Q3 2021 Monster Beverage Corp Earnings Call
Good afternoon, and welcome to the Monster beverage company third quarter 2021 conference call.
Future business future events financial performance 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 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 or.
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'd now like to hand, the call over to Rodney sacks.
Thank you Tom.
Despite the ongoing impact of the COVID-19 pandemic the company achieved record third quarter net sales.
During the 2021 third quarter the company procured additional quantities of aluminum cans from suppliers in the United States, South America and Asia in response to increased consumer demand.
Although the company continues to experience shortages and its aluminum can requirements in the United States and EMEA during the 2021 quarter.
An increase of 13.2% adjusting for foreign currency movements net sales for the 2021 third quarter would've been up 11, 9% gross profit as a percentage of net sales for the 2021 third quarter was 55, 9% compared with 59, 1% in the 'twenty 'twenty third quarter.
The decrease in gross profit as a percentage of net sales for the three months ended September 30, 'twenty 'twenty. One was primarily the result of increased aluminum can costs attributable to higher aluminum commodity pricing as well as the cost of importing aluminum cans logistical costs and geographical sales mix.
Operating expenses for the 2021 third quarter with $344 7 million compared with 277.9 million in the 'twenty 'twenty third quarter as a percentage of net sales operating expenses for the 2021 third quarter with 24, 4% compared with 22 43.
Percent into 2023rd quarter, and 24, 5% in the 2019 third quarter pre COVID-19.
In particular operating costs were adversely affected by increased logistical inefficiencies, including higher freight out and warehousing costs are one time distributor termination fee of $5 3 million and increased selling and marketing expenses, including the resumption of CIT and sponsorship and event activities as compare.
To the same quarter last year, a number of sponsorship activities were canceled in the comparable quarter last year due to the COVID-19 pandemic.
Operating income increased three 1% to $444 5 million from $458 6 million in the third quarter of 2020, primarily driven by increased input costs increased transportation increased selling expenses and a one time distributor termination fee of $5 3 million.
Net income decreased 3% to $337 2 million as compared to 347.7 million in the 'twenty 'twenty comparable quarter diluted earnings per share for the 2021 third quarter decreased three 5% to 63 cents from 65 cents in the third quarter of Twitter.
20.
It all goes into the energy drink category in the convenience and gas channel, including energy shots in dollars increased eight 8% over the same period the previous year. So all of the company's energy brands, which include reign increased four 3% in the four week period in the convenience and gas channel sales of monster increased by 7.4%.
Sent over the same period versus the previous year reign sales decreased six 7% nauseous sells were down 17.5% and full throttle was up 7.8% sales of Red Bull were up 13, 1% Rockstar was down 14, 7% and five hours.
Up 1.9% V P X bang cells increased 3.4%.
According to Nielsen for the four weeks ended October 'twenty, three 2021 the company's market share of the energy drink category in the convenience and gas channel, including energy shots in dollars decreased one six points to 36.4% monster share decreased <unk> four of a share point to 30.8% range.
<unk> decreased <unk> four of a share point to 2.4% nausea shade decreased <unk> eight points to 2.4% and full throttle share remained at a 0.8 of a percent Red Bull share increased one four points to 37, 6% Rockstar share was down one point to three 8%.
One, 2% down 4.8 share points versus the same period, a year ago Red Bull sales increased 41, 4% and it sure was 15, 7% up two points.
Celsius as sales increased 95, 2% and HCA increased five five points to 19, 4% five hour's sales increased point father present, any shade De-clawed 1.1 points to two 9% V. P X Bang sales increased 36, 6% and that she had decreased.
One of a share point to five 6% range share decreased <unk> two of a share point to four 8% Rockstar share increased by one seven share points to five 2%.
According to Nielsen in all measured channels in Canada for the 12 weeks ended October nine 2021 the energy drink category increased 10, 5% in dollars sales of the company's energy drink brands increased 13, 3% versus a year ago the market share of the company's energy drink brands was 41 three per.
Up one point Monster sales increased 14, 4% and its market share increased 1.2 points to 36, 2% today support too.
19%.
Volts sales increased city, 4.2% and its market share increased 1.1 shape points to 19.5 per cent, while boost sales increased 12.8% and its market share decrease 0.7 points to 5.3% emphasize increased 55.5% and it's market.
She increased 3.4 points to 18.2% the Nielsen statistics from Mexico kind of a single months, which is a short period that may often be materially influenced positively Andrew negatively ourselves into arcsec convenience giant which dominates the market sells indoxyl convenience shine and tuned can be materially influence.
But promotions that may be undertaken in that chain by one or more energy drink brands during a particular month.
Consequently, such activities could have a significant impact on the month Nielsen Statistics will Mexico.
According to Nielsen for the month of September 2021, compared to September 2020th Monsters retail market Shane value increased in Argentina from 44.2% to 47.6% Monster energy continues to be the leading and is your brand in value in Argentina, Munsters retail market share in value increased.
In Brazil from 33% to 37.6% and not trials Red Bull by only 3.3 points in Chile, Although monsters knit cells in the third quarter with 34% higher it's retail market share for the month of September decreased from 46.6% to 42.2% due to run.
[noise] bust growth in the energy category in Chile, which is garage, 65% for the month of September 2021.
I would like to point out that the Nielsen numbers in EMEA should only be used as a guide because the channels red button Nielsen in 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, ending October 10th 2021 months is retail market share in value as compared to the same period. The previous year grew from 13.5% to 13.6% in Belgium from 25.8% to 26.3% in France from 25.4 per.
<unk>, 229% in Great Britain.
Market share in value as compared to the same period. The previous year grew from nine 8% to 18, 6% in Kenya and from zero percent 12, 2% in Nigeria, We launched a new printer to multiply the energy drink in Nigeria during the third quarter. The Nielsen numbers in EMEA should only be used as a guide.
Because the channels read Bud Nielsen in EMEA vary from country to country.
According to IRI in Australia monsters market share in value for the months ending October 2021 increased from 12, 7% to 13, 9% as compared to the same period the previous year.
Are those market share in value decreased from 11, 9% to 11, 3% during the same period the market share of the company's brands in Australia for the month ended October 2021 increased from 24, 6% to 25, 2%.
According to IRI and use eland monsters market share in value for the four weeks ended October 17, 2021 increased from 10, 6% to 12, 6% as compared to the same period the previous year.
Lift plus market share in value decreased from six 7% to six 3% and mother's market share in value increased from five 6% to six 1% market share of the company's brands in New Zealand for the four weeks ended October 17, 2021 increased from 23% to 25% according to.
And toss in Japan for the month ended September 'twenty, 2021 2021.
Monsters market share in value in the convenience store channel as compared to the same period. The previous year grew from 49.9% to 53.9%. According to Nielsen in South Korea for the month ended September 'twenty, one 2021 monsters market share in value in all outlets combined as compared to the same.
Period, the previous year grew from 54, 4% to 60.4% Monster continues to be the leading energy brand in Japan, and South Korea, We again point out that certain market statistics that cover single months or four week periods may often be materially influenced positively <unk> negatively by promotions or other.
Trading factors during those periods.
Net sales to customers outside the U S. With 527 4 million 37, 4% of total net sales in the 2021 third quarter compared to $444 5 million or 35, 7% of total net sales in the corresponding quarter in 2020.
Foreign currency exchange rates had a positive impact on net sales in the U S.
In U S dollars by approximately $16 4 million in the 2021 third quarter included in 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 third quarter increased 22, 9% in dollars and increased 17, 2% in local currencies over the same period in 2020 gross profit in this region as a percentage of net sales for the third quarter was 37, 7% compared to 39, 5%.
In the same quarter in 'twenty 'twenty.
<unk> due to an unfavorable country product mix and can frighten raw material if REIT costs.
Local currencies gross profit as a percentage of net sales for the quarter was 38.4% cash.
Can't supply shortages exacerbated by production disruptions at our major supplier and in EMEA lack of ingredient availability insufficient canning capacity and the shortage of trucking availability together had an adverse impact on sales in the third quarter in EMEA and in some cases impacting there but.
The availability of our products on shelf at retailers.
The company has addressed and continues to address the controllable challenges in its supply right.
Huge timing of cells into bottlers.
In Latin America, including Mexico, and the Caribbean net sales in the 2021 third quarter increased 57, 6% in dollars and decreased 57, 7% in local currencies over the same period in 2020.
Profit in this region as a percentage of net sales was 41% compared to 42, 9% over the same period in 2020.
In Brazil net sales in the 2021 third quarter increased by 56, 6% in dollars and 54, 1% in local currency.
Net sales in Chile increased 34, 5% in dollars and 27, 4% in local currency in the 2021 third quarter net sales in Argentina increased 41, 6% in dollars and 93, 1% in local currency in the 2021 third quarter there.
There are a number of pending proceedings with V P X, but as they all SAP Judy Kay we will not be answering any questions on this matter on today's call.
In the United States, we successfully launched our new true Newell, North pure energy sell Salon and E Commerce and selected channels and will launch nationally into mainstream channels without Coca Cola bottlers in the first quarter of 2022.
Only one third quarter during the quarter. We also launched our strategic brands innovation and predator in additional countries in particular, we launched a predator mall flavored energy drink in Nigeria.
During the third quarter of 2021 we launched monster Super few blue streak in Red Dog in July in Japan. Additionally, in October 2021 we re launched monster Rossi in Japan.
As a result of the COVID-19 pandemic still impacting the region sitting about planned launches of new products and the number of Asia Pacific markets have been deferred until 2022.
The predator is anticipated to launch later this month in Vietnam.
We are planning to launch a number of additional products and product lines in our domestic and international markets. Later this year.
We estimate October 2021 sales to be approximately eight 3% higher than in October 2020 on a foreign currency adjusted basis October 2021 sales would have been approximately seven 9% higher than the comparable October 'twenty 'twenty yourselves October 2021 had one less sell.
<unk> date in October 2020.
Additionally, the company continued to experience multiple supply chain challenges in October which adversely impacted sales.
In this regard we caution again that 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 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 our bottlers are responsible for production and you literally 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.
Thank you.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
In the interest of time, please limit yourselves to one question only thank you.
Our first question comes from Wendy Nicholson with Citi. Please go ahead.
Hi, My question has to do with how you're thinking about pricing and promotion because on the one hand, you've got <unk>.
<unk> market share it seems like strong demand.
<unk> got capacity constraints in the supply chain constraints.
On the one hand, you want to keep dry promotion up to keep people coming to your brand, but if you can't service demand how do you how do you balance those two if you could talk about what youre thinking about just in the short term over the next few months, how you scale up supply and get more more bottles on the shelf or count on the shelf.
Okay. Randy this is Hilton.
Excellent question so we.
We have a department.
Revenue growth management <unk>.
Balances pricing and balances promotions in line with the expectations that we set.
For the business and for our brands. So we've been working very closely.
And started in this quarter in fact slightly before this last quarter in cutting back promotions and using them very judiciously. So we look at this on an ongoing basis, we have plans for 2022 which.
Involve changing retail.
Retail pricing on shelves, which leads to obviously a reduction in promotions and we don't rule out the possibility of a full price increase later on in 2022, but we keep all options open we preferred to.
The objective through reductions in promotions, but we have to see what the cost environment looks like going into 2022, obviously, if you haven't got product and you showed a product it doesn't make sense to promote extensively but we still have to promote in order to fulfill the contracts that we've had.
This year with our customers and our REIT status, which was set at the beginning of the AR and some cannot be changed and as we move into 2020 to adjust pricing through promotions and price increases.
The next question is from Bonnie Herzog with Goldman Sachs. Please go ahead.
Alright, Thank you hi.
Hi, Rodney and Hilton I.
We have opened up a number of coke package in the which will be supplying in the fourth quarter. So if we look at Q3 and Rodney will probably kill me, but I'll I'll give you an estimate my my estimate is that we shorted.
In the high single digits.
That's my that's my estimate in terms of millions of cases.
The next question is from Peter Galbo with Bank of America. Please go ahead.
Hey, guys. Good afternoon. Thank you for taking the question.
I I was just wondering Hilton the comments on other pricing actions you know.
Retail pricing on shelves potential for a full list price increase.
Can you give us a sense on on maybe when you would consider that more thoroughly you know is there is there a reason why it's not now is there.
A shelf reset period that you need to wait for.
Just listening to some of the commentary from some of the bottle or is it seems like they are taking pricing now just just why wait.
So we're not waiting I mean.
We already implemented promotional adjustments in this quarter.
So we're not we're not waiting they all sit in customers that we have.
That we contractually obligated to maintain.
Pricing and promotions, we've we've entered into agreements with them.
That we have new contract starting in 2022 and those.
New contracts will.
The address the pricing issues that you're talking about so you know it's not waiting.
Susan trying to hire people, it's not be not be an easy we have a number of open positions, but we already actually we've seen good success from what we've implemented the end, we actually are expanding on field team and we're gonna do that in conjunction with the butlers, but you know that's part of the part of the challenges we've had all supply chain and part of the.
Lenses, we've had which have affected ourselves have been you know just inefficiencies getting products on the shelf and it's and they were all different any different parts of the country and in different parts of the world even it it varies in some cases you can you know you you see empty shelves, where you'll see shelves that haven't been refilled, which is obviously heartbreaking for us and and.
And then not turned to what's happened in the aluminum so in the mid of Middle of October we ended up with the highest priced we've ever seen.
For aluminum in the Midwest premium and that's now fallen 15% from from its high and now. It's you know it's a fee at the end of October. So we don't know what's happening with aluminum what would we do know.
Is that we have substantial quantities of cans, we have two new manufacturers that have opened in the U S and all beginning to suppliers. So that's that's a fact and we have also opened a number of additional co packing facilities. Both in the U S and in Europe. So we eat the Kansas.
Coming in we have new co packing capacity and what I'm, hoping is that this inefficient freight that we've been experienced we spoke on previous calls about operating within orbitz to minimize cost of distribution and cost of freight and so now you know we.
One of our products through the Coca Cola Bottler system internationally, we believe that we are well positioned in the energy drink category and continue to be optimistic about our total 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.
Okay.
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