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    Monster Beverage Corp (MNST)

    Business Description

    Monster Beverage Corporation, headquartered in Corona, California, is a holding company that develops, markets, sells, and distributes a variety of beverages through its subsidiaries . The company's product offerings include energy drinks, craft beers, hard seltzers, flavored malt beverages (FMBs), and still and sparkling waters . Its energy drink portfolio features well-known brands such as Monster Energy®, Monster Energy Ultra®, Java Monster®, Reign Total Body Fuel®, Bang Energy®, and NOS® . The company operates through four main segments: Monster Energy® Drinks, Strategic Brands, Alcohol Brands, and Other .

    1. Monster Energy® Drinks - Develops and markets energy drinks, including Monster Energy® and Reign Total Body Fuel®, which are the primary drivers of the company's revenue .
    2. Strategic Brands - Includes brands acquired from The Coca-Cola Company and affordable energy brands like Predator® and Fury®, contributing to the company's diverse energy drink portfolio .
    3. Alcohol Brands - Offers craft beers and flavored malt beverages (FMBs), expanding the company's presence in the alcoholic beverage market .
    4. Other - Involves products sold by American Fruits and Flavors LLC to third-party customers, adding to the company's product diversity .

    Q3 2024 Summary

    Initial Price$50.04July 1, 2024
    Final Price$51.59October 1, 2024
    Price Change$1.55
    % Change+3.10%

    What went well

    • Management believes that consumer demand has bottomed out and expects a recovery in sales, indicating confidence in future growth prospects.
    • Recent Nielsen data shows an upward trend in the energy drink category and Monster's sales, suggesting a positive shift in market dynamics.
    • Despite facing increases in commodity costs like aluminum and sugar, the company considers these impacts manageable, supporting stable future margins.

    What went wrong

    • Significant increases in commodity costs, particularly aluminum and sugar, are expected to negatively impact Monster Beverage Corporation's margins.
    • The company cannot determine the extent to which recent sales increases are due to advanced purchases ahead of price increases, introducing uncertainty in sales data and forecasting.
    • Consumers are reducing energy drink consumption, drinking one less per week, which may indicate a potential decrease in demand.

    Q&A Summary

    1. Recovery of the Energy Drink Category
      Q: How is the energy drink category performing currently?
      A: Management believes the energy drink category has reached the bottom and is showing signs of recovery, with latest Nielsen data indicating category growth of 1.9% over the latest 13-week period, 3.2% over 14 weeks, and 3.7% in the latest week. Improved macroeconomic conditions, such as a recent rate cut and the conclusion of the election, are expected to boost consumer confidence and foot traffic in convenience stores, which comprise 62% of energy drink sales.

    2. Impact of Price Increases and Demand Elasticity
      Q: What is the effect of recent price increases on demand and promotional activity?
      A: Management is assessing the impact of recent price increases on demand and determining the elasticity before deciding on any promotional activities. They note it's challenging to answer precisely at this time due to factors like buy-ins and the impact of hurricanes.

    3. Gross Margins in EMEA
      Q: How are gross margins trending in EMEA, and can they return to 2021 levels?
      A: Gross margins in EMEA have been improving each quarter, and management is optimistic about further improvement due to pricing actions and the upcoming juice plant production early next year. While uncertain if margins will return to 2021 levels, they are positive about the trend.

    4. Advanced Purchases Before Price Increase
      Q: Was there an impact from advanced purchases ahead of the price increase?
      A: Unlike previous years, it's difficult this time to determine the impact of advanced purchases ahead of the price increase because the favorable pricing was cut off mid-October, making it complex to assess any effect on October sales.

    5. Commodity Costs and Inflation
      Q: What is the outlook on commodity costs and inflation?
      A: Management notes significant increases in commodity costs, particularly aluminum due to tariffs, and sugar. They actively manage and hedge aluminum exposure using a ladder strategy to mitigate price volatility.

    6. Impact of Innovation on Consumption Trends
      Q: How is innovation affecting category growth?
      A: While innovation drives consumption, recent product launches had limited impact as the latest innovation (one SKU) only reached shelves towards the end of October. Management doesn't believe innovation has significantly influenced recent trends yet.

    7. Inventory Levels and Distributor Orders
      Q: How are inventory levels affecting sales figures?
      A: The company fulfills orders based on distributor requirements, which are informed by consumption data and other factors. They haven't observed inventory hiccups like some competitors and execute orders as per customer demand.

    Key Metrics

    View all financials →
    Revenue by Segment - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Monster Energy Drinks1,561.71,686.91,708.21,598.36,555.11,729.11,742.81,722.7
    Strategic Brands86.499.798.891.7376.6108.4109.2112.6
    Alcohol Brands46.361.142.335.2184.956.141.639.8
    Other4.67.36.74.923.55.57.05.9
    Finished Products--------
    Concentrate--------
    DSD Segment--------
    Warehouse Segment--------
    Energy Drinks--------
    Non-carbonated--------
    Carbonated--------
    Total Revenue1,698.91,855.01,856.01,730.17,140.01,899.11,900.61,881.0
    Revenue by Geography - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    U.S. and Canada1,115.31,184.51,168.9641,141.344,610.11,206.11,198.2091,172.161
    EMEA308.1381.6391.883309.121,390.7395.6393.923417.588
    Asia Pacific131.0146.3127.267109.83514.4131.2145.088132.046
    Latin America and Caribbean144.6142.6167.914169.79624.9166.2163.377159.178
    - Net Sales Outside U.S.--------
    - Gross Sales Outside U.S.--------
    Total Revenue1,698.91,855.01,856.0281,730.077,140.01,899.11,900.5971,880.973
    KPIs - Metric (Unit)FY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Energy Drink Case Sales (Thousands of Cases)182,444198,406203,088185,304-211,430212,194219,409
    Average Net Sales per Case (USD)9.039.008.909.12-8.698.738.36
    Barrel Sales for Craft Beers, Hard Seltzers, FMBs (Millions of Barrels)0.150.20.15--0.200.150.14

    Executive Team

    NamePositionStart DateShort Bio
    Rodney C. SacksChairman of the Board of Directors and Co-CEONovember 1990Rodney C. Sacks has been serving as the Chairman of the Board of Directors since November 1990 and became Co-Chief Executive Officer in January 2021. He has extensive experience in the food and beverage industry .
    Hilton H. SchlosbergVice Chairman of the Board of Directors and Co-CEOJanuary 2021Hilton H. Schlosberg has been Vice Chairman and Co-Chief Executive Officer since January 2021. He was previously President, COO, and Secretary from November 1990 to January 2021, and CFO from July 1996 to January 2021 .
    Thomas J. KellyChief Financial OfficerJanuary 2021Thomas J. Kelly has been the Chief Financial Officer since January 2021. He previously served as Executive Vice President, Finance, and/or Controller and Secretary of MEC from 1992 to January 2021 .
    Guy P. CarlingPresident, EMEAJuly 2018Guy P. Carling has been the President of EMEA since July 2018. He joined Monster Beverage Corporation in December 2007 and has over 26 years of experience in the beverage industry .
    Emelie C. TirrePresident, AmericasJuly 2018Emelie C. Tirre has been serving as the President of the Americas since July 2018. She joined Monster Beverage Corporation in July 2010 and has over 32 years of experience in the beverage industry .

    Questions to Ask Management

    1. Given the significant increase in aluminum costs and the possibility of higher tariffs, how do you plan to mitigate these pressures on gross margins, and can you elaborate on the effectiveness of your current hedging strategies?

    2. With the recent implementation of price increases in the United States and internationally, have you observed any changes in consumer behavior or demand elasticity that could impact your sales volumes or market share?

    3. Could you provide more details on the $16.7 million provision related to the intellectual property claim involving the Hubert Hansen name, including any potential ongoing financial impacts or steps being taken to resolve the issue?

    4. In light of the $10.6 million in inventory reserves due to excess inventory levels in the alcohol brands segment, what specific measures are you implementing to improve inventory management and prevent similar write-downs in the future?

    5. Despite sequential improvements, gross margins in the EMEA region remain below 2021 levels; what targeted initiatives are in place to restore margins to historical levels, and what is your expected timeline for achieving this?

    Share Repurchase Program

    Program DetailsProgram 1Program 2Program 3
    Approval DateNovember 2, 2022 November 7, 2023 August 19, 2024
    End Date/DurationExhausted by September 30, 2024 Exhausted by September 30, 2024 Not specified, no shares repurchased as of November 6, 2024
    Total Additional Amount$500.0 million $500.0 million $500.0 million
    Remaining Authorization$0.0 million $0.0 million $500.0 million
    DetailsExhausted Exhausted No shares repurchased

    Competitors

    Competitors mentioned in the company's latest 10K filing.

    • Red Bull GmbH: Competes domestically and internationally with Monster's energy drinks, including non-carbonated Red Bull in China and Asia .
    • PepsiCo, Inc.: Competes with Monster's products and has a long-term distribution arrangement with Celsius Holdings, Inc. .
    • Keurig Dr. Pepper Inc. (KDP): Competes with Monster's products .
    • Rockstar: Competes domestically and internationally with Monster's energy drinks .
    • MTN Dew Amp and MTN Dew Energy: Compete domestically with Monster's energy drinks .
    • G Fuel: Competes domestically with Monster's energy drinks .
    • Venom: Competes domestically with Monster's energy drinks .
    • 5-Hour Energy Shots: Competes domestically with Monster's energy drinks .
    • MiO Energy: Competes domestically with Monster's energy drinks .
    • V8 + Energy: Competes domestically with Monster's energy drinks .
    • Uptime: Competes domestically with Monster's energy drinks .
    • hi*ball: Competes domestically with Monster's energy drinks .
    • CELSIUS: Competes domestically and internationally with Monster's energy drinks .
    • C4: Competes domestically with Monster's energy drinks .
    • Alani Nu: Competes domestically with Monster's energy drinks .
    • 3D Energy: Competes domestically with Monster's energy drinks .
    • ZOA Energy: Competes domestically with Monster's energy drinks .
    • GHOST Energy: Competes domestically with Monster's energy drinks .
    • Gatorade Fast Twitch: Competes domestically with Monster's energy drinks .
    • Prime Energy: Competes domestically and internationally with Monster's energy drinks .
    • Starbucks BAYA Energy: Competes domestically with Monster's energy drinks .
    • Guayaki Yerba Mate: Competes domestically with Monster's energy drinks .
    • Adrenaline Shoc: Competes domestically with Monster's energy drinks .
    • Accelerator Active Energy: Competes domestically with Monster's energy drinks .
    • Arizona Rx Energy: Competes domestically with Monster's energy drinks .
    • Bucked Up Energy: Competes domestically with Monster's energy drinks .
    • XYIENCE Energy: Competes domestically with Monster's energy drinks .
    • V-Energy: Competes internationally with Monster's energy drinks .
    • Lucozade: Competes internationally with Monster's energy drinks .
    • HELL: Competes internationally with Monster's energy drinks .
    • Amper: Competes internationally with Monster's energy drinks .
    • Shock: Competes internationally with Monster's energy drinks .
    • Tiger: Competes internationally with Monster's energy drinks .
    • Fearless: Competes internationally with Monster's energy drinks .
    • Boost: Competes internationally with Monster's energy drinks .
    • TNT: Competes internationally with Monster's energy drinks .
    • Shark: Competes internationally with Monster's energy drinks .
    • Dragon: Competes internationally with Monster's energy drinks .
    • Score: Competes internationally with Monster's energy drinks .
    • Sting: Competes internationally with Monster's energy drinks .
    • Hot 6: Competes internationally with Monster's energy drinks .
    • Suntory ZONE: Competes internationally with Monster's energy drinks .
    • Battery: Competes internationally with Monster's energy drinks .
    • Bullit: Competes internationally with Monster's energy drinks .
    • Flash Up: Competes internationally with Monster's energy drinks .
    • Black: Competes internationally with Monster's energy drinks .
    • Non-Stop: Competes internationally with Monster's energy drinks .
    • Bomba: Competes internationally with Monster's energy drinks .
    • Semtex: Competes internationally with Monster's energy drinks .
    • Vive 100: Competes internationally with Monster's energy drinks .
    • Dark Dog: Competes internationally with Monster's energy drinks .
    • Speed: Competes internationally with Monster's energy drinks .
    • Guarana: Competes internationally with Monster's energy drinks .
    • M-150: Competes internationally with Monster's energy drinks .
    • Lipovitan: Competes internationally with Monster's energy drinks .
    • Bacchus: Competes internationally with Monster's energy drinks .
    • Volt: Competes internationally with Monster's energy drinks .
    • Bolt: Competes internationally with Monster's energy drinks .
    • Mr. Big: Competes internationally with Monster's energy drinks .
    • Boom: Competes internationally with Monster's energy drinks .
    • Raptor: Competes internationally with Monster's energy drinks .
    • Amp: Competes internationally with Monster's energy drinks .
    • Fusion: Competes internationally with Monster's energy drinks .
    • Hi-Tiger: Competes internationally with Monster's energy drinks .
    • Eastroc Super Drink: Competes internationally with Monster's energy drinks .
    • Carabao: Competes internationally with Monster's energy drinks .
    • Power Horse: Competes internationally with Monster's energy drinks .
    • XL: Competes internationally with Monster's energy drinks .
    • Crazy Tiger: Competes internationally with Monster's energy drinks .
    • Effect: Competes internationally with Monster's energy drinks .
    • Missile: Competes internationally with Monster's energy drinks .
    • Nocco: Competes internationally with Monster's energy drinks .
    • Adrenaline Rush: Competes internationally with Monster's energy drinks .
    • Real Gold: Competes internationally with Monster's energy drinks .
    • War Horse: Competes internationally with Monster's energy drinks .
    • BLU: Competes internationally with Monster's energy drinks .
    • Eneryeti: Competes internationally with Monster's energy drinks .
    • GURU Organic Energy: Competes internationally with Monster's energy drinks .
    • Molson Coors: Competes within the FMB, hard seltzer, and craft beer categories .
    • Constellation Brands: Competes within the FMB, hard seltzer, and craft beer categories .
    • AB InBev: Competes within the FMB, hard seltzer, and craft beer categories .
    • The Boston Beer Company: Competes within the FMB, hard seltzer, and craft beer categories .
    • The Mark Anthony Group: Competes within the FMB, hard seltzer, and craft beer categories .