as a percentage of net sales.

Operating expenses for the 2021 first quarter with $300.8 million compared with $272 2 million in the 2021st quarter as a percentage of net sales operating expenses for the 2021 first quarter with 24, 2% compared with 25, 6% in the 'twenty 'twenty first quarter.

Operating income increased 13.5 per cent to $414 1 million up from $365 million in the first quarter of 2020 net income increased 13% to $315 2 million as compared to 278.8 million in the 'twenty 'twenty comparable.

Quarter diluted earnings per share for the 2021 first quarter increased 14, 2% to 50 non sense from 52 cents in the first quarter of 2020.

According to the Nielsen reports for the 13 weeks through April 'twenty, four 2021 for all outlets combined, namely convenience grocery drug mass merchandisers sales in dollars in the energy drink category, including energy shots increased by 23% versus the same period, a year ago sales of the company's energy.

Brands, including Ryan were up 17, 2% in the 13 week period sales of Monster were up 27% sales of reign were down <unk> six of a percentage sales of naus increased one 4% and sells a full throttle increased eight 1% sales of Red Bull inquiry.

<unk>, 27.9% sales of Rockstar decreased by 11.9% sales of five hour increased 11, 6% and sales of Amp increased 6.9% VP ex bank sales increased 16, 3% and Coca Cola energy sales decreased 59 points.

3% with a market share of point full of upset accordingly.

According to Nielsen for the four weeks ended April 'twenty four 2021 sales in dollars in the energy drink category in the convenience and gas channel, including energy shots in dollars increased 34% over the same period the previous Europe sales of the company's energy brands, which include reign increased 27 percentage in the four week period.

In the convenience and gas channel sales of monster increased by 39% over the same period versus the previous year range sales increased $13 four per cent nausea was up five 7% and full throttle was up 17, 2% sales of Red Bull were up 41 two.

Percentage Rockstar was down nine 9% five hour was up 41 four per cent and Amp was up 14, 6%. The P. Ex Bang sales increased 35.5 per cent and Coca Cola energy was down 45.8%.

According to Nielsen for the four weeks ended April 24, 2021, the company's market share of the energy drink category in the convenience and gas channel, including energy shots in dollars decreased two one points to 37, 4% monster share decreased by <unk> seven of a share point to 31 two per cent range.

Decreased <unk> five of a share point to 0.6% nausea share decreased <unk> eight of a point to two 8% and full throttle share decreased 0.1, other point to 0.7% Red Bull's share increased one point non points to 36, 9% Rockstar share was down one point non points two three.

8% five hour's share was higher by <unk> three of a point at 4.8 per cent and M share remained at 44 per cent VP ex as Bang share Bankshares increased 0.1, other point to seven five per cent and Coca Cola energy share decreased <unk> three of a point to 2%.

According to Nielsen for the four weeks ended April 'twenty four 2021 sales in dollars in the coffee plus energy drink category, which includes our Java Monster line in the convenience and gas channel increased 47, 5% over the same period the previous year sales of Java Monster, including Java Monster 300 with $44 seven.

1% higher in the same period versus the previous year.

Sales of Starbucks energy were 53% reported 8% higher Java monster share, including Java Monster 300 of the coffee plus energy category, which primarily includes Java Monster Java Monster 300, Starbucks double shot and Triple shot Rockstar roasted and Bang keto coffee for the four weeks ended April 24.

2021 was 51, 1% down one point, while Starbucks Energy's share was 46% up one nine points.

According to stack line, which tracks energy drink sales by Amazon in the United States for the four week period, ending April 17, 2021 sales in dollars in the energy category by Amazon, including energy shots increased 161% over the same period the previous year.

Sort of a point to 1.9% full throttle sales increase 0.2 of sent each point and its market share decreased 0.1 of a 0.20 0.7 per cent redbull sales increased 24.8 per cent and its market share increased 2.2 points to said he 7.7 per cent.

[noise] Rockstar sales decreased 17% and its market share decreased for two points to 10 per cent gurus sales increased 12.8 per cent and each shade decreased 0.2, other shape 0.23, 0.9% cause I'm kind of energy sales increased 36.6.

Per cent and its share it increased 0.1 percentage 0.2 0.8 per cent.

According to Nielsen fold outlets commodity in Mexico, the energy drink category increased 18.5 per cent for the month of March 2021 Monster sales increased 19.3 per cent all could change in value increased 0.2 of a point to 27.5% against the comparable period the previous year ripple sales any.

Creased 17.6 per cent and its market share decrease spot 0.1 of a 0.26 0.8 per cent very one hundreds sales increased 1.9% and its market share decreased by 3.3 points to 20.3% vaults sales increased 20.1 per cent and it's market.

<unk> increased 0.2 of a shape 0.2 19.1 per cent, while boost sales decreased 1.3 per cent and its market share decreased 1.1, 0.25 0.6 per cent.

<unk> sales increased 45 per cent and he's market share increased three points to 16.4% Coca Cola energy sales decreased 94% and its market share decreased 2.1 points to 0.1 per cent predator, which was launched in March 2020 achieved a market share of too.

0.7 per cent.

The Nielsen Statistics will Mexico.

A single months, which is a short period that may often be materially influenced positively endo negatively by sales into oxheart convenience chain, which dominates the market sales in the OXXO convenience shining too can be materially influenced bought promotions that may be undertaken in that chain by one or more energy drink brands during a per.

Stream 0.8 per cent in the Czech Republic from 24, five per cent to $26 four per cent in Denmark from 28% to 31, 8% in France from 22 seven per cent to 27.9% in Great Britain from 34 per cent to 37, 7% in Greece.

From $6 four per cent to 8% in the Netherlands from 24, 7% to 29, 1% in Norway from 15, 3% to 18, 2% in Poland.

93, 8% to 28% in the Republic of Ireland, and from 34% to 36% in spine and from 13.5 percentage of 14.9% in Sweden.

The Nielsen numbers in EMEA should only be used as a guide because the channels read by Nielsen in EMEA.

EMEA vary from country to country. According to IRI in Australia monsters market share in value for the four weeks ended April 11, 2021 increase from 10% to 13, 1% as compared to the same period the previous year mother's market share in value decreased from 13, 6% to 11.8.

Percentage during the same period the market share of the company's brands in Australia for the four weeks ended I pretty live in 2021 increased from 23 six percentage of 24, 9%.

According to IRI in New Zealand monsters market share in value for the four weeks ended April 18, 2021 increase from non 0.9% to 12, 7% as compared to the same period the previous year lift plus's market share in value decreased from seven 4% to $6 five per cent and mother's day.

Market share in value decreased from six 5% to five 6% market share of the company's brands and use either for the four weeks ended April 18, 2021 increased from 23, 9% to 24.8%. According to Nielsen in South Korea monsters market share in value in all outlets combined.

For the month of March 2021 increased from 52, 3% to 54.8% as compared to the same period in the previous year.

According to indulge in Japan monster market share in value in the convenience store channel for the month of March 2021 decreased from $62 one per cent to 51% as compared to the same period in the previous Europe. Once the remains the market leader in Japan. However, I'll share was negatively impacted by the labeling issue of a pre.

<unk> referenced in our fourth quarter 2020, released which was re listed on retail shelves in April 2021 by the introduction of U S. K use by a new competitor and by the timing of our 'twenty 'twenty. One innovation, we again point job debt certain market statistics that cover single months or four week periods may often be material.

Really influenced positively and negatively bought promotions or other trading factors during those periods.

Net sales to customers outside the U S was $459 $4 million 36 non percent of total net sales in the 2021 first quarter compared with $356 8 million and 53 six percentage of total net sales in the corresponding quarter in 2020.

Foreign currency exchange rates had the effect of increasing net sales in U S dollars by approximately $9 3 million in the 2021 first quarter income.

And reported geographic sales are ourselves to the company's military customers, which are delivered in the U S and drawn shipped to the military and day customers overseas.

In EMEA net sales in the 2021 first quarter increased 27, 7% in dollars and increased 21 two per cent in local currencies over the same period in 2020.

Profit in this region as a percentage of net sales in the first quarter was 37 three per cent compared to 43, one percentage in the same quarter in 2020 per mirrored 41.

Net.

41, 3% per.

Primarily due to unfavorable country and Prague.

<unk> mix. We also pleased that in the 2021 first quarter Monster gained market share in Belgium, Czech Republic, Denmark, France, Germany, Great Britain, Greece, Italy, the Netherlands, Norway, Poland, The Republic of Ireland, South Africa, Spain, and Sweden.

In Asia Pacific net sales in the 2021 first quarter increased 24.8 per cent in dollars and $17 four per cent in local currencies over the same period in 2020 gross profit in this region as a percentage of net sales was 48, 8% versus 42% over the same period in 2020 in Japan.

<unk> net sales in the 'twenty to 'twenty, one first quarter increased nine 2% in dollars and four 1% in local currency in South Korea, net sales increased 17% in dollars and nine 6% in local currency as compared to the same quarter in 2020.

In China net sales increased 59, 4% in dollars and the 2021 first quarter and 48% in local currency as compared to the same quarter in 2020.

You know she and other which includes Australia, New Zealand Tahiti, French Polynesia, New Caledonia, Papua New Guinea, and Guam net sales increased 66% in dollars and 47, 8% in local currencies sales of the Monster brand and Oceana increased 65, six percentage and dollars and $48 one per cent here.

Currency as compared to the same quarter in 2020.

In Latin America, including Mexico, and the Caribbean niche sells into 2021 first quarter increased 35, seven percentage and dollars and decreased 55, 9% in local currencies over the same period in 2020 gross profit in this region as a percentage of net sales was 37, 9% compared to.

42.5 percentage over the same period in 2020, primarily as a result of foreign exchange rates as certain raw materials and ingredients for product in this region are purchased in U S dollars.

In Brazil net sales in the 2021 first quarter increased by 34% in dollars and 71% in local currency net sales in Chile increased 48, 9% in dollars and 37 seven per saying he local currency into 2021 first quarter.

Since our last earnings call in February 2021.

Have been no significant updates on our litigation with vital Pharmaceuticals, Inc. The maker of Bang energy drinks as this litigation and other pending proceedings with V. P. Ex all sub Judy Kay we will not be answering any questions on this matter on today's call.

Indian noted states during early January 2021 we converted our 10 pack monster portfolio into 12 packs in late January 2021 we launched Ryan Jerry law made and range, what gummy bear as well as raining for net watermelon warlord. We also launched monster Ultra Golden singles and enough.

In a full pack in late February 2021 we launched full core flavors Monster Green low Carb Monster Monster Zero Ultra and Monster Ultra Paradise in 12 ounce slim cans targeted to the convenience retail channel and foodservice channel in late March 2020, one we converted our entire monster hydro.

Portfolio into 20 ounce P T containers and added two new Monster Hydro Super Sport desk, I use killer QE and met much other mango in late March 'twenty 'twenty. One we also launched rehab monster Strawberry lemonade as the first non T option in the rehab Monster brand family Redrow.

Afraid to ask I used during the first quarter of 2021 monster Max Super draw into Monster Nitrous Super draw in a 16 ounce cans as well as our refreshed design on Monster assault. This summer. We also planning to launch a line a new line of energy drinks under the true North brand name in 12.

Sleek cans, which will contain an organic plant based energy blend and ingredients for immunity support.

Initially true North will have a limited targeting 2021 with plans for a full launch into mainstream channels. In 2022, we are planning to launch additional new products later in 2021.

In Canada during early January 'twenty, 'twenty, one we launched monster Ultra Fiesta.

Drava Monster utmost as well as Monster Ultra Paradise full pack later in February 2021 we launched a monster Ultra Paradise and singles as a 310 ml option in early March 'twenty, 'twenty Rami launched range Lilly Quilici singles, and Ryan Orange Dream sickle in singles and a full pack we all.

Also launched naus two about in March 2021.

In February 2021 we launched specific punch in Mexico and in Honduras, We launched mean Green I'll second flavor of theory, which is one of our affordable energy brands in March 2021 belongs to ultra watermelon in Puerto Rico, and Ultra Paradise in Aruba.

We introduced the number of Skus across EMEA in the 'twenty 'twenty. One first quarter highlights include the geographical expansion of a number of existing monster, Ryan and strategic brand products into new countries, including juice Monster Pacific Punch juice Monster monarch, which is pep alone and non EMEA markets.

Juice Monster Mango Loco juice Monster pipeline Punch Monster Ultra Paradise Monster Ultra Fiesta Monster Zero Ultra Monster Ultra Blue Black Monster Ultra Sunrise in Russia Monster meal, Boons Euro Peach and plays Euro Beach, various rainiest skus, including Ryan in melanoma.

Yeah, Sarah Apple Razzle Berry Peach Fuzz, Orange Dream sickle and Lemon heads were launched in Belgium, The Netherlands, South Africa Stone, yet, Latvia, Lithuania, Sweden, and Germany in the first quarter of 2021.

In January 2021 we launched ultra Rosa market wide in Australia. Following an exclusive lead launch with one change in the fourth quarter of 2020 in March 2021 in New Zealand, we launched monster Super fuel in both purple passion and sugar free flavors.

The 2021 first quarter in Japan, we launched Monster energy Super color without distributor Asahi soft drinks. In Additionally, we began shipments in the quarter in Japan for the relaunch at retail of Ultra Paradise in April 2021 day.

During the 2021 first quarter, we launched pipeline punch in Hong Kong, and Macau and began distribution of Monster energy zero sugar in the Philippines. We are planning to launch a number of additional products and to market lines in our domestic an inch and national markets. Later this year.

During the 2021 first quarter no shares were repurchased under the previously authorized repurchase program as of May six 2021 and approximately 441 5 million remained available for repurchase under the previously authorized repurchase program.

We estimate April 2021 sales to be approximately 71, 3% higher than in April 2020.

On a foreign currency adjusted basis April 2021 sales would've been approximately 67.8% higher than comparable April 2020 sales April 'twenty 'twenty. One had the name same number of selling days as April 2020, Please keep in mind that the comparator.

As of April 2020 sales were materially adversely impact, but impacted by the COVID-19 pandemic in our 2021st quarter conference call to shareholders. We reported that April 'twenty 'twenty sales with 22 two per cent a lover than April 2019 sales with the same number of selling days in both P.

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In this regard we have caution a guy in debt sales over a short period, often disproportionately impacted by various factors such as for example, selling days days of the week in which holidays fall timing of new product launches the timing of price increases and promotions in retail stores distributor incentives as well as shifts in the timing of production.

And in some instances, where our bottlers are responsible for production and unilaterally determine their production schedules, which affects the dates on which we invoice such bottlers as well as inventory levels maintained by our distribution partners, which they alter unilaterally for their own business reasons, we read.

You're right that sells over short periods, such as a single month should not necessarily be imputed, two or regarded as indicative of results for a full quarter or any future period, if the COVID-19 pandemic and related unfavorable economic conditions continue in certain regions and new product innovation launches in those regions could be delayed.

Got it.

In conclusion, I would like to summarize some recent positive points.

One currently the company's flavor manufacturing facilities, it's co Packers warehouses and shipment facilities and bottlers and distributors are all operating we are continually addressing our aluminum can requirements given our volume growth and the current supply constraints in the aluminum can industry. We are pleased with the new additions to the <unk>.

The energy portfolio and are planning additional launches later in the year free.

Free we are planning to continue additional launches of our reign total body fuel high performance energy drinks in additional international countries. Full we are pleased with the rollout of credits and Fury and affordable energy drink portfolio internationally, we are proceeding with plans to launch our affordable energy brands in a number of international countries during the year.

Five finally, please note that similar to last year and the launch of the COVID-19 pandemic, we will conduct our annual stockholders meeting exclusively as a viral meeting via live webcast additional information regarding attending the annual meeting voting your shares and submitting questions can be.

Found in the company's proxy statement I'd like to open the floor to questions about the quarter. Thank you.

We will now begin the question and answer session to ask a question you May Press Star then one on you touched on.

If you are using a speakerphone please pick up your handset before pressing the keys.

Your line Jonathan Your question. Please press Star then two.

Good day time constraint other conference please limit yourself to a single question first.

First question is from Bonnie Herzog of Goldman Sachs. Please go ahead.

Hi, everyone.

I I'm behind.

Hello, I wanted to ask you guys about shortages of can you expand thing could you give us a sense of how big of a driver that was odd year caused some margin contraction in the corner I mean was it the bulk of that for instance, and then curious to hear if the situation has deteriorated further in <unk>.

Pardon me.

And then finally, you know when do you expect the shortage situation to improve or maybe stabilize I mean I guess.

Trying to understand if we all should assume this will be a pretty big issue for the remainder of the year.

So maybe I can get that Bonnie so what happened when.

When we set our can requirements without can companies about a year ago, we estimated debt sales.

Sales would be 10% to 12% up this year in fact as you can see they are substantially above that so whatever we contracted for we've got.

What happened without sales in January and February.

Sales were doing okay, and then in March they've spiked up and as Rodney quoted in April they are spiked up yet again.

So what we've done is we've procured additional cans from South America and from Asia that will start coming in late in the second quarter. We also have.

You can companies that are opening their doors later this year and we will be drilling cans from those companies as well so yeah.

Answer your question about the first quarter, yes, there was an impact.

The debt the big impact as.

As we mentioned.

In the release and on this call is that the bigger impact was these are these faith in costs, where we were drawing product for example from Canada.

And we were shipping product from various locations to a distribution center that impacted cost of sales.

We also had we broke all bits in other words, we've always tried to manufacture and sell within regions to avoid excessive shipping costs. We had to break that this year to satisfy consumer demand and so that was another factor that impinged on the result.

But the the margin was.

It was impacted by not only by those freight costs, but.

Excuse me as we mentioned.

Bye.

The promotional allowances that were higher in the second quarter across the board and.

So from a geographical sales mix because as you know we sold a significantly higher percentage of product overseas than we did in the U S. So it's the same the same story that we've experienced in and we've spoken to shareholders. The movie sell overseas. The lower is a gross margin percentage, but again.

You know I must caution.

Shareholders that we are.

We bank dollars, we don't bank gross profit percentages and then taken the decisions. We took in the first quarter. It was important to do so to satisfy demand we knew the the the profitability would be higher.

But the percentage may in fact below which it was.

The next question is from Alright, Grandad Guggenheim. Please go ahead.

Yes, good evening, everyone and actually I I want to dig the more we use.

You're just saying you come off.

Of gross margin so you.

You mentioned freight, but I understand that's the number one are you at a minimum can you mentioned promotional activity. So if we were to them to put some numbers net <unk> 50 per cent of the impact I'm not you know what you mean I'm counting now maybe 70 per cent them.

And promotion that I'll keep it to 20 per cent nature.

He understands this would be better if you if you can give us an idea here that would be great. Thank you.

So laurie.

We spoke about the first quarter in the first quarter the impact of the aluminum can costs.

We're not a major factor and as you know and everyone else on the call probably knows as well debt we have suffered.

You can't and will serve to significant increases in aluminum costs going forward. So for example, you know it's no. It's no secret, but if you look back on a year ago, our aluminum costs up 83, 6%, including the Midwest premium in in the U S and there.

We're up 71% 71, 1% in our in Europe. So as we go forward.

We may not have some of the the cost impacts on gross margin but.

But we certainly will have impacts on aluminum in.

In the second and subsequent quarters.

So you know for me to talk more about the first quarter, we don't actually give the numbers out that you're asking for but what I can say is that I didn't expect the margins to improve going forward.

This year I expect that we will not you know debt our margins will not improve as we go into the second third and possibly the fourth quarter I think things will be better. That's my my analysis, but sitting in the second and third quarter. We will continue to suffer gross margin percentage in our stress gross margin per se.

<unk> erosion.

Yeah.

Yeah.

The next question is from Chris Carey of Wells Fargo Securities. Please go ahead.

Hi, everyone.

So.

We see a big.

Hey, so so obviously.

A big number.

<unk> Corp.

To date and I guess the question is with.

With the aluminum supply shortages that you that you have or are you going to run into some issues with the ability to fill that demand.

And could that prevent you from doing some things that might help with your gross margin, which sounds like they could improve by by Q4 like taking any any pricing in the business.

So that's obviously something that we very aware about on pricing I know what some of our competitors some of the big beverage companies have spoken about with regard to pricing but.

Not sure that we would take a move ourselves last time, we went ahead and did it.

Irrespective of Red Bull strategy with regard to pricing day.

You know I think this time around you know we are examining what they will be doing a member they importing a substantial amount of debt cans and product from overseas. So.

So we'll be watching that but you know there are other ways to take price up for example, we can re assess which we are doing a structure of promotional allowances.

To you know to move move margins in them in a more positive direction.

But again you know we don't want to disturb the business that is doing very well a share as you know we were happy with where the business is game, we are happy with our share and we don't want to disturb what we already have so we're bringing tens from abroad as a as I said, we're getting you cans in the system later on in.

And you know as far as far as we're concerned we will continue to examine the opportunity to take price and Ah if necessary as I said, we're looking at a promotion.

Bush of allowances as well.

Yeah.

The next question is from Andrea Teixeira of Jpmorgan. Please go ahead.

I. Thank you and good afternoon, Oh that true north organic energy allowance should we assume that the impact will be mostly concentrated in the second half and particularly in 2022 and does that mean, you have decided to remain in alcohol segments any other non launching a hard seltzer for now and then.

So on the gross margin and I appreciate your commentary a me too.

Perhaps we should assume that it may get worse before it gets better given the freight and alumina have accidents.

Actually worse.

Thank you.

Perhaps I'll take the part of it and Hilton can take part of it on true North.

You know we are as low as I indicated we are going to have limited.

Sales are just going into and seeding the market this year.

The full launch and rollout will take place early in from the beginning early in 2022. So it will we think it will have an impact in 2022, and we will have much less of an impact this year.

Okay.

You were talking about margins you know as I said I didn't think margins will get better in the second and the third quarter margin percentages, but with robust sales, which are you know is obviously something that we're.

We're looking at in our in terms of you know one full costing although we don't give guidance.

You know we must look at the bottom line and we must not necessarily look at percentages because you know what we have to do them as part of our every day function is to satisfy the demand of our customers because the last thing we want to do is to have our bottlers on the line without inventory of consumers.

Gravitating to other products and we have to maintain the status quo as the company is doing really well on a top line and we you know we we hopefully will continue to do so.

Yeah.

Just and then just as you complete your question with regard to the alcoholic cirrhosis side I don't think you can assume that would be.

Going into the and not going into it I'd make that assumption, we have addressed the non alcoholic sell some market.

Decided our strategy and we've developed products and a line and we are going to launch that line.

As regards an alcoholic sensitive we are still looking at the market I think if you.

I've been watching the market I'm sure. The analysts have been I think you've seen quite a lot of.

Fortune of new products being launched.

Many cases from the same companies just different variance throwing them against the wall and seeing what's going to stick.

What you've also seen in the last three months, what we've noticed is I.

Quite a falloff in the rate of increase in the category.

You know as the categories maturing so the the increase here is also temporary.

So we you know we are involved in looking at debt category in developing products and as I've said I think I've stated in the last call. We simply don't want to launch a product. That's me too and that follows everyone else. It is just no pointing that and taking the time and effort and detracting from our focus on our core energy brands and portfolio, where we were.

Get a better return and have obviously, it's much easier for us to get meaningful sales, but we are continuing to monitor the alcoholic energy Seltzer category, and we may well do something in that but how do we do it and what do you do it he's still are not not being determined and still not not a b.

Don't have a firm direction so.

All I can really say is just that we are addressing it but you shouldn't assume that we are definitely going to go ahead or definitely not going to get ahead or how.

The next question is from Marcus Johnson of Stifel. Please go ahead.

Yeah, Hey, Thanks and afternoon everyone.

I guess don't don't kill me I'm going to ask a bunch of debt.

But follow up questions here to help them to restrain yourself for a second share them I guess.

Our cash shortages impacting your U S market share if not or if they are could you maybe just talk about kind of what youre seeing.

In the U S. Also could you clarify on the gross margin.

Talking about.

Relative to <unk> levels for Q2, and three Q are you talking about youre, not giving us any sort of color on Houston in <unk> relative to <unk>.

And then.

Back to the other question on pricing and then related promotional allowances, so you're capacity constrained at least for the time being what's the harm in taking price to constrain the demand and then also you're suggesting that the promotional allowances after <unk> will.

Will lessen into Q3, Q kind of the same effect.

Yeah.

So where do you want me to start [laughter]. So I think it's I think it is fair to say that other stocks have.

Have impacted share I don't know, how big that impact is and I'm not going to cause that honestly, we don't know, but what we do know is that red Bulls on premise has moved into the measured channels. There's no question about debt I think we underestimated the impact of their on premise.

Our business moving into measured channels. However, you know share is doing nicely.

Our sales are growing very nicely and frankly, you know we are sending them everything that we can make.

What what you guys are not seeing were not addressing is things like Amazon we spoke about the stateline data.

And other unmeasured channels. For example, you know the home depots and the Lowe's home improvement stores and all those other.

Parts of the business that are very strong for us or continuing to grow and and and and and.

Team to gain share in those particular channels. So overall I think we aren't satisfied with where we are as I said earlier and.

We were anticipating that as soon as we know that they can start start coming to the U S and we stopped.

Being in a more orderly situation.

Debt you know that debt that we will continue to go again as you know it.

As we anticipate.

So that was one question. Your second question was on margins.

And I think I've said that I expect you know my personal view them and this is not guidance, but I expect margins to get worse in the second and third quarter before they get debt. So that's that small answers to that.

Mark I'm, just remind me what what do we have other questions.

Our pricing and.

And promotional allowances relative to capacity constraint.

And I think you know pricing I'll say to you we continue to evaluate and you know we deem this honor.

On honesty on on a daily basis, we would like Red Bull to lead but if they don't then indeed, we will you know will make a decision as to whether we should or shouldn't go with regard to pricing with regard to promotional allowances.

That is correct. We will we are putting back promotional allowances and you should see we should see some impact in our in future quarters.

Yeah.

The next question is from Dara <unk>.

<unk> of Morgan Stanley. Please go ahead.

Yeah.

Yeah.

Hey, guys.

So just one quick clarity question and then one broader question.

It does sound like there's a little bit of demand impact from.

The lack of full supply on the aluminum side are you expecting that to be a significant issue in Q2 before it gets better and you get some of this incremental supply and just trying to understand that the short term.

And then just a broader question, we've obviously seen an acceleration in U S energy category growth. The last few quarters. After the initial weakness for a few months post COVID-19 can you just review what you think the key factors have been behind that acceleration in U S category growth how sustainable they are going forward.

We sort of look to that cycling that higher category growth in the back half of the year.

Thanks.

So maybe I'll just take the first one and then we.

We will get Rodney to to take the second one so I'm sorry, if if you look at and April sales. For example, you take out the strip out what happened in 2020 and you can see that you know there was a very big impact in in sales in the second quarter in a very.

Positive impact. So you know it is presenting challenges to the supply chain team and we are doing everything we can to ensure that our debt debt, we were able to keep as much as possible in stock in fact, we focusing on the Skus that are you know that debt that are generating.

You know there's significant part of our volumes at the expense of Skus that are not you know not performing as well. So that's really that's really where we're at with regards to our to the second quarter.

We will be getting cans in if these put a port issues resolve themselves and will you know well we are trying as best as we can to get back in stock as soon as possible.

Just if I could just it just add just one thing to the uncertainty that we've got is obviously for Kansas. We were importing were also incurring freight costs.

Above the aluminum cost, okay and process, that's where all of those costs will go up in the short term as the additional plants in the U S come on stream, we will get back to a more normalized pricing structure for cans and get the additional volume side, it's a little difficult to predict.

Exactly where are we going to go on a month to month or quarter to quarter basis, but we think it will normalize as Hilton said towards the.

The fourth quarter.

With regard to the AR increased category.

I think we're all in a world of just unknown is the the category.

Had a really steep.

It hit a wall in late March early April last year.

Differently in different parts of the of the world when a lot of the Butler literally took their staff and people teams out of the markets.

But it has come back on the growth has come back really really nicely and so you know one other things that we were which she was sort of unusual we found that the.

Growth was.

Generally historically, there's always been laid by the convenience channel at a higher rate than the mainstream grocery and drug channels and that sort of reversed itself with COVID-19. So again, you're looking at factors that I'll just not normal.

What we have seen as you can see from the last four weeks numbers I quoted in Nielsen from convenience that started to pick up again quite nicely.

So again, we were in a very uncertain period because of what happened last year in your comps on last year, but even if you look at the two year stack sort of set of numbers, you're getting some healthy growth back a week, where the category has slowed a little bit towards the end of 19. The growth was they were still growing but slower so we.

Thinks it will we will see continued growth.

<unk> of how we come out of COVID-19 and how people come back into the markets and we are hopeful for that but again. It's it's it's we just can't predict that at this stage.

All numbers are good the numbers are strong.

And you know Red Bull's numbers have been strong again, a little bit we think are skewed bothered by the switch from on premise to off premise, but continued to grow.

Obviously, we all the main players.

Players in the category and the category growth is driven by all our respectively by Oh two brands respective sales. So I think it augurs well for us, but if we just don't have any couldnt give you any further color on it because we would be guessing I think we all are.

Yeah. So the only thing I would add to that is debt I always look at the first quarter of 2020, because that was kind of a pure quarter for US you know COVID-19 started kind of late in the quarter, where our sales are already in house and so the first quarter for US was really a 2020.

He was really kind of a normal quarter and if you look back to that first quota and I always do you know the first quarter net sales in 2020 over.

Over 2019 Rose 12, 3%, so even as we enter into COVID-19 as you know our sales were strong.

This concludes our question and answer session I would like to turn the conference back over to Mr sacks, and Mr. Schlosberg for closing remark.

Thanks, very much on behalf of Monster I'd like to thank everyone for their continued interest in the company. We continue to believe in the company.

And our growth strategy and remain committed to continuing to innovate develop and differentiate our 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 pandemic and hope that this unfortunate situation will resolve itself in the near future. We believe that if you are well positioned in the energy drink category and content.

To be optimistic about our total portfolio of energy drink brands. We hope that you will all 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.

Yeah.

[music].

[music].

[music].

Okay.

They don't have to name and welcome to the Monster beverage companies first quarter 2021 conference call all participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question.

You May press Star then one on your Touchtone phone to withdraw from the question queue. Please press Star then two I would now like to turn the conference over to Mr. Rodney sacks, and Mr. Hilton Schlosberg co Ceos. Please go ahead.

Thank you good afternoon, ladies and gentlemen, thank you for attending this call I'm royalty checks Hilton Schlosberg, our Vice Chairman and co Chief Executive Officer is on the call as he is Tom Kelly, Our Chief Financial Officer, Tom 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 27, a of the Securities Act of 1933 as amended and section 21 E of the Securities Exchange Act of 119.

34, as amended and are based on currently available information regarding the expectations of management with respect to revenues profitability future business future events financial performance and trends as well as the future impact other COVID-19 pandemic on the company.

These 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 of the 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 filed on March one 2021.

Including the sections contained therein entitled risk factors and forward looking statements for a 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.

I would now like to hand, the call over to Rodney sacks.

Thank you Tom.

Company's top priority remains the health safety and wellbeing of its employees the company's flavor manufacturing facilities, It's co Packers warehouses and shipment facilities have operated throughout the COVID-19 pandemic, the company's bottlers and distributors are operating and the company's products remain generally available to come.

Humans, He limited countries the operations with the company's bottlers distributors have in part b negatively affected for varying periods of time.

Despite the ongoing impact of the COVID-19 pandemic. The company achieved record first quarter net sales currently the company does not foresee a material impact on the ability of its co packers to manufacturer and its bottlers and distributors to distribute its products as a result of the COVID-19 pandemic the company supply chain remain.

<unk> largely intact. However, the company is experiencing shortages in its aluminum can requirements in North America, and Europe, given the company's volume growth and the current supply constraints in the aluminum can industry. The company has taken steps to source additional quantities of aluminum cans from South America and day.

However, logistical issues, including ocean freight and port of entry congestion could realize such supply.

Logistical issues in relation to the importation of certain other raw materials and ingredients could impact future supply.

Furthermore, we are continuing to experience freight inefficiencies and like other beverage companies are incurring increased aluminum can and other costs in the current environment.

In the first quarter of 2021 net sales were 1.24 billion compared to 1.16 billion in the first quarter of 2020, an increase of 17, 1% adjusting for foreign currency movements net sales for the 2021 first quarter would have been up 16, 2%.

Gross profit as a percentage of net sales for the 'twenty 'twenty. One first quarter was 57 five per cent compared with 60% in this 2021st quarter. The decrease in gross profit as a percentage of net sales for the three months ended March 31, 'twenty 'twenty. One was primarily the result of increased input costs.

Mainly increased raw material freight and costs geographical sales mix and higher promotional allowances as a percentage of net sales.

Operating expenses for the 2021 first quarter with 300.8 million compared with $272 2 million in the 2021st quarter as a percentage of net sales operating expenses for the 2021 first quarter with 24, 2% compared with 25, 6% in the 'twenty 'twenty first quarter.

Operating income increased 13, 5% to $414 1 million up from 365 million in the first quarter of 2020 net income increased 13% to $315 2 million as compared to 278.8 million in the 'twenty 'twenty comparable.

Quarter diluted earnings per share for the 2021 first quarter increased 14, 2% to 59 cents from 52 cents in the first quarter of 2020.

According to the Nielsen reports for the 13 weeks through April 'twenty, four 2021 for all outlets combined, namely convenience grocery drug mass merchandisers sales in dollars in the energy drink category, including energy shots increased by 23% versus the same period, a year ago sales of the company's energy.

Brands, including Ryan we were up 17, 2% in the 13 week period sales of Monster were up 27% sales of reign were down <unk> six of a percentage sales of naus increased 1.4% and sells a full throttle increased eight 1% sales of Red Bull increase.

27.9% sales of Rockstar decreased by 11.9% sales of five hour increased 11, 6% and sales of Amp increased six 9% VP ex Bang sales increased 16, 3% and Coca Cola energy sales decreased 15 nine points.

3% with a market share of 0.4 of a percent.

According to Nielsen for the four weeks ended April 'twenty four 2021 sales in dollars into energy drink category in the convenience and gas channel, including energy shots in dollars increased 34% over the same period the previous year sales of the company's energy brands, which include reign increased 27 percentage in the four week period.

In the convenience and gas channel sales of monster increased by 39% over the same period versus the previous year range sales increased 13.4% nausea was up five 7% and full throttle was up 17.2% sales of Red Bull were up 41.2.

Percent Rockstar was down 9.9% five hour was up 41 four per cent and Amp was up 14, 6%. The P. Ex Bang sales increased 35.5 per cent and Coca Cola energy was down 45.8%.

According to Nielsen for the four weeks ended April 'twenty, four 2021 the company's market share of the energy drink category in the convenience and gas channel, including energy shots in dollars decreased 2.1 points to 37.4% monster share decreased by <unk> seven of a share point you said you won two per cent range.

Decreased <unk> five of a share point to 2.6% nausea share decreased <unk> eight of a point to 2.8 per cent and full throttle share decreased <unk> one of a point to 0.7% Red Bull share increased one point non points to 36, 9% Rockstar share was down one point non points two three.

8% five hour's share was higher by <unk> three of a point at 4.8 per cent and M share remained at 44 per cent V. P. Ex as Bang share Bankshares increased 0.1, other point to 7.5 per cent and Coca Cola energy share decreased <unk> three of a point to 0.2%.

According to Nielsen for the four weeks ended April 'twenty four 2021 sales in dollars in the coffee plus energy drink category, which includes our Java Monster line in the convenience and gas channel increased 47, 5% over the same period the previous year sales of Java Monster, including Java Monster 300 with $44 seven.

1% higher in the same period versus the previous year sales of Starbucks energy were 53% reported 8% higher Java monster share, including Java Monster 300 of the coffee plus energy category, which primarily includes Java Monster Java Monster 300, Starbucks double shot and Triple shot Rockstar.

Hosted and bank each other coffee for the four weeks ended April 'twenty four 2021 was 51, 1% down one point, while Starbucks Energy's share was 46% up one nine points.

According to stack line, which tracks energy drink sales by Amazon in the United States for the four week period, ending April 17, 2021 sells in dollars in the energy category by Amazon, including energy shots increased 161% over the same period the previous year sales of Monster increased 163.

3% and its share was 35, 6% up <unk> four of a share point versus the same period, a year ago Red Bull's sales increased 135.4 per cent and each share was 13, four 7% down one four points Celsius as sales increased 265 point to.

Scent and its share increased 4.4 points to 15, four and five per cent.

Five hour's sales increased 29.5 per cent and its share declined three two points to $3 one per cent VP ex bank sales increased $306 four per cent and its share increased 1.8 share points to 4.9% range share increased <unk> two of a share point to 5.1.

One per cent and Rockstar share increased <unk> six of a share point to three five per cent.

According to Nielsen in all measured channels in Canada for the 12 weeks ended March 27, 2021, the energy drink category increased 17, 5% in dollars sales of the company's energy drink brands increased 27, 2% versus a year ago the market share of the company's energy drink brands was for.

2.1% up 3.2 points Monster sales increased 22, two per cent and its market share increased one four points to 37.1, nauseous sales decreased 4% and its market share decreased <unk> four of a point to 1.9% full throttle sales increased.

Two of sent each point and its market share decreased <unk>, one of a point to 0.7% Red Bull's sales increased 24.8 per cent and its market share increased 2.2 points to 37.7% Rockstar sales decreased 17% and its market share.

Triste four two points to 10% Guru's sales increased 12.8 per cent and each shade decreased 0.2 of a share points to 3.9% Coca Cola energy sales increased 36, 6% and its share increased 0.1 percentage point to point.

Per cent.

What is your Nielsen for all outlets combined in Mexico, the energy drink category increased $18 five per cent for the month of March 2021 monster sales increased 19, 3% our market share in value increased <unk> two of a point to 27, 5% against the comparable period, the previous year Red Bull's sales increase.

<unk> 17, 6% and its market share decreased <unk>, one of a point to six 8% value one hundred's sales increased one 9% and its market share decreased by three three points to 24, 3% vaults sales increased 21 per cent and its market share.

<unk> increased <unk> two of a share point to $19 one per cent, while boost sales decreased 1.3 per cent and its market share decreased one one points to five 6%.

Emphasis sales increased 45 per cent and its market share increased three points to 16.4% Coca Cola energy sales decreased 94 per cent and its market share decreased 2.1, 0.20, 0.1% pretty show, which was launched in March 2020 achieved a market share of too.

Seven per cent.

The Nielsen statistics for Mexico cover.

A single months, which is a short period that may often be materially influenced positively or negatively by sales in the OXXO convenience chain, which dominates the market sells in the OXXO convenience chain in turn can be materially influenced by promotions that may be undertaken in that chain by one or more energy drink brands during a.

A month consequently, such activities could have a significant impact on the monthly Nielsen statistics for Mexico.

According to Nielsen for the month of March 'twenty, and 'twenty, one compared to March 'twenty, 'twenty monsters retail market share in value increased in Argentina from city 7.9 percentage of 45, 2% and in Brazil from $25 four per cent to 34, 7% in Chile Monster is reached.

Our market share decreased from 42, 1% to 40%.

Once the energy continues to be the leading energy brand in value in Argentina.

I would like to point out that the Nielsen numbers in EMEA should only be used as a guide because the channels read by Nielsen in EMEA EMEA vary from country to country and are reported on varying dates within the month referred to from country to country.

According to Nielsen in the 13 week period ended April for 'twenty, and 'twenty, one monsters retail market share in value as compared to the same period. The previous year grew from 15.8 percentage of 16% in Germany from 19, 7% to 28, 1% in Italy and from 17.

3% to 26% in South Africa.

According to Nielsen in the 13 week period till the end of March 2021 monsters retail market share in value as compared to the same period. The previous year grew from 13, 2% to $15 one per cent in Belgium from 12, six percentage of 14.8 per cent in the Czech Republic from 24 five per cent.

$26 four per cent in Denmark from 28% to 31, 8% in France from 22 seven per cent to 27.9% in Great Britain from 34% to 37, 7% increase from six 4% two eight percentage in the Netherlands from 'twenty.

For 7% to 29, 1% in Norway from 15, 3% to 18, 2% in Poland.

23, 8% to 28% in the Republic of Ireland, and from 34% to 36% in spine and from searching for <unk> five percentage of 14.9% in Sweden the.

The Nielsen numbers in EMEA should only be used as a guide because the channels read by Nielsen in EMEA.

EMEA vary from country to country. According to IRI in Australia monsters market share in value for the four weeks ended April 11, 2021 increased from 10% to 13.1% as compared to the same period the previous year mother's market share in value decreased from 13, 6% to live in 0.8.

Percentage during the same period the market share of the company's brands you know Australia for the four weeks ended a pretty live in 2021 increased from 23 six percentage to 24, 9%.

According to IRI in New Zealand monsters market share in value for the four weeks ended April 18, 2021 increased from nine 9% to 12, 7% as compared to the same period the previous year lift plus's market share in value decreased from 7.4 per cent to $6 five per cent and mothers.

Market share in value decreased from six 5% to five 6% market share of the company's brands and use either for the four weeks ended April 18, 2021 increase from 23, 9% to 24.8%. According to Nielsen in South Korea monsters market share in value in all outlets combined.

For the month of March 'twenty, 'twenty, one increased from 52.3% to 54.8% as compared to the same period in the previous year.

According to indulge in Japan monster market share in value in the convenience store channel for the month of March 2021 decreased from 62, one percentage to 51% as compared to the same period in the previous year.

There remains the market leader in Japan, However, I'll share was negatively impacted by the labeling issue or a product reference day now fourth quarter 'twenty 'twenty released which was re listed on retail shelves in April 2021 by the introduction of U S. K used by a new competitor and bought the timing about 2021 innovation we agree.

Poor job debt certain market statistics that cover single months or four week periods may often be materially influenced positively and negatively bought promotions or other trading factors during those periods.

Net sales to customers outside the U S was $459 $4 million 36, non percentage of total net sales in the 2021 first quarter compared with 356.8 million and 53 six percentage of total net sales in the corresponding quarter in 2020.

Foreign currency exchange rates had the effect of increasing net sales in U S dollars by approximately $9 3 million in the 2021 first quarter.

<unk> and reported geographic sales are ourselves to the company's military customers, which are delivered in the U S and drawn shipped to the military and their customers overseas.

In EMEA net sales in the 2021 first quarter increased 27, 7% in dollars and increased 21 two per cent in local currencies over the same period in 2020.

Gross profit in this region as a percentage of net sales in the first quarter was 37.3 per cent compared to 43.1 percentage in the same quarter in 2020 per mirrored what do you want.

Is that something like 41, 3%.

Primarily due to unfavorable country and product mix were also pleased that in the 'twenty to 'twenty, one first quarter monster gained market share in Belgium, Czech Republic, Denmark, France, Germany, Great Britain, Greece, Italy, the Netherlands, Norway, Poland, The Republic of Ireland, South Africa, Spain, and Sweden.

In Asia Pacific niche sales into 2021 first quarter increased 24, 8% in dollars and $17 four per cent in local currencies over the same period in 2020 gross profit in this region as a percentage of net sales was 48, 8% versus 42% over the same period in 2020.

In Japan net sales in the 2021 first quarter increased nine 2% in dollars and 4.1% in local currency.

South Korea, net sales increased 17% in dollars and nine 6% in local currency as compared to the same quarter in 2020.

In China net sales increased $59 four per cent in dollars in the 2021 first quarter and 48 per cent in local currency as compared to the same quarter in 2020.

In Oceana, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea, and Guam net sales increased 66% in dollars and 47.8 per cent in local currencies sales of the Monster brand and Oceana increased 65, six percentage and dollars and 48 one percentage.

Local currency as compared to the same quarter in 2020.

That's in America, including Mexico, and the Caribbean niche sells into 2021 first quarter increased 35, 7% in dollars and decreased 55, 9% in local currencies over the same period in 'twenty 'twenty gross profit in this region as a percentage of net sales was 37.9% compete.

42.5 percentage over the same period in 2020, primarily as a result of foreign exchange rates as certain raw materials and ingredients for product in this region are purchased in U S dollars.

In Brazil net sales in the 2021 first quarter increased by 34% in dollars and 71% in local currency net.

Sales in Chile increased 48, 9% in dollars and city, 7.7% local currency in the 2021 first quarter.

Since our last earnings call in February 2021.

There have been no significant updates on our litigation with vital Pharmaceuticals, Inc. The maker of Bang energy drinks as this litigation and other pending proceedings with V. P. Ex all sub Judy Kay we will not be answering any questions on this matter on today's call. Indeed.

Indian noted states during early January 2021 we converted our 10 pack monster portfolio into 12 packs in late January 2021 we launched Ryan Jerry law made and range wide gummy bear as well as reigning food a watermelon warlord. We also launched monster Ultra Golden singles and enough.

In a full pack in late February 2021 we launched full core flavors Monster Green low Carb Monster Monster Zero Ultra and Monster Ultra Paradise in 12 ounce slim cans targeted to the convenience retail channel and foodservice channel in late March 2021 we converted our entire monster hydro.

Portfolio into 20 ounce P T containers and added two new Monster Hydro Super Sport is skus. He look QE and met much other mango in late March 'twenty 'twenty. One we also launched rehab monster Strawberry lemonade as the first non T option in the rehab Monster brand family Redrow.

<unk> two day Sky used during the first quarter of 2021 monster Max Super draw into Monster Nitrous Super draw in a 16 ounce cans as well as our refreshed design on Monster assault. This summer. We are also planning to launch a line a new line of energy drinks under the true North brand name in 12.

Sleek cans, which will contain an organic plant based energy blend and ingredients for immunity support.

Initially true North will have a limited targeting 2021 with plans for a full launch into mainstream channels. In 2022, we are planning to launch additional new products later in 2021.

In Canada during early January 'twenty, 'twenty, one we launched monster Ultra Fiesta.

Drawbar Monster Mocha, as well as Monster Ultra Paradise full pack.

Later in February 2021 we launched a monster Ultra Paradise and singles as a 310 ml option in early March 'twenty. Two when you Army launched range Lilly Quilici singles and Ryan Orange Dream Sickle in singles and a full pack. We also launched naus two about in March 2021.

In February 2021 we launched specific punch in Mexico and in Honduras, We launched mean Green I'll second flavor of theory, which is one of our affordable energy brands in March 2021 be launched ultra watermelon in Puerto Rico, and Ultra Paradise in Aruba.

We introduced the number of Skus across EMEA in the 'twenty 'twenty. One first quarter highlights include the geographical expansion of a number of existing monster, Ryan and strategic brand products into new countries, including juice Monster Pacific Punch juice Monster monarch, which is pet belonged in non EMEA markets.

Juice Monster Mango Loco juice Monster pipeline Punch Monster Ultra Paradise Monster Ultra Fiesta Monster Zero Ultra Monster Ultra Blue Black Monster Ultra Sunrise in Russia Monster meal, Boons Euro Peach and plays Hereof Beach, various ryanair skus, including Ryan Mellon.

Yeah, Sarah Apple Razzle Berry Peach Fuzz, Orange Dream sickle and Lemon heads were launched in Belgium, The Netherlands, South Africa Stone, yet, Latvia, Lithuania, Sweden, and Germany in the first quarter of 2021.

In January 2021 we launched ultra Rosa market wide in Australia. Following an exclusive lead launch with one China in the fourth quarter of 2020 in March 2021 in New Zealand, we launched monster Super fuel in both purple passion and sugar free flavors.

During the 2021 first quarter in Japan, We launched Monster energy Super Cola without distributor Asahi soft drinks.

Additionally, we began shipments in the quarter in Japan for the relaunch at retail of Ultra Paradise in April 2021.

During the 2021 first quarter, we launched pipeline punch in Hong Kong, and Macau and began distribution of Monster energy zero sugar in the Philippines. We are planning to launch a number of additional products and a market launch in all domestic an inch and national markets. Later this year.

During the 2021 first quarter no shares were repurchased under the previously authorized repurchase program as of May six 2021 of approximately $441 5 million remained available for repurchase under the previously authorized repurchase program.

We estimate April 2021 sales to be approximately 71, 3% higher than in April 2020.

On a foreign currency adjusted basis April 2021 sales would have been approximately 67.8% higher than comparable April 2020 sales I pulled 'twenty 'twenty. One had the same number of selling days as April 2020 per.

Keep in mind that the comparative April 'twenty 'twenty sales were materially adversely impact, but impacted by the COVID-19 pandemic in our 2021st quarter conference call to shareholders. We reported that April 'twenty 'twenty sales with 22.2% lower than our April 2019 sales.

At the same number of selling days in both periods.

In this regard we have caution a guy in that sales over a short period are often disproportionately impacted by various factors such as for example, selling days days of the week in which holidays fall timing of new product launches the timing of price increases and promotions in retail stores distributor incentives as well as shifts in the timing of production.

In some instances, where our bottlers are responsible for production and unilaterally determine their production schedules, which affects the dates on which we invoice such bottlers as well as inventory levels maintained by our distribution partners, which they alter unilaterally for their own business reasons, we read.

You're right that sells over short periods, such as a single month should not necessarily be imputed to regarded as indicative of results for a full quarter or any future period, if the COVID-19 pandemic and related unfavorable economic conditions continue in certain regions and new product innovation launches in those regions could be delayed.

Got.

In conclusion, I would like to summarize some recent positive points.

One currently the company's flavor manufacturing facilities, it's co Packers warehouses and shipment facilities and bottlers and distributors are all operating we are continually addressing our aluminum can requirements given our volume growth and the current supply constraints in the aluminum can industry. We are pleased with the new additions to the monster.

Energy portfolio and are planning additional launches later in the year.

Free we are planning to continue additional launches of our reign total body fuel high performance energy drinks in additional international countries.

We are pleased with the rollout of credits and Fury and affordable energy drink portfolio internationally, we are proceeding with plans to launch our affordable energy brands in a number of international countries during the year.

Five finally, please note that similar to last year and the launch of the COVID-19 pandemic, we will conduct our annual stockholders meeting exclusively as a viral meeting Vaughn via live webcast additional information regarding attending the annual meeting voting your shares and submitting questions can be found in the company's.

Proxy statement I'd like to open the floor to questions about the quarter. Thank you.

We will now begin the question and answer session to ask a question you May Press Star then one on you touched on zone, if you like.

Speakerphone, please pick up your handset.

Your line Jonathan the question queue. Please press Star then two.

Due to time constraint of the conference please limit yourself to a single question.

The first question is from Bonnie Herzog of Goldman Sachs. Please go ahead.

Hi, everyone.

Hi.

Hi, Brian.

Hello, I wanted to ask you guys about you know they started can you expand.

Can you give us a sense of how big of a driver that lives a year you know gross margin contraction in the corner I mean was it the bulk of that for instance, and then curious to hear if the situation has deteriorated further in April and May.

And then finally, you know when do you expect the shortage situation trying to trim or maybe stabilize I mean I guess.

Trying to understand if we all should assume this will be a pretty big issue for the remainder of the year. Thanks, Okay. So maybe I can get debt Bonnie so what happened when we set our can requirements without can companies.

A year ago, we estimated debt sales would be 10% to 12% up this year in fact as you can see Dallas substantially above that so whatever we contracted full we've got.

What happened with ourselves in January and February.

We're doing okay, and then in March they've spiked up and as Rodney quoted him in April they all spiked up yet again.

So what we've done is we've procured additional cans from South America and from Asia that will start coming in late in the second quarter. We also have you can companies that are opening their doors later this year and we will be drawing cash.

<unk> from those companies as well so.

Answer to your question about the first quarter, yes, there was an impact.

And the debt the big impact as we mentioned in the release and on this call is that the bigger impact was these are these faith in costs, where we were drawing product for example from Canada and.

We're shipping product from various locations to a distribution center that impacted cost of sales.

We also had we broke all bids in other words, we've always tried to manufacture and sell within regions to avoid excessive shipping costs. We had a break debt. This year, just satisfying consumer demand and so that was another factor that impinged on there.

But.

The the margin was impacted by not only by those freight costs, but.

Excuse me as we mentioned by.

By.

Motion allowances that were higher in the second quarter across the board and.

So from a geographical sales mix because as you know we sold a significantly higher percentage of product overseas than we did in the U S. So it's the same the same story that we've experienced in and we've spoken to shareholders. The movie solo overseas. The lower is a gross margin percentage, but again.

You know I must caution shareholders that we are you know we we we bank dollars, we don't bank gross profit percentages and then taken the decisions. We took in the first quarter. It was important to do so to satisfy demand we'd use the the the profitability would be higher but the.

Percentage may in fact below which it was.

The next question.

Alright Grandad of Guggenheim. Please go ahead.

Yes, good evening, everyone and I showed you a I want to dig the more we use.

And what you are you just saying I'm a fan.

Of gross margin so.

You mentioned freight, but I understand that's the number one odd immuno cans, you mentioned or sort of any promotional activity. So if we were to them to put some numbers <unk> 50 per cent of the impact and now you know what you mean, Canada, maybe you said he per sign them and promotion that I keep it 20% I liked your busy Kansas non diesel.

Be better if you if you can give us an idea here that would be great. Thank you.

So laurie.

Well, we spoke about the first quarter in the first quarter the impact of the aluminum can costs were not a major factor and as you know and everyone else on the call probably knows as well debt we have suffered.

<unk> significant and will serve to significant increases in aluminum costs going forward. So for example, you know it's not.

It's no secret, but if you look back on a year ago, our aluminum costs up 83, 6%, including the Midwest premium in in the U S and they're up 71% 71, 1% in our in Europe.

So as we go forward you know we may not have some of the the cost impacts on gross margin but.

But we certainly will have impacts on aluminum them in the second and subsequent quarters.

So you know for me to talk more about the first quarter, we don't actually give the numbers out that you're asking for.

But what I can say is that I didn't expect the margins to improve going forward.

This year I expect that we will not you know that our margins will not improve as we go into the second third and possibly the fourth quarter I think things will be better. That's my my analysis, but certainly in the second and third quarter. We will continue to suffer gross margin percentage in our stress gross margin per se.

Erosion.

Yeah.

The next question is from Chris Carey of Wells Fargo Securities. Please go ahead.

Hi, everyone.

Obviously, a big day.

Hey.

So obviously you know a.

A big number quarter to date and I guess the question is you are with the aluminum supply shortages that you that you have or are you going to run into some issues with the ability to fill that demand and could that prevent you from doing something.

That might help with your gross margin, which sounded like they could improve by by Q4 like taking any any pricing in the business.

So that's you know obviously something that we very aware about on pricing I know what some of our competitors some of the big beverage companies have spoken about with regard to pricing.

But.

I'm not sure that we would take a move ourselves last time, we went ahead and did it irrespective of Red Bull's strategy with regard to pricing day.

You know I think this time around you know we are examining what they will be doing remember they importing a substantial amount of day cans and product from overseas.

So we'll be watching that but you know there are other ways to take price up for example, we can re assess which we are doing a structure promotional allowances.

Too.

To move move margins in in a more positive direction.

But again you know we don't want to disturb the business that is doing very well share as you know we were happy with where the business is game, we happy with our share and we don't want to disturb what we already have so are we bringing tens from abroad as a as I said, we're getting you cans in the system later on in.

And you know as far as far as we're concerned we will continue to examine the opportunity to take price and Ah if necessary as I said, we looking at a promotion.

Bush allowances as well.

Yeah.

The next question is from Andrea Teixeira of Jpmorgan. Please go ahead.

I. Thank you and good afternoon, Oh, that's really.

Organic energy allowance should we assume that the impact will be mostly concentrated in the second half and particularly in 'twenty 'twenty two and does that mean, you have decided to be named and alcohol segments and they are not allowed to seeing a hard seltzer for now and then Oh here on the gross margin and I appreciate your commentary.

Maybe perhaps we should assume that it may get worse before it gets better and given the fate and alumina have actually.

Actually worse.

Thank you.

Perhaps I'll take the part of it and Hilton can take part of it on true North.

You know we are as I indicated we are going to have limited sales are just getting into and seeding. The market. This year, the full launch and rollout who will take place early in from the beginning or early in 2022.

So it will we think it will have an impact in 2022, and we'll have a much less of an impact this year.

Okay.

You would talk to you about margins you know as I said I didn't think margins will get better in the second and the third quarter margin percentages, but with robust sales, which are you know is you know obviously something that we're.

We're looking at in our in terms of you know one full costing although we don't give guidance.

You know we must look at the bottom line and we must not necessarily look at percentages because you know what we have to do them as part of our every day function is to satisfy the demand of our customers because the last thing. We wanted to do is to have our bottlers on the line without inventory of consumers you know.

Gravitating to other products and we have to maintain the status quo at other companies doing really well on a top line and we you know we hopefully will continue to do so.

Yeah.

Just and then just to complete your question with regard to the alcoholic sales aside I don't think you can assume that would be.

All going into it or not going into it I'd make that assumption we've addressed the non alcoholic sell some market.

<unk> decided to strategy and we've developed products and a line and we are going to launch that line.

As regards an alcoholic sensitive we are still looking at the market I think if you.

I've been watching the market I'm sure. The analysts have been I think you've seen quite a lot of a.

Fortune of new products being launched.

Many cases from the same companies just different variance throwing them against the wall and seeing what's going to stick.

What you've also seen in the last three months, what we've noticed is a quarter.

Quite a falloff in the range of increase in the category and you know as the categories maturing. So the increase is also temporary. So we you know we all are involved in and looking at debt category in developing products and as I've said.

I think I've stated in the last call, we simply don't want to launch a product that's me too and that follows everyone else's. He's just know pointing that and taking the time and effort and detracting from our focus on our core energy brands and portfolio, where we get a better return and obviously, it's much easier for us to get meaningful sales, but.

We are continuing to monitor the alcoholic energy Seltzer category.

And we may well do something in that but how do we do it and what do we do it he's still are not not being determined and still not not.

We don't have a firm direction so all.

All I could really say he's just debt we are addressing it but you shouldn't assume that we are definitely going to go ahead, we're definitely not going to get ahead or how.

The next question is from Mark It's John King of Stifel. Please go ahead.

Yeah, Hey, Thanks and afternoon everyone.

I guess don't don't kill me I'm going to ask a bunch of debt.

Book follow up questions here to help them to restrain yourself for a second.

Our can shortages impacting your U S market share if not or if they are could you maybe just talk about kind of what youre seeing.

In the U S. Also could you clarify on the gross margin you're you're talking about.

Relative to <unk> levels for Q2, and three Q are you talking about youre, not giving us any sort of color on Tuesday, <unk> relative to <unk>.

And then.

Back to the other question on <unk>.

Pricing and and then you released promotional allowances, so you're capacity constrained at least for the time being what's the harm in taking price cute constrained that the demand and then also you're suggesting that the promotional allowances. After one kiln will will lessen into Q3 Q.

For the same effect.

Okay, So where do you want me to start [laughter]. So I think it's I think it is fair to say that other stocks have impacted share I don't know how big that impact is and I'm not going to you know because honestly, we don't know, but what we do know is that red bull's.

On premise has moved into the measured channels. There's no question about debt I think we underestimated the impact of their on premise business moving into measured channels. However, you know share is being nasty Oh, our sales are growing very nicely and frankly you know.

We are sending them everything that we can make.

And what what you guys are not seeing them, we're not addressing is things like Amazon.

We spoke about the stack line data.

And other unmeasured channels. For example, you know the home depots and the Lowe's.

<unk> proven stores and all those other parts.

Parts of the business that are very strong for us or continuing to grow and and and and and.

Team to gain share in the in those particular channels. So overall I think we are satisfied with where we are as I said earlier and.

We were anticipating that as soon as we you know that they can start start coming to the U S and we stopped.

Being in a more orderly situation.

Debt you know that that debt will continue to go again as you know as we anticipate.

So that was one question. Your second question was on margins.

I think I said that I expect you know my personal view and this is not guidance, but I expect margins to get worse in the second and third quarter before they get better. So that's that small answers to that.

Mark I'm, just remind me what what are your other questions.

Oh pricing.

And promotional allowances relative to capacity constraint.

Again, I think you know pricing I'll say to you we continuing to evaluate and you know we're doing this on a you know.

On honesty on on a daily basis, we would like Red Bull to lead but if they don't they are indeed, we will you know will make a decision as to whether we should or shouldn't go with regard to pricing with regard to promotional allowances debt is correct. We will we are putting back promotional allowances and you should cease.

We should see some impact in our in future quarters.

The next question is from Dara <unk>.

<unk> of Morgan Stanley. Please go ahead.

Hey, guys.

So just one quick clarity question and then one broader question.

Just it does sound like there's a little bit of demand impact from.

The lack of full supply on the aluminum side are you expecting that to be a significant issue in Q2 before it gets better and you get some of this incremental supply and just trying to understand that in the short term.

And then just a broader question, we've obviously seen an acceleration in U S energy category growth. The last few quarters. After the initial weakness for a few months post COVID-19 can you just review what you think the key factors have been behind that acceleration in U S category growth how sustainable they are going forward.

We sort of look to that cycling that higher category growth in the back half of the year.

Thanks.

So maybe I'll just take the first one and then we.

We will get drug need to to take the second one so dairy if if you look at and April sales. For example, you take out the strip out what happened in 'twenty.

2020, and you can see that you know there was a very big impact in in sales in the second quarter in a very positive impact. So you know it is presenting challenges to the supply chain team and we are doing everything we can to ensure that our debt debt.

We were able to keep as much as possible and in stock in fact, we focusing on the Skus that are you know that debt debt of generating you know there's significant part of our volumes at the expense of Skus that are not you know not performing as well. So that's really you know that's really.

Where we're at with regards to our to the second quarter, we will be getting cans in if these.

What are you know port issues resolve themselves and will you know who.

We are trying as best as we can to get back in stock as soon as possible.

Just if I could just it just add just one thing to the uncertainty that we've got is obviously for Kansas. We were importing. We're also incurring freight costs are above the aluminum cost okay and process. That's why all of those costs will go up in the shorter term as the additional plants in the U S come on stream, we will get back to.

A more normalized pricing structure for cans and get the additional volume so it's a little difficult to predict.

Exactly where are we going to go on a month to month or quarter to quarter basis, but we think it will normalize as Hilton said towards the debt.

Fourth quarter.

With regard to the.

Increased category.

You know I think we'd all in a world of up just unknowns the category.

<unk> had a really steep.

Hit Awards in late March early April last year.

Differently in different parts of the of the world when a lot of the butlers literally took their staff and people teams out of the markets.

But it has come back and the growth has come back really really nicely and so you know one of the things that we were which was sort of unusual.

Usual, we found that the.

Growth was.

Generally historically has always been laid by the convenience channel at a higher rate than the mainstream grocery and drug channel and that sort of reversed itself with COVID-19. So again, you're looking at factors that I'll just not normal.

What's what we have seen as you can see from the last four weeks numbers I quoted in Nielsen from convenience that started to pick up again quite nicely.

So again, we were in a very uncertain period because of what happened last year in your comps on last year, but even if you look at the two year stack sort of set of numbers, you're getting some healthy growth back a week, where the category has slowed a little bit towards the end of 19. The growth was there was still growing but slower so we think.

We will see continued growth.

This of how we come out of COVID-19 and how people come back into the markets.

And we are hopeful for that but again, it's it's it's we just can't predict that at this stage all our numbers are good the numbers are strong and you know red Bull's numbers have been strong again, a little bit we think skewed bothered by the switch from on premise to off premise, but continued to grow.

And you obviously, we all the main.

Players in the category and the category growth is driven by all our respectively by Oh two brands respective sales. So I think it augurs well for us, but if we just don't have any couldn't give you any further color on it because we would be guessing I think we all are.

Yeah. So the only thing I would add to that is debt you know I always look at the first quarter of 'twenty 'twenty, because that was kind of a pure quota for US you know COVID-19 started kind of late in the quarter, where our sales are already in house and so the first quarter for US was really a 'twenty 'twenty.

He was really kind of a normal quarter and if you look back to that first quota and I always do you know first quarter net sales in 'twenty to any of.

Over 2019 Rose 12, 3%, so even as we enter into COVID-19 as you know our sales were strong.

This concludes our question and answer session I would like to turn the conference back over to Mr sacks, and Mr. Schlosberg for closing remark.

Thanks, very much on behalf of Monster I'd like to thank everyone for their continued interest in the company. We continue to believe in the company.

And our growth strategy and remain committed to continuing to innovate develop and differentiate our 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 pandemic and hope that this unfortunate situation will resolve itself in the near future. We believe that we all well positioned in the energy drink category and content.

To be optimistic about our total portfolio of energy drink brands. We hope that you will all 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.