Q2 2023 Monster Beverage Corp Earnings Call
Good day and welcome to the Monster Beverage Corporation second 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 Star then zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone to withdraw your question. Please press Star then two please.
Please note this event is being recorded.
I would now like to turn the conference over to Mr. Rodney sacks, and Mr. Hilton Schlosberg co Ceos of Monster beverage. Please go ahead.
Thank you.
Good afternoon, ladies and gentlemen.
Turning to school.
Sex Hilton Schlosberg, our Vice Chairman and co Chief Executive Officer is on the Cold as is Tom Kelly, Our Chief Financial Officer, Tom Kelly will now read a cautionary statement.
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 $19 33, as amended and section 21 E of the Securities Exchange Act of $19 30.
Four 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.
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 2023, and quarterly report on Form 10-Q, 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.
Now I'd like to hand, the call over to Rodney sacks.
Thanks, Bob.
The company achieved record second quarter net sales of 1.85 billion in the 'twenty to 'twenty, three second quarter, 12.1% higher than net sales of $1 66 billion and the drilling 22 comparable period and 14.4% higher on a foreign currency adjusted basis gross profit as it was.
Net sales for the 2023 second quarter was 52.5% compared with 47.1% in the comparative 2022 second quarter. The increase in gross profit as a percentage of net sales for the 2023 second quarter as compared to the 2022 second quarter was primarily the result.
Crossing accidents decreased frightening across an increased aluminum can cause the increase was partially offset by lower gross margins in the alcohol segment and are in which sales had quite a nice bump as you seen from the release.
As expected promotional allowances for the 2023 second quarter were marginally higher than the comparable 2022 second quarter as well as the 'twenty to 'twenty three first quarter operating expenses for the 2023 second quarter with $450 4 million compared with 400 was a $6 9 million in the.
2022 second quarter as a percentage of net sales operating expenses for the 'twenty to 'twenty three second quarter with 24, 3% compared with 24, 6% in the 2022 second quarter distribution expenses for the 'twenty to 'twenty, three second quarter decreased to 82 million or four 4%.
Net sales compared to 80 749 million or five 3% of net sales in the 'twenty to 'twenty two second quarter. The 4.8 million decreasing distribution expenses was primarily due to decreased freight out expenses of 11.8 million, partially offset by higher warehouse expenses a full point.
But again as a result of higher raw materials and finished product inventories in the United States and EMEA the.
The increase in the other operating expenses.
It was primarily due to increased payroll expenses, we are purchasing aluminum cans from local sources globally. We've returned to our open strategy of producing in closer proximity to our customers. The cost of repositioning finished products to distribution centers are included in for 18 across the company continues to address.
This sudden challenges it is supply chain as it navigates the current global supply chain environment operating income for the 2023 second quarter increased 44% to 523 8 million from 373 million in the 'twenty to 'twenty two competitors of quota do you figure.
A tax rate for the 2023 second quarter was 23, 2% compared with 25, 3% in the 'twenty to 'twenty two second quarter. The decrease in the effective tax rate was primarily attributable to an increasing deductible interest expense a decrease in the effective state income tax rate as well as an increase.
Net income in certain foreign jurisdictions, which have lower tax rates compared to the United States.
Net income increased 51, 4% to $413 9 million as compared to $273 4 million in the 2022 comparable quarter.
Earnings per share for the 'twenty to 'twenty three second quarter increased 52.8%. She said he nonsense from 26 cents in the second quarter of 2022.
Due to continued cost pressures the company implemented pricing actions in the United States in 2022 as well as in many other international markets in 2022 and in the first half of 2023, the company plans to implement additional price increases in a number of other international markets during the remainder.
Over the 'twenty to 'twenty three year in United States. The company implemented an additional price increase on its 18.6 ounce 24 hours lines effective April one 2023 we will continue to review further opportunities for pricing actions in order to mitigate inflationary pressures.
According to the Nielsen reports for the 13 weeks through July 22, 2023 for all outlets combined, namely convenience grocery drug mass merchandisers sales in dollars in the energy drink category, including energy shots increased by 13, 6% versus the same period, a year ago sales of the company.
Energy brands, including Ryan were up 12, 2% in the 13 week period sales of Monster were up 10, 5% sales of reign were up.
43, 7% South of nausea increased 11, 2% and sells a full throttle increased 14.7% sales of Red Bull increased 10, 2%. The company continues to have market share leadership in the energy drink category.
The outlets combined in the United States in both the 13 week and 14 four week periods ended July 22 2023.
According to Nielsen for the four weeks ended July 22, 2023 sales in dollars in the energy drink category in the convenience and gas channel, including energy shots in dollars increased 13, 7% over the same period the previous year.
Also the company's energy brands, which include reign increased 13, 8% in the four week period in the convenience and gas channel sales of Monster increased by 11, 1% over the same period versus the previous year reign sales increased 54, 9% nausea was up 13 point to present full throttle was.
23, 2% sales of Red Bull were up 8.8% accordingly.
According to Nielsen for the four weeks ended July 22, 2023, the company's market share of the energy drink category in the convenience and gas channel, including energy shots in dollars increased from 36% to 36, 1% monster share decreased from 34, 4% a year ago to 29.8% range.
Share increased point age of a share point to 3.1% nauseous share remained at two 5% and full throttle share remained at four 7%.
Red Bull's share decreased one six points from city six 3% a year ago to 34, 7% V. P X bangs shade decreased 4.2 points to one point to 8% five hour's share was lower by <unk> seven points at three 5% Rockstar.
Share was down <unk> two of a point to 3.4% Celsius as she is six 6% seafoods share is 3% and ghosts share is 2.8%. Please note that V. P X Bang was in bankruptcy. During this period and we will address our acquisition of Bang later in this call.
According to Nielsen for the four weeks ended July 22, 2000, $23000 in the coffee plus energy drink category, which includes our Java Monster line in the convenience and gas channel decreased 3%.
Over the same period, the previous year sales of Java Monster.
Including Java Monster 300.
And Java Monster Nitro Cold brew with three 3% higher than the same period versus the previous year sales of Starbucks energy were 7% lower Java monster share of the coffee plus energy drink category for the four weeks ended July 22, 2023 was 54, 1% up three three points.
While Starbucks Energy's share it was 45.6% down two points.
What is your Nielsen and all major channels in Canada for the 12 weeks ended June 17, 2023, the energy drink category increased 14, 8% in dollars sales of the company's energy drink brands increased 21, 6% versus a year ago. The market share of the company's energy drink brands was 40 point 42.4 per se.
<unk> up two full points monster sales increased 25, 6% and its market share increased 3.3 points to 38.1 nauseous sales decreased five point to 8% and its market share decreased <unk> three of a point to 1.3% full throttle sales decreased 43.
One, 2% and its market share decreased <unk> three of a point to 0.3% okay.
Nielsen for all outlets combined in Mexico, the energy drink category increased 23, 7% for the month of June 2023 monster sales increased 25, 3% monsters market share in value increased four full points to 28.8% against the comparable period the previous year.
Sales of credits are increased to 75, 3% and its market share increased one seven points to five 6%.
The Nielsen statistics for Mexico cover single months, which is a short period that may often be materially influenced positively and negatively by sales in the OXXO convenience chain, which dominates the market sales in the OXXO convenience chain in turn can be materially influenced by promotions that may be undertaken in there.
That chain by one or more energy drink brands during a particular month consequently, such activities could have a significant impact on the monthly Nielsen statistics for Mexico.
According to Nielsen for the month of June 'twenty twenty-three compared to June 2022 monsters retail market share in value increased in Argentina from 55% to 55, 5% in Chile from 38, 1% to 40 point to 8% and in Brazil from 41, 6%.
244.4% Monster energy as the leading energy brand in value in Argentina, Brazil and Chile.
Like to point out that the Nielsen numbers in EMEA should only be used as a god 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 Accordingly.
According to Nielsen in the 13 week period until June 19, 2023 monsters retail market share in value as compared to the same period. The previous year grew from 16, 2% to 16, 6% in Belgium from 32.7% to 73, 1% in France from 29 point to 8%.
31, 1% in Great Britain from Citi, One point to 8% to 35, 2% in Norway from 28.1% to 33% in the Republic of Ireland from 39, 4% to 41, 6% in Spain and from 15, 6% to 15, 9% in Sweden.
Once it is retail market share in value as compared to the same period the previous year declined from six 6% to five 5% in the Netherlands.
According to Nielsen in the 13 week period ended until the end of June 2023 monsters retail market share in value as compared to the same period. The previous year declined from 19, 3% to 17, 7% in South Africa.
What is your Nielsen in the 13 week period until the end of May 2023 monsters retail market share in value as compared to the same period. The previous year grew from 18% to 22.1% in the Czech Republic from 27, 4% to 28% in Denmark from 15% to 16, 4% in Germany from two.
Many eight to 29 point non percent in Italy monsters retail market share in value as compared to the same period. The previous year declined from 38, 7% to 37.7 cities of about 5% in Greece and from 26% to 18, 7% in Poland.
According to Nielsen in the 13 week period until the end of May 'twenty twenty-three privileges retail market share in value as compared to the same period. The previous year grew from 26, 3% to 31, 5% in Kenya and from 15, 4% to 19 point to 8% in Nigeria.
According to IRI in Australia monsters market share in value for the four weeks ending July nine 2023 increased from 14.1% to 16.9% as compared to the same period the previous year mother's market share in value decreased from 10, 4% to 10, 43%.
According to IRI in New Zealand monsters market share in value for the four weeks ended July nine 2023 increased from 12, 6% to 14, 9% compared to the same period of the previous Europe lift plus's market share in value decreased from six 5% to five 6%.
Mother's market share in value remained at five 3%. According.
According to indulge in Japan in the month, ending June 2023 monsters market share in value in the convenience store channel as compared to the same period the previous year declined from 56, 7% to 55, 1%.
According to Nielsen in South Korea in the month, ending June 2023 monsters market share in value in all outlets combined as compared to the same period the previous year decreased from 59, 9% to.
57, 6%.
We again point out that certain market statistics that cover single months or four week periods may often be materially influenced positively and negatively by promotions or other trading factors. During these periods.
Sales to customers outside the U S with $715 4 million.
But he eight 6% of total net sales.
In the 'twenty to 'twenty, three second quarter compared to 649 million well city nine 2% of total net sales in the corresponding quarter in 2020 to foreign currency exchange rates had a negative impact on net sales in the U S.
U S dollars by approximately $38 4 million in the 'twenty to 'twenty three second 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 'twenty to 'twenty three second quarter increased 13% in dollars and increased 16, 4% in local currencies over the same period in 2022 gross profit in this region as a percentage of net sales for the second quarter was 34% compared to 26, 7% during the <unk>.
Same quarter in 2022.
We are pleased that in the 2023 second quarter Monster gained market share in Belgium, Czech Republic, Denmark, France, Germany, Great Britain, Italy, Norway, The Republic of Ireland, Spain and Sweden.
In Asia Pacific net sales in the 2023 second quarter increased 17, 8% in dollars and increased 26, 7% in local currencies over the same period in 2022.
Gross profit in this region as a percentage of net sales was 42, 4%, which was 44% over the same period in 2022 net sales in Japan in the 'twenty to 'twenty three second quarter increased 11, 9% in dollars and increased 21, 2% in local currency.
South Korea net sales increased 53% in dollars and increased 59, 5% in local currency as compared to the same quarter in 2022 months to remains the market leader in Japan, and South Korea and.
In China net sales in the second quarter increased three 7% in dollars and increased 10, 6% in local currency as compared to the same quarter. In 2022, we remain optimistic about the prospects for the Monster brand in China in the 2022 second quarter distribution partners restocked in.
Inventories following the easing of the COVID-19 restrictions in China.
In Oceana, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea, and Guam net sales increased 26% in dollars and 36, 4% in local currencies in Latin America, including Mexico, and the Caribbean net sales in the 2023 seconds.
Increased 0.1 of a percent in dollars and increased nine 4% in local currencies over the same period in 2022 in Brazil net sales in the 2023 second quarter increased by two 5% in dollars and three 6% local currency net sales in Mexico increased 23 three.
Presenting dollars and 10.1% in local currency in the 'twenty to 'twenty three second quarter net sales in Chile decreased 23, 8% in dollars and decreased 26, 6% in local currency in the 'twenty to 'twenty three second quarter. The decrease in sales in Chile were due in part to a norm.
Amortization of bottler inventory levels.
In Argentina decreased 19, 5% in dollars, but increased 54% in local currency in the 'twenty to 'twenty three second quarter.
We will now provide an update on our litigation with vital Pharmaceuticals, Inc, which will be referred to as V. P X. The form a maker of Bang energy drinks. We previously discussed the trademark infringement arbitration in which an arbitrator found against V. P X and awarded Monster Energy company or M. A C and Orange Bang 100.
$75 million in damages attorneys' fees and costs and an ongoing 5% royalty on future sales of certain Bang energy products V. P X as appealed the judgment. We also previously discussed the false advertising case in the United States District Court for the Central District of California, which the jury returned a verdict.
M. A C approximately $293 million in damages and the district court granted M. A c's motion for a preliminary injunction enjoining V. P X and former CEO , Jack I walk from fall asleep, deceptively, claiming that bang or any other beverages containing creatine or a form of creatine.
V P X inject a walk appeal the injunction the bodies have completed briefing on remaining post draw issues on October 10, 2022 V. P X along with certain of its domestic subsidiaries and affiliates filed for protection under chapter 11 of the bankruptcy code Indian Nodded States District Court for the Southern District.
Florida on June 28, 2023 V P X and certain affiliates entered into an asset purchase agreement with the company, which among other things provided for the company's acquisition of substantially all of <unk> assets the transactions contemplated by the asset purchase agreement closed on July 31.
2023 at which time the company was deemed to have allowed general unsecured claims in V. P. Exit bankruptcy case relating to the Arbitration Award and the Jury's award subject to the potential modification of the jury award and the launch of pending post verdict motions filed by M. A C N V P.
The asset purchase agreement also includes a mutual release between V. P N and M. A C, which among other things requires V. P X to dismiss its appeals of the trademark infringement arbitration and the false advertising case as well as cases that V. P X for all the games to M. D C. Indianapolis States District court for the southern industry.
To Florida now.
This mutual release does not include any claims the company might have against most of our work.
In relation to that jury award the company will not recognize the allowed general unsecured claims all the jury award.
As it relates to Mister outlook until they are realized or realizable.
We'll not be answering questions on these legal proceedings on today's call.
In June 2023, the company also entered into an agreement with Orange banking regarding the company's use and registration of certain bank trademarks and trade names subject to the successful closure of the asset purchase agreement under this agreement the company will pay Orange Bank, Inc. A one time payment of approximately 12.5.
$5 million and a 2.5% royalty on all future sells products bearing the trade name Bang.
On June said, he one 'twenty two 'twenty three we completed.
Our acquisition of substantially all of the assets of Watson Pharmaceuticals, Inc.
July July that sorry, sorry, sorry apologize on July 31, 2023, we completed its acquisition of substantially all of the assets of vital Pharmaceuticals, Inc. And certain of its affiliates collectively Bang energy for a purchase price of approximately $362 million subject to adjustments the acquired assets.
Bang energy beverages, and the beverage production facility in Phoenix, Arizona, We successfully recruited a limited number of former V. P. Ex employees to full certain open positions within monster as well as the majority of the team at the manufacturing site in Phoenix pursuant to monsters obligations with the Coca.
The company Bang energy will be distributed through the Coca Cola Bottler network, starting with the United States in the 2023 third quarter as a result, there will be a temporary disruption of the product supply of Bang energy brand energy drinks. Additionally, our intention is to rationalize bank product offer.
Rings and product lines and to fully integrate bang into the monster infrastructure, we do not intend to manufacture or sell banks other product lines, such as red line or shots beyond liquidating existing inventories at this time, we may consider reintroducing certain of those product lines sometime in the future.
We are excited about our acquisition of the stage of the odd Bang energy production facility in Phoenix, Arizona, which we intend to utilize full bank as well as other products in the monster portfolio as.
As we only completed the acquisition. This week. It is still early days and we will provide you with further updates on Bang energy on our next investor call in November .
In the first half of 'twenty to 'twenty three we launched the Beast unleashed, which is now available in 28 states through a network of beer distributors. We are pleased with the early results and are continuing to expand distribution with the goal of being national by the end of the year.
According to Nielsen scan data the Beast unleashed is currently one of the top new brands in the beer category in 2023.
We plan to launch a hard ice tea extension of the Beast unleashed named Nasty Beast hardcore T. Later this year or early next year with the goal of national distribution in the first half of 'twenty 'twenty four the brand will have full flavors original half-and-half Razzle Berry and green.
Nasty Beast hardcore tea will be available in 24 ounce single serve cans as well as in a variety 12 pack in 12 ounce sleek cans.
Read refresh the dials and double Dallas beer brands in the first half of 'twenty to 'twenty, three and introduced dials American light Lager is part of the refresh the brand family has performed well since the refresh.
Hi, Leigh brand family is the largest in our beer portfolio.
From skull City is also performing well despite the overall headwinds in the crop segment and it's showing in growth in retail scans alcohol beverage innovation pipeline is robust and we look forward to sharing use of additional new products in the future.
In the 'twenty to 'twenty, three second quarter in the United States, we focused on gaining distribution.
On our first quarter product innovation.
Following the success of our recent months to energy zero Sugar launch, we are planning to launch naus zero sugar in 16 ounce cans in the 'twenty to 'twenty three or fourth quarter.
In the 20th twenty-three second quarter, we expanded our Java Monster portfolio in Canada with the launch of Java Monster 300, Triple shot Mocha and vanilla.
We launched several new products in Latin America in the 'twenty to 'twenty three second quarter in Argentina, We introduced a monster reserve brand with the launch of reserve what pineapple in June in.
In the Caribbean and we continued to expand our portfolio and introduced a number of new products in different countries.
After we successfully launched Java Monster Super Coffee mean, bean and Loca Moca in Australia earlier. This year, we expanded the launch of such products to the New Zealand market in the 'twenty to 'twenty three second quarter. We're pleased with early results in both markets.
In EMEA in the second quarter of 'twenty to 'twenty, three we launched Monster reserve Watermelon, and what pineapple Ultra gold Ultra Fiesta Mango Ultra Paradise, Ultra Rosa Altra watermelon juice to also eliminate and juice chaotic and a number of countries.
During the 2023 second quarter. We also launched additional Skus of V. P. M Byrne, nor loop predator and reign in certain countries, we launched Monster energy brand in Egypt in June 2023 to add to privilege, our which we launched earlier this year in Egypt.
In EMEA as part of an ongoing Pan EMEA launch, we expanded the distribution of our Monster Energy Lewis Hamilton 44 zero sugar energy drink to an additional eight EMEA markets in the second quarter of 2023 for a total of 35 markets to date.
During the.
The second quarter of 'twenty to 'twenty, three we launched Monster Reserve Watermelon in Japan, and Monster Ultra Sunrise in Korea, and Monster Reserve Pineapple in Turkey, We launched predator in additional regions in India. We are planning to introduce the privilege of brand in additional countries in APAC.
Check.
In the course of 2023.
In July 2023 launched Monster Ultra Peachy-keen in Japan, and prejudice in Iraq Monster energy will be launched in the Philippines later this year.
We estimate that on a foreign currency adjusted basis, including the alcohol brand segment July 2023 sales were approximately $13, 7% higher than the comparable July 2022 sales and 12% higher than July 22, excluding the alcohol brands segment.
We estimate July 2023 cells, including the alcohol brands segment to be approximately 12.1% higher than in June than in July 'twenty, 'twenty, two and 11, 2% higher than in July 2022, excluding the alcohol brands segment July 2023 had the same number of sitting.
Days is July 2022.
This regard we caution again 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 and the timing of price increases and promotions in retail stores distributor incentives as well as <unk>.
Shifts in the timing of production.
In some instances our bottlers are responsible for production and determine that are unproductive and schedules. This affects the dates on which we invoice such bottlers. Furthermore, our bottling and distribution partners maintain inventory levels. According to their own internal requirements, which they may also from time to time for their own business reasons.
We reiterate that sales over a short period, such as a single month should not necessarily be imputed to regarded as indicative of results for a full quarter or any future period.
In conclusion, I would like to summarize some recent positive points.
First the energy category continues to grow globally.
Second we are pleased to report that our pricing actions, which have been implemented to partially mitigate inflationary pressures have not significantly impacted consumer demand third IFA flavor facility in Ireland is not providing a large number of flavors.
Two our EMEA region, enabling better service levels and lower landed cost to our EMEA region.
Fourth we already sushi ethic for 2023 new product innovations, notably Monster energy zero Sugar Altra, Strawberry Dreams, rainstorm and to award in United States and Monster Energy Lewis Hamilton 44 zero sugar in EMEA.
Fifth we are pleased with the early results from the launch of the Beast unleashed, we are continuing to expand distribution with the goal of being national by the end of the year. Six we are excited about the launch of Nasty Beast hardcore T. Later this year or early next year with the goal of national distribution in the first half of 'twenty.
24, as well as the additional alcohol opportunities that the Kentucky acquisition presents.
Kevin.
We are pleased with the initial results of our launch of rain storm a new line of total wellness energy drinks eight we are pleased with the rollout of printers in theory are affordable energy drink portfolio internationally, we are proceeding with plans to launch our affordable energy brands and the number of additional number of international markets non <unk>.
We are excited about the opportunities that the acquisition of the Bang energy brand presents to us and believe that the brand will fit well within our broader portfolio of energy drink brands I would like to now open the floor to questions about the quarter.
Thank you.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone, if you're using a speakerphone. Please pick up your handset before pressing Nicky.
If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
In the interest of time.
We allow one question on me if you have a follow up you can rejoin the queue.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from Peter Grom with UBS. Please go ahead.
Thanks, operator, and good afternoon, guys hope you're doing well so I wanted to pick up on the gross margin commentary and just get a sense of how the quarter came in versus your expectations. This is the first time, we haven't really seen a sequential improvement on gross margin and about a year.
And I know you mentioned promotions I think you've talked about.
Other costs back into shareholder meeting, but can you maybe just talk about how you see the drivers of gross margins evolving through the balance of the year should we still expect to see sequential progression from here and then maybe bigger picture.
I'll frame, where we are on the long term margin recovery journey. Thanks.
Debated the difficult answer to your question is that you you know, we really don't give guidance.
If we look at this quarter that we just reported.
You know we.
Spoke about some of the drivers behind the improvement in gross margin, but against that you know we did have continued increases and I've said this in previous quarters in certain ingredients and other input costs as well as Kodak So.
So thats the fact.
That will stay with US and then we have another obviously issue that we spoke about and that is.
Geographical sales mix as we sell more product overseas.
Oh the margin.
It reduces overall the percentage gross margin reduces overall and then.
As you look at the the alcohol business building.
The gross margins from that side of the business or less than the gross margins that we enjoy.
In the in the energy drink sector. So you've got you've got pluses and minuses.
The alcohol brands, you'll see in the in the Q that will be released in the data.
The alcohol brands was $60 million of sales.
That margin is lower and we reported it has been lower than in the rest of the business.
Overall, there is very.
It really is a mix and then the bank product coming in we expect that the <unk>.
<unk> product will.
Have the <unk>.
Margins as the kind.
Kind of ultra products in our own portfolio the rain products. The ultra product and then that will improve margin. So overall, there's a we've got a mix.
Of Oh positive items that are benefiting gross margins and those items that are detracting from gross margins.
The next question comes from Andrea <unk> with J P. Morgan. Please go ahead.
Thank you and good afternoon.
Can you comment on what you're seeing in the energy category demand perspective.
Consumer standpoint, and then related to that obviously congrats on the on the acquisition of bank.
How are you planning to lean even more into these wellness energy category.
The organic growth through the house Duena innovation rainstorm in particular continues to grow fast, but now being adds more president seems to that into that sub segment. So why are you why do you can share at this point I know youre going to see them more in the next earnings call, but can you talk about how you can participate even more.
In that category.
And if I can squeeze just a clarification about Brazil, and Latin America I think acts.
Mexico continues to do well, but I was surprised to see a deceleration I know its tough comparison way to gain a lot of share in Brazil, but just to make sure that we we got those points. Thank you.
So if I talk about.
The energy category as such and we started looking at the one week data because the the community it looks as though Henry's data and the energy category is still growing.
In good double digits, 13% in the last week. So we are seeing.
We're seeing a good increase in the energy category.
And as we look at traditional energy and wellness energy and performance energy, obviously, you've seen kind of differences with within those segments.
Interesting the banks started of lives as a.
Very much performance energy.
And today, if you if you look at the brand and you analyze what it stands for really stands for a different segment, which is really lost on energy.
So you've got all these different.
Brands that all fitting different needs within the energy space.
Traditionally energy is still growing.
I did a quick analysis and.
The traditional energy is still growing and the number I'm looking at is around 10%.
You've got these other eagle wellness energy and obviously, we are participating in that in that segment with rainstorm with which.
Which we are really excited about and then performance energy, where we had rain, which is doing very well the difficulty in in.
Really getting deep in.
Deep dive into performance energy is that the bank brand has suffered because its loss so much distribution.
And that's a factor there obviously is driving that segment of the of the market.
And then.
Could you just turning to Brazil and Chile.
Yeah.
The energy category in those countries really grew very rapidly and we grew extensively within those those two countries, but there has been we've seen a little bit of a slowdown.
And in growth in in both Brazil and in Chile.
We as you can see from the numbers that we reported we are still market leaders. So.
It's something that is part of a <unk> business within it.
Brazil and in Chile, and are we maintaining our market share and we had.
Product issues in Chile, which have now been which have now been sorted we're bringing product from Mexico. We are now able to produce locally in Chile, but the market has taken.
Somewhat of a slowing in growth and you know.
We've been as a market leader, we've been part of that as well.
The next question.
Comes from Philip Falcone.
Please go ahead.
Hey, good afternoon, everyone.
Clarification on the bank acquisition. So first can you provide us with like a the last 12 months sales for the brand.
And then a bigger picture like how are you guys planning to position the brand in the U S. What consumers are you going after and then internationally you mentioned the transition to the Coke system in the U S. You plan that all sorts of trends, you're seeing internationally and if you can give us any timeline on that thank you.
Maybe I'll.
Just comment a little bit just pretty.
Pretty much Hilton I think covered most of this in his in his last answer.
But you know we we we are able to look at the brands if you've seen what how the bank brand has in fact developed it was originally in the black can focused sort of focus on on on competing with monster and.
They went to a colored cat and then more recently it went to a white cat and then that what Ken has gone through in the U.
The transition as well. So you then got Ryan, which isn't a black cat and then you've got rain storm, which isn't a 12 ounce Watkins and so we have we see a different way of separating.
Separating the brands.
Marketing them differently and positioning and we think they can all basically fit within our broader portfolio completely separate to two naus, which is very much a motorist sort of brand full throttle and and monster. So if you look at that that packaging. We that's how we do it we're going to.
Probably change that should.
Change the packaging slightly of bank brand, but he will remain principally a watch.
Can and 16 ounce and so we feel that there is a way, which we the all these <unk>.
Hands can play quite you know with each other within within our portfolio.
The next question comes from Peter Galbo with Bank of America. Please go ahead.
Hey, guys. Good afternoon, thanks for taking the question.
I guess, if I can just just to follow back up on Peter Graham's question and I understand you don't give guidance around gross margin I guess as we looked at it on a gross profit per case basis.
You were actually kind of flattish sequentially. So ignoring that the percentage of I'm looking at the dollars is that at all.
The way to think about the go forward is just as you're managing.
You know managing gross profit competes on a dollar basis relative to the margin thanks very much.
So we always look at gross profit per case, when we launch a product.
That's very much.
Part of it.
The way that this company has always examine new product introductions. So.
No youll costs that phrase has been something that we've reached full for any number of years.
So as we go forward with new products with new innovation.
Even for example, with a bank acquisition, knowing the cost is vital to really being able to position our product within our portfolio, obviously some products.
Lower gross profit per case like for example, the coffee products, but they are an important part of it.
All of our portfolio so as we examine products and we examine where we are we always have to look at what we are delivering.
To consumers to meet their needs within the overall.
But of all the other.
Product portfolio no when we went into energy into.
Alcohol I'm, sorry, we went and gel coal with our eyes wide open we knew the margins that were in alcohol would be lower than the margins in the energy drink category.
So we look at it.
Margin I've always said this on calls I'll say, we bank dollars, we don't bank percentages and I've always encouraged.
And then two just think likewise, we don't bank percentages, we bank dollars.
The next question comes from Chris Carey with Wells Fargo Securities. Please go ahead.
A handle on how are you doing.
Sure.
So just a one one.
A quick follow up there.
And then just.
Kind of like a capital allocation question, but would.
Would you mind, providing the Latin American gross margin on the quarter.
I, probably missed it or not I'm not sure you gave it but that would be helpful and just on Latin America in general is there a temporary disruption that we're working through or.
Is what we're seeing underlying demand.
So just just those two follow ups.
And then I really.
This is a multi part question I could probably get in trouble, but just from a capital allocation standpoint, when can you start buying back stock again, thanks, so much.
Yes.
Talk a little bit about Latin America remember, we sell to the distributors.
And the distributors sell to the resellers.
And as the.
Demand is somewhat reduced at retail the distributors cut back their inventories so they over inventory laws. They cut back and Unfortunately, we were the recipient of what happens in the distribution channel.
So oh.
As I said all of these issues.
Will will resolve themselves because you have these cutbacks, but then we go to a more orderly situation, we should go to more lease situation in future quarters.
And that's that's where we are that's really our net in America. The brand is still as I said very strong.
We market leaders in Argentina with market leaders in Brazil, the market leaders in Chile is very big markets and market leaders in other countries as well so that's that.
On to do that and then.
What I would ask you to do is.
Listen to the conference call because I don't want to repeat numbers that we've already said, we're already running out of time, the key will be odds in in two days and that should answer your questions on Latin America.
Our next question comes from Bonnie Herzog with Goldman Sachs. Please go ahead alright.
Alright, Thank you hi, guys.
I just wanted to quickly circle back on gross margins and see if you could share.
What impact on orbit issue that you highlighted during our shareholder meeting.
And whether they should.
I'll just ask me and I just want to confirm that you guys are now back working with them on that.
Bonnie.
There always will be anomalies and we are in the middle of summer as you know and it's been pretty hot out there and we're doing our very best to stay within our orbit, but.
There are anomalies from time to time in our mission in this company has always been to satisfy our customers. So yes, there will be.
We are maintaining.
Within our business, but.
There are times, when we will and we do straight from that.
This concludes our question and answer session I would like to turn the conference back over to Mr. Rodney sacks for any closing remarks.
Thanks, very much on behalf of the company I'd like to thank everyone for their continued interest.
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 capitalizing on our relationship with the Coca Cola Bottler system. We believe that we are well positioned in the beverage industry and continue to be optimistic about the future of our company. We hope that you all remain safe and healthy and have a enjoyable summer. Thank you very much for your attendance.
The conference has now concluded. Thank you for attending today's presentation you may all now disconnect.
[music].
[music].
[music].