Q3 2022 Monster Beverage Corp Earnings Call

Good afternoon, everyone and welcome to the Monster beverage third quarter 2022 financial results Conference call.

All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

After todays presentation, there will be an opportunity to ask questions.

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Please also note that as the Venezuela recorded.

At this time I'd like to turn the floor over to Rodney sacks, and Hilton Schlosberg gentlemen, Please go ahead.

Thank you good.

Good afternoon, ladies and gentlemen, thank you for attending this call I'm Rodney Sachs 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 our cautionary statement.

Yeah.

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'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 February 28, 2022, including the sections contained therein entitled risk factors and forward looking statements for a discussion on <unk>.

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 Jerome the company achieved record third quarter net sales of 1.62 billion in the 'twenty to 'twenty, two food quarter $15, 2% higher than net sales of 1.41 billion in the 2021 comparable period and 22% higher on a foreign.

Currency adjusted basis since the beginning of the COVID-19 pandemic and the subsequent increase demand for the company's energy drinks the company prioritized ensuring product availability for its customers and consumers. This strategic direction has remained in place throughout the global supply chain shall.

And disruptions despite adversely impacting the company's profitability.

The company continues to stand by its strategy to ensure product availability and solidify the continued long term growth of the company's brands.

During the 2022 third quarter the company experienced a significant increase in cost of sales relative to the comparative <unk> 2021 third quarter, primarily due to increased ingredients and other input costs, including secondary packaging materials and increased co packing fees increased logistical costs.

Increased aluminum can costs and geographical and product sales mix. We continue to believe that some of these increased costs. We are experiencing are likely to be drawn surgery.

The depletion of our higher cost imported cans will continue over the next few quarters. However, our main promotion in the third quarter was executed with lower cost locally sourced cans in the United States and globally we.

We estimate that of the increasing cost of sales in the 'twenty to 'twenty two third quarter approximately $84 2 million was comprised of approximately 41 million due to increased ingredient and other input costs, including secondary packaging materials and increased co packing fees.

To approximately $24 4 million due to increased freight rates and fuel costs, including costs relating to the importation of aluminum cans. Three approximately 11 5 million due to increased aluminum can costs attributable to higher aluminum commodity pricing and for approximately 8.2.

Million due to geographical and product sales mix.

We continue to if rates quantities of certain ingredients internationally, particularly to EMEA Asia Pacific and Latin America, that's additional costs and inefficiencies to enable timely innovation launches we.

We continued to experience significant increases in distribution expenses, primarily as a result of increased warehousing expenses as well as other logistical expenses, which adversely impacted operating expenses.

Company continues to address the challenges and its supply chain as it navigates through the uncertainty of the current global supply China environment.

Gross profit as a percentage of net sales for the 'twenty to 'twenty two third quarter was 51, 3% compared with 55, 9% in the 'twenty to 'twenty, one third quarter and 47, 1% for the 2022 second quarter.

The decrease in gross profit as a percentage of net sales for the 'twenty to 'twenty two third quarter was partially offset by pricing actions, including the implementation of a general price increase in the United States effective September one 2022 price increases in certain international markets and reductions in promotions.

Such pricing actions positively impacted gross profit margins in the 'twenty to 'twenty two third quarter.

Operating expenses for the 2022 third quarter were $415 8 million compared with $344 7 million in the 'twenty to 'twenty, one third quarter as a percentage of net sales operating expenses for the 2022 third quarter were 25, 6% compared to 24, 4%.

In the 'twenty to 'twenty, one third quarter and 24, 5% in the 2019 third quarter pre Covid distribution.

Expenses for the 'twenty to 'twenty, two third quarter increased to 83 million, which is an increase of 27.1% or 5.1% of net sales compared to $65 3 million or four 6% of net sales in the 'twenty to 'twenty, one third quarter and three 3% of net sales.

In the 2019 third quarter pre COVID-19.

The 17.7 million increase in distribution expenses was primarily due to higher warehouse expenses of $11 7 million as a result of higher raw materials and finished product inventories in the United States and EMEA as well as increased <unk> expenses of $4 8 million as a result.

Lots of higher outbound freight rates and fuel increased volume and out of all but freight.

The increase in other operating expenses was primarily due to increased payroll expenses increased expenditures for sponsorships and endorsements and increased expenditures for travel and entertainment.

These increases were the result of the company's return to activities consistent with pre COVID-19 levels. We have decreased our reliance on imported cans and are currently purchasing aluminum cans from local sources globally. We have seen a reduction in cost of cells through increased use of domestic cans as we continue.

Just cycle through existing inventories of imported cans over the next few quarters, we have rebuilt and increased finished product inventory levels across the United States and EMEA to reduce the excessive cost long distance freight satisfy demand and to return to our orbit strategy of producing in closer proximity.

A T to our customers the cost of repositioning finished products to distribution centers are included in the freighting costs.

Operating income for the 2022 third quarter decreased 6% to $417 9 million from $444 5 million in the 2021 competitive quarter net income decreased four 4% to $322 4 million as compared to $337 2 million.

In the 'twenty to 'twenty, one comparable quarter diluted earnings per share for the 2022 third quarter decreased three 9% to 60 cents from 63 cents in the third quarter of 2021.

Through pricing actions the company was able to achieve positive pricing appreciation in the United States and in EMEA.

Due to continued cost pressures the company implemented.

Our net sales price increase in the range of 6% market wide in the United States effective September one 2022.

In addition to price increases or pricing actions taken earlier this year in order to mitigate inflationary cost pressures the company implemented price increases in the second half of 2022 and certain international markets and will be implementing additional price increases early in 2023 and a number of international.

Markets. The company will continue to review further opportunities for price increases and pricing actions in order to mitigate inflationary pressures.

According to the Nielsen reports for the 13 weeks through October 22, 2022, all outlets combined, namely convenience grocery drug mass merchandisers sales in dollars in the energy drink category, including energy shots increased by 11, 2% versus the same period, a year ago sales of the company's energy.

<unk>, including Ryan were up 11, 2% in the 13 week period sales of Monster were up 11, 2% sales of reign were up 2.9% sales of nausea increased 17, 2% and sells a full throttle increased one 7% sales of Red Bull increased six 6% sales of Rockstar.

<unk> increased by six 1% and sales of five hour decreased one 8% V. P. Expanding sales decreased 22, 6%. The company has regained market share leadership in the energy drink category in the United States for the 13 weeks ended October 22, 19, sorry 2022.

What are you to Nielsen for the four weeks ended October 22 to 2022 sales in dollars in the energy drink category in the convenience and gas channel, including energy shots in dollars increased 10, 4% over the same period the previous year sales of the company's energy brands, which include Ryan increased 11.

0.8% during the four week period in the convenience and gas channel sales of monster increased by 11.4% over the same period versus the previous year reign sales increased 12% nausea was up 13, 9% and full throttle was up seven 1% sells a red bull up six 2%.

<unk> was up eight 1% and five hour was down two 2% the PX Bang sales decreased 27.3%.

According to Nielsen for the four weeks ended October 'twenty, two 2022 the company's market share of the energy drink category in the convenience and gas channel, including energy shots in dollars increased a half a point to 36, 9%.

The sheer increase from city, 0.8% a year ago to 31, 1% ratings share remained at two 4% normal shade increased 0.1 of a point to 2.5% and full throttle share remained at <unk> seven of a percent Red Bull share decreased one four points from 37.4.

5% a year ago to 36, 1% VP expansion decreased 2.5 points to four 8% five hour's share was lower by a half a point at 4% Rockstar share was down 0.1 of a point to three 7% Celsius is Shay is two 6% alani Nu share.

<unk> six of a percent and goes share is 1.8%.

According to Nielsen for the four weeks ended October 'twenty, two 2022 sales in dollars of the coffee plus energy drink category, which includes Java Monster line in the convenience and gas channel increased 11, 4% over the same period the previous year.

Sales of Java Monster, including Java, Monster, 300, and Java Monster Nitro Cold Brew with 10, 4% higher in the same period versus the previous year sales of Starbucks energy were 17, 4% higher Java Monster share, including Java Monster, 300, and Java Monster Nitro Cold brew of the coffee plus.

G category, which primarily includes Java Monster Java Monster 300, Java Monster Nitro Cold Brew, Starbucks double shot and Triple shot Rockstar roasted and Bang keto coffee for the four weeks ended October 22, 2022 was 52, 1% down a half a point, while Starbucks energy share was 40.

Six 9% up two full points.

According to Nielsen in all major channels in Canada for the 12 weeks ended October eight 2022, the energy drink category increased 15, 8% in dollars sales of the company's energy drink brands increased 14, 9% versus a year ago the market share of the company's energy drink brands was 49% down three of them.

A point monster sales increased 17, 3% and its market share increased.

Five of a point to 36, 6% nauseous sales decreased 11, 6%.

And its market share decreased <unk> four of a point to 1.3% full throttle sales decreased 8% and its market share decreased <unk>, one of a point to 2.5% okay.

Nielsen for all outlets combined in Mexico, the energy drink category increased 26% for the month of September 2022 Monster sales increased 36, 4% monsters market share in value increased 2.2 points to 28, 6% against the comparable period the previous year.

Sales of credits increased 94% and its market share increased one five share points to four 4%.

The Nielsen statistics for Mexico cover 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.

More energy drink brands during a particular month.

Sequentially such activities could have a significant impact on the monthly Nielsen statistics for Mexico.

According to Nielsen for the month of September 2022, compared to the September 2021 monsters retail market share in value increased in Argentina from 47, 9% to 51, 7% and in Brazil from 37, 7% to 41.8%.

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

In Chile monsters retail share for the month of September 2022 decreased from 42, 2% to 41, 7%.

I'd like to point out the Nielsen numbers in EMEA should only be used as a guide because the channels read by 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 nine 2022 monsters retail market share in value as compared to the same period. The previous year grew from 13, 5% to 15, 5% in Belgium.

26, 6% to 31% in France from 28, 9% to 29, 9% in Great Britain.

From 27% to 31, 6% in Norway and from 36, 9% to 43% in Spain.

According to Nielsen in the 13 week period, ending September 11, 2022 monsters retail market share in value.

As compared to the same period the previous year grew from 27, 4% to 27, 9% in Denmark from 27, 5% to 28, 1% in the Republic of Ireland and from 13, 6% to 15, 5% in Sweden.

<unk> market share in value as compared to the same period the previous year declined from 7.8% to two 5% in the Netherlands. According.

According to Nielsen in the 13 week period until the end of August 2022 months as retail market share in value as compared to the same period. The previous year grew from 15% to 18, 1% in the Czech Republic from 15, 3% to 15, 6% in Germany from 28, 8% to 31.

Alright.

According to Intorsion, Japan in the month, ending September 20, twenty-two monsters market shooting value in the convenience store channel as compared to the same period of the previous you grew from 53.9% to 55%.

According to Nielsen in South Korea, and the month of ending September 20, twenty-two monsters market sharing value and all athletes combined as compared to the same period the previous year increased from 60.4% to 61.5% with a game for job that certain market's statistics that kind of a single months before we periods.

May often be materially influenced positively and negatively bought promotions or other trading effect is during those periods.

It sells to customers App solved the U S was $610.6 million, 37.6% of total net sales in the 20 twenty-two third quarter compared to $527.4 million will city, 7.4% of cuddling itself in the corresponding quarter in 2021.

Foreign currency exchange rates had a negative impact on net sales in U S dollars bought proximity $71.3 million in the 2021 third quarter included in reported geographic cells or ourselves to the company's military customers, which are delivered in the U S and drawn ship to the military and their customers.

Overseas.

In EMEA knit cells in the 20 twenty-two third quarter increased 14.1% in Dallas and increased 30.4% in local currencies over the same period in 2021.

Property in this region as a percentage of in itself for the third quarter was 34.7% compared to 37.7% in the same courtroom 2021 and compared to 26.7% in the second quarter of 2022.

Companies continuing to address the controllable challenges and its supply chain in EMEA.

Also pleased that in the 20 twenty-two food quota monster gained market share in Belgium, The Czech Republic, Denmark, France, Germany, Great Britain, Italy, Norway, Poland.

Public violence by in Sweden.

In Asia Pacific knit cells in the 2022 third quarter decreased 13.9% in Dallas and decreased 1.5% in local currencies over the same period in 2021 gross profit in this region as a percentage of net cells was 37.4% versus 43.5% over the same period.

2021.

June part two a product supply issue with an ingredient that impacted a number of our products in Japan, but which has now been resolved net sales in the 20 twenty-two suit quota decreased 35.8% in dollars and decreased 21.2% in local currency.

Sales in the 20th 22 third quarter remain impacted by Covid in certain channels.

In South Korea.

Net sales decreased 8% in Dallas, but increased 4.4% in local currency as compared to the same quota in 2021.

Once the remains the market leader in Japan, and South Korea.

In China net sales decreased six per cent in Dallas and 1.8% in local currency as compared to the same quarter in 2021, largely impacted by covered related Lockdowns, we remain optimistic about the prospects for the monster brand in China.

You know she Ana which includes Australia, New Zealand Tahiti, French Polynesia, you Caledonia, Papa New Guinea, and Guam net sales increased 30.7% in dollars and 41.5% in local currencies.

In Latin America, including Mexico, and the Caribbean net sales in the 2022 third quarter increased 63.8% in dollars and increased 74.7% in local currencies over the same period in 2021.

Gross profit in this region as a percentage of in itself was 34.7% for the 2022 third quarter versus 41% in the 22 and he wants a quarter.

In Brazil net sales in the 20 twenty-two food quota increase by 139.4% in Dallas and 142.9% in local currency.

And it sells in Mexico increased 17% in dollars and 18% he local currency and the 2022 third quarter net cells in Chile decreased 4.4% in dollars and increased 15.1% in local currency in the 2022 food quota net cells in Argentina increased <unk>.

7.8% in dollars, an increase to 166.2% in local currency in the 2022 suit quota.

We will now provide an update on our litigation with vaudeville Pharmaceuticals, Inc, which will be referred to V. P X. The maker of Bang energy drinks. We've previously discussed the April 20, twenty-two final Arbitration award, which.

Which the orbit try to found in favor of Monster Energy Company, We me see and Orange banging against V. P X on all claims the arbitrator awarded M C and Orange Bang 175 million to remedy B P X as postmus conduct as well as attorneys fees and costs, which are monitored nearly 9.3 million.

Yeah I'll try to also ordered V P extra pay N B C and Orange Bang, an ongoing five per cent royalty on all future cells or V. P X bangs energy drinks and other bank branded products.

She went to the terms of the agreement between M C and Orange Bang The award and future royalties will be shared equally between M C and Orange Bang.

On September 29, 20, twenty-two United States District Court for the Central District of California into the final judgment confirming the award.

On October 28, 2022 V. P X fault a notice of appeal of the district Court's final judgment confirming the award the company will not recognize the award or royalties until such time as they all realised or realizable Adair.

Additionally, on 29 September 20, twenty-two a jury.

In the United States District Court for the Central District of California returned a verdict awarding M. C. Approximately 293 million in damages are these claims against V. P X for false advertising misappropriation of trade secrets and interference with monsters contract Ah the shelf space with certain key retailers.

N B C will not recognize the jury award until such time as the what Israel lost or realizable.

On October 10th 2022 V P X along with certain of its domestic subsidiaries and affiliates fault for protection under chapter 11 of the bankruptcy code in the Southern District of Florida V. P X initiated the bankruptcy action before the district court could decide certain remaining issues at this little Guy.

Litigation and other pending proceedings with V P X or sub Judy K, we will not be answering any questions on those matches on today's call.

I'll search alcohol based product line to live reached Monsters brand equity is scheduled to launch in the first quarter of 2023, the Beast unleashed will be a full bodied flavor mulch beverage with 6% alcohol by volume and when will come in full bald flavors mean green why ties Peach perfect and scary.

Berries, all of which are based on monsters, well known and popular flavor profiles.

Kentucky will introduce the Beast unleashed through certain beer distributors in the United States utilizing a phased approach launch with the goal of being national by the end of 2023.

Or alcohol innovation pipeline is robust in addition to the Beast unleashed, we will relaunch Wild Bison Hall, it's also with new packaging and great new flavors and taste profiles. The Dales B F family will get Iris refresh, including the introduction of Dell's American light lager and easy drinking lager with $4.

2% alcohol by volume 95 calories at 2.5 calls per 12 ounce, serving we also have several additional innovative alcohol beverage products under development and look forward to sharing use of those products at a later date.

In the U S. In September we began shipping Monster reserve Orange Dreams to go to distributors for an October launch at retail.

We are excited about the planned launch about your monster energy zero Sugar energy drink initially and did not it states at retail in January of 2023.

Once the energy zero sugar was specifically developed as an indistinguishable zero sugar analogue of the original unique monster energy Green fly them. We are excited about the opportunities that this product will provide to a monster consumers who have come to enjoy the unique taste profile all all the all original monster Greenfly.

Which remains a leading flavour we are planning to launch monster two of water in the United States in stolen sparkling variance in 19.2 ounce cans and the first off of 20 twenty-three wants to to a water is a pure and flavored water product and.

In the first half of 2023, we are also planning to launch rainstorm in full flavors in 12 ounce slim cans to compete directly with certain competitive new entrants in the energy drink category Indian States.

In Puerto Rico. During July we introduced first 16 ounce 12 pack ultra variety pecs and in August we launched amongst the reserve Watermelon and reserve one pineapple in Mexico, we expanded out Jews portfolio and launched amongst the Jews Monarc in August .

[noise] Monster Dragon T Lemon in August in Honduras, and El Salvador and in September in Guatemala.

Trailer during the month of July we expanded our mother portfolio and launched mother lava guava.

In EMEA in the third quarter of 2022, we launched monster assault and most of the reserve watch pineapple and the number of countries in certain countries. We also launched Joost monarc juice chaotic ultra Rosa and ultra watermelon during the 20 twenty-two food quota.

During the 2020 juices quarterly also launched Additionally, ask I use a bird predator and Ryan in certain countries. We are excited about the planned launch at retail over a new Monster Energy Lewis Hamilton, Xerox sugar and as your drink initially and select EMEA markets late in the fourth quarter of 2022.

Followed by an additional 20 markets in the first quarter of 2023 during.

During the third quarter of 20 twenty-two we lose predator in Kazakhstan, Malaysia in Jordan and we continue the national rollout of predator in India. We are planning to introduce the predator brand an additional countries in APEC in the last quarter of 2022, and the first off of 2023.

We also launched Monster Super Cola and a cat in Japan in August and Monster rehab T plus lemonade in October .

We estimate October 2022 sales, including Kentucky to be approximately 6.5% higher than in October 2021, and 5% higher than in October 2021, excluding Kentucky on a foreign currency adjusted basis, including Kentucky October 20, twenty-two sales would have been approximately 12 point.

9% higher than the comparable October 2021 sales and 11.4% higher than October 2021, Excluding Kownacki October 2022 had the same number of selling days as October 2021, the company had sufficient can capacity and come manufacturing Flint Flint capacity.

Russell Regents to address them on for October we would like to remind listeners that we took a general process increase in United States effective September 120 22.

In this regard precaution a guy in that sales of the short period, often disproportionately impacted by various factors such as for example, selling days days of the week in which holidays full timing of new product launches in the timing of price increases promotions in retail stores stupidity incentives as well as shifts in the <unk>.

<unk> of production in some instances I bought those are responsible for production and determined they're unproductive scheduled this affects the dates on which we invoice such Butler's. Furthermore, bottling and distribution partners maintain inventory levels. According to their own internal requirements, which they may also from time to time for the.

And business reasons, we reiterate that sells over a short period, such as a single month should not necessarily be imputed to all regarded as indicative of results for a full quota or any future period.

COVID-19 pandemic and related unfavorable economic conditions continue in certain regions Ah new product innovation launches in those regions could be delayed.

Don't even briefly to share repurchases.

During the 20 twenty-two third quarter. The company puts just approximately 3.1 million shares of common stock and as of November 320, 22, approximately 182.8 million remained available for repurchase under the June 20 twenty-two repurchase program.

Board of directors also authorized that you share repurchase program for the repurchase of up to an additional $500 million of the company's outstanding common stock.

In conclusion, I would like to summarize some recent positive points one consumer demand remains solid even with the pricing actions that had been taken in 2022.

To the company has increased its raw material and finished product inventories to better serve customers and ensured availability of its products three all a if a flavour facility in Ireland is not providing a large number of flavors to all EMEA region, enabling bitter service levels and low landed costs to all EMEA.

Region.

For we are pleased with the new additions to the monster energy portfolio.

Five we all particularly exhausted for the launch of Monster Energy Zero Sugar in January 2023 in the United States as I mentioned previously monsters zero sugar is an analogue of our original unique monster energy Green flavour.

Six we are planning to launch rain total body fuel high performance energy drinks and additional international markets and countries. We're also pleased with the road out of predator in Fury are affordable energy drink portfolio internationally, we all proceeding with plans to launch our affordable and your brands and additional in a in an additional.

Number of international countries, we already Susie ethnic for the planned launch of the Beast unleashed I'll first flavored multiple beverage alcohol product and for the opportunities that the Kentucky acquisition presents we are all saying who's yesterday for the planned launches of the month or two of water and rainstorm lines in the first off of 2020.

Three in the United States.

10, we believe that we will be able to address many of the challenges we have experienced in our supply chain.

11, we consider that certain of the increased costs that we have experienced in the courtroom I will be transitory for example, lemme prosper aluminum has reduced materially from his recent mulch highs and we all beginning to see a reduction in fright costs as well as reductions in the cost of shipping containers and ocean freight I would like to not open.

The floor to questions about the quarter. Thank you.

Ladies and gentlemen, we will now begin the question and answer session.

To ask a question you May press Star and then one on your Touchtone telephones. If you are using a speaker phone. We do ask that you. Please pick up your handset prior to pressing the keys to ensure the best sound quality.

To withdraw your questions you May press star and too.

In the interest of time, we do ask that you. Please limit yourself to a single question.

At this time, we will pause momentarily to assemble the roster.

Our first question today it comes from.

Andrea T Shera from J P. Morgan. Please go ahead with your question.

Thank you and good afternoon, I was hoping if you can comment on they'll kill the performance, excluding if vaccine the load up Oh Jeeze I tend not to take you know the merits of it but it's just understanding [noise]. If there is some signs of retailer's that may have decided to take inventory now are seeing some of us to see all the time.

<unk> of pricing and was this performance pretty much consistent across all channels.

So Arizona you know as we look at where we are on the week the volume trends, we really not concerned because the training that we look at or the or the Nielsen trains and the depletion.

So four volumes seemed to be holding up and we set aside with the performance of the price increase and as you also know we reduced our promotions as we went through 2022. So at this time you know we are.

Continuing to evaluate performance Ah it looks as if the price increase is in fact sticking you know I'm looking at.

Numbers are located on my screen the total industry in the various participants in the industry volume seemed to be holding up. So I think that's the only comment that I'd like to make at this time.

Our next question comes from Tara most anyone from Morgan Stanley . Please go ahead with your question.

And he'll maybe the follow up on that can you just talk about what you're seeing internationally in terms of energy category grow their bodies had been some broader concerns across CPG around the macro impact and weaker consumer spending and if you could see that impact the consumer broadly in particular.

And the energy categories, So an update on it.

In terms of the.

The category internationally it would be helpful.

Yeah, I think it is as we look at the Kennedy internationally MVA really still looks pretty strong you know I remember at the end of the day, we sending an affordable luxury so yeah me a and there are lots of concerns and costing MVA gas prices.

And not [laughter] nobody's really petrol.

Petrol prices.

Energy costs.

Being up significantly in EMEA, we've seen lots of lots of other costs hitting us but at the end of the day the consumers still seems to be spending not at the rates.

<unk> 2021, but they still seemed to be you know spending on our products anyway. So we've seen we've seen growth in EMEA as you know as I look at other parts of.

The World, Japan had an issue with an ingredient that Rodney spoke about and he's narrative.

And the the risk to be MBA.

The rest of Asia Pacific I'm, sorry seems also to be continuing.

With with growth will that are not at the same rate as as 2021.

And we monitoring the situation, but yeah, right now volume still seemed to be still seemed to be healthy.

The only thing I would add is that there is.

Still a little bit of the effects of Covid in places like China, and Japan, and Japan that is correct.

A little bit of the volume, but but again, we think that's more covered related and that.

Basically is going to work its way out.

Its way through and then if you think things will start to improve a guy you know.

Our next question comes from Bonnie Herzog from Goldman Sachs. Please go ahead go ahead with your question.

Alright, Thank you hi, everyone.

Give us a sanchez how much of your volume growth in the Carter was the result of pre buying ahead of your price increase or did.

Did you really limit back and then on your margin could you give us a sense and you know how much it would be expensive inventory his lap and and if it will be fully work thrill.

By the end of this year and then thinking about next year and I'm well aware you don't Guy but is there any reason to think your gross margins can you know get back to the mid 50 per cent range. You know early next year, possibly T Y, especially given the pricing you've already put in the market.

Checking and you did you know just announced some future pricing and international market. So how should we think about the gross margin break padre. Thanks.

Okay. So that was quite a long Christian Bunny, let's start at the very beginning.

You spoke about these.

These more expensive imported Kansas, we have in the system that could be brought in to satisfy demand.

If you look at cost of sales in the in the quota you know what we what we talk about is not as significant number but we'll be worked through as we work through normally inventory and we anticipating it will be.

Through the probably the next I would say three three quarters. So.

That is something that we.

We will look through and the old because they are tens of mainly of green and white that we send in the old because he was told them everyday and eh. The comment on this quota was that we had a major promotion with apex agents and city to produce promotional cans overseas because he's.

When they will arrive at the <unk>.

Time that arrived late so we stick to.

Cool excuse for international Cats so.

And you're right we have at a price increase.

And and in the U S and we've had price increases internationally and we have even more price increases in 2023.

We enunciated on the.

The discussion earlier, so plus process all gang up and.

And possibly getting up in response to inflation costs that we've seen.

As you know inflation is.

Is rampant.

But on the other hand, there are some good things that are coming out to be seen faked rates coming down.

There was a lot of capital expenditure, putting to new equipment and containers. So we've seen page rates coming down you know fuel is where fuel is you know.

Let's say, what's gonna happen with gas prices and diesel and fuel.

Illuminates coming dawn, but aluminum is one of those elusive.

[noise] commodities.

Our business because we part of aluminum is H part as Bhutan and minus one so you don't see a perfect.

Groupement in aluminum prices when you look at a specific quote so.

We've seen increases in commodities, we seeing you know.

Horrific increases in energy costs in in Europe .

And you know there's there's there's a bunch of costs that are continuing to to.

Compromise.

<unk>, but all in all we believe that the price increases that we are putting into into place.

Should be able to be.

Tolerated by the consumer and help mitigate some of the increased costs we sing.

I would perhaps add on that is that I mean, we all know that the inflation is continuing and when you saw the the increase in interest rates today again.

So inflation both in the U S and Europe is high and if we continue to see inflation that those rights I mean, we we will review.

Margins will.

Crossing as I'm sure other consumer product companies have done and will continue to do and so we will review whether you know going into next year, whether they're in fact crossing needs.

Dusty fought in looking at an increase at that time in order to keep our margins.

Ah Ah reasonable if we if we need to do that we will review. It. So just just religion, we are open to it.

But at this stage, we have the current increase and we'll see how things go out, but I think the whole world is going through he's gonna continue for some time to face a lot of inflation and so you know.

Whatever we say will be reviewed.

Reviewed.

Tommy basis once we see we we at the beginning of the year.

And are they come.

Comment sorry, I just wanted to respond to another comment that funny made about binds we restricted cut.

Customers, obviously, the distributors in buying in we didn't give them carte Blanche they were allowed to buying.

Modest amount and as we look at the numbers for the for the quota we believe that the that.

Whatever it was it was.

Was purchase was probably sold in the quota.

As we've seen.

And our next question comes from Kevin Grundy from Jeffries. Please go ahead with your question.

Great. Thanks, Good afternoon guys.

A quick two quarter, if you didn't <unk> number one if you could just confirm that your understanding is still deep red Bull is going to follow the magnitude of the price increase that you took it is lagging a little bit in the Nielsen data. If you could just confirm that my broader question is this on the recent distribution changes from some of your competitors, but with Celsius going into the Pepsi says.

The bank coming out.

Very common for that to create opportunity for incumbents like like you guys in rebel in this instance can you just comment on your observations with respect to the state of those transition and how much of that disruption, particularly around Bang. You think is contributing positively your market share performance in house. Thank you that is thanks.

You wanted to start that one who joined me I'll I'll I'll I'll sorta start that one I think that you know.

The Celsius transition will be interesting, but you know it's.

It's not all the panacea doesn't there's no magic in it we think that they will then font increased distribution an increased number of outlets I think that the discipline that system locked Pepsi will clearly introduce will also be.

Negative on the flexibility and that they've been able to achieve.

Chievo being able you know being able to enjoy through the B a distribution network. So you know, you'll get pluses and minuses and.

As you can see from the the numbers their strength continues to be in the grocery and and a large format store channel. When you look at the numbers in sales per point in the convenience channel there. It's not it's not as high so I don't we don't believe that's going to make a major difference.

There are a number of other brands that are all sort of.

Getting some traction at a smaller level.

I don't know what effect you know, they're gonna have but overall I think that.

We're getting a lot of abstraction from the innovation and from from execution and focus.

I think that will will continue.

So let me go back to Kevin's Christian on Red Bull.

You know given you know obviously, we can call me and doing what they do and what they don't do but understanding is they they imposed a price increase and what are we seeing any go to Lee as we not seeing that price increase reflected in many cases at retail to the extent that you know the the the increase was supposed to have gone up.

We we on the other hand, we've seen prices move up strongly.

At retail.

And our next question comes from Mark Astrakhan from Stifel. Please go ahead with your question.

Yeah. Thanks, an afternoon guys.

I guess just following up on on the last question and kind of thinking about self self placement. So your overall placement has has improved I think he's still a little bit below where you were a couple of years ago, giving some of the supply chain challenges at.

At the same time, you got lots of innovation, probably more than I think most can can remember at least the last 10 years going into 2003.

How do you think about your shelf space.

And a go forward basis are you putting innovation in place of existing products are you expanding your.

Footprint on the shelf and then if you think about the performance and functional category Celsius C for ghost et cetera are you seeing placement in the existing energy cooler is that going into new new coolers are different places within the existing coolers to a certain extent thanks.

So let me start off Mark Ah sales team as an objective because this is the time and.

We do.

Shelf plans and shelf negotiations and a sales team both on the convenience side and on the logical side all very active in achieving.

Additional shelf space full for a branch because we do feel that they are under spaced and they they do deserve for the space relative to what's happening in the market for example, inconvenience we.

We sell more than single surf.

Fucking beverages, so as a category the the energy.

Category.

Requires.

More space relative to.

Sure and as such a brand, which is growing and we mentioned that we've.

Taken Red Bull as a as a company with all the various.

Friends that make up the the.

The company.

Our mission is to increase shelf space in retail I think we have to.

I think if you know the.

The other point, that's what's happening now is you've got this emergence of quite a few new brands, who are getting distribution through the distribution network.

Taking the place of with Celsius is and they are getting so we've got quite a few brands now putting pressure on the retail is to give additional space there isn't additional spice in the existing energy do and what we've been trying for a few years. He has two obviously trying to see we are in performance energy and other sort of Allied energy brands.

Are able to create a second door additional shelving separate and I think that he is going to continue I think that this emergence of a lot of new products in the convenience category in particular.

Will will result in an expansion of Spice. We so hopefully we believe we will be able to.

Gets additional space in the traditional dwarf or innovation in now and is your product.

As well as space for additional.

Additional brands and outperformance products like rain and rain storm together with a lot of the other performance or clean energy products in additional.

Doors. So we think that will actually happen and will improve this year, but you know that's always the challenge you've always got drawn you at a certain amount of fix shelves and you'll go to trial.

Increase your space.

Yeah, but remember the categories growing hey, Mark and decorate that in itself is.

Effective for the retailer.

The space that the allocate to energy generates them really good returns really good revenue.

And it's something spaces, something that we've we always stifle, including putting our own cooters in in retail. So that's a big push for us and always has been.

Our next question comes from Peter Galbo from Bank of America. Please go ahead with your question.

Hey, guys. Good afternoon. Thanks for taking the question I'll be pretty quick just to clarify Hilton.

Your fourth quarter gross margins, you're gonna be laughing I guess that the promo benefit from three Q, but should we still expect a sequential improvement in the gross margin or at that promo benefit you saw on the third corner enough that you'd be actually down quarter on quarter into <unk>. Thanks very much.

The difficulty theater is that we don't give guidance so.

It's hard it's hard to give guidance because we don't give it but let me just <unk> with the thought when you talk about gross margins that the price increase with effective September one. So we basically had one month of the price increase we will have three months of the price increase in December .

While we may have additional costs, you will still have the benefit of the price increase for the full quota.

And at this time.

We will conclude today's question and answer session I would like to turn the conference call back over to Mister sacks for any closing remarks.

Thank you a bath monster, who would like to thank everyone for their continued interest in the company. We continue to believe in the company into our growth strategy and remain committed to them.

To innovate develop and differentiate how 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 are well positioned in the beverage industry and continues to be optimistic about the future of our company. We hope that you remain safe and.

Healthy. Thank you very much for your attendance.

Ladies and gentlemen, the conference has now completed we do thank you for joining today's presentation. You may now disconnect your lines.

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