Monster Energy continued to push the throttle in the accelerating energy category, reporting a 17.6% increase in net sales during Q4 2020.
The Corona, California-based brand has emerged from a challenging year in a strong position, beating analysts’ expectations on top and bottom line growth.
Net sales for the core Monster Energy products, which includes Reign Total Body Fuel, grew 17.7% year-over-year ($1.12 billion) in Q4 2020. Monster’s Strategic Brands segment increased net sales 14.8% ($67.9 million), while sales for it’s “Other” division, which includes certain products from American Fruits and Flavors, grew to $6.7 million.
A formulation issue on “a limited number of products” in Europe and a “labeling issue” in Japan on a single SKU caused the company to incur a negative impact of $15.2 million on net sales due to customer product returns. Net changes in foreign currency rates also had a negative impact of $7.1 million on overall net sales.
Gross profit as a percentage of net sales declined in 2020, dropping from 60% in 2019 to 57.7% last year. Co-CEO Rodney Sacks cited increased input costs and unfavorable geographical mix, which were partially offset by favorable product mix.
No shares of Monster were repurchased under the company’s previously authorized program. Approximately $441.5 million remain available.
During the call, the company shared a look into its recent performance across various channels and segments. According to Nielsen data from the four-week period ending February 13th, 2021, sales of Monster on Amazon increased 193.7%, its dollar share growing by 1.8 points (34.2%) versus the same period a year ago. The company’s dollar share of the energy drink category in c-stores and gas, rose 0.2 points to 39% during the time.
Analysts at Goldman Sachs were encouraged by Monster’s performance and innovation pipeline, despite mounting cost pressures related to aluminum can supply and transportation. So far this year, the brand has introduced new flavors for Reign and Monster Ultra, along with introducing four SKUs (Monster Green, low-carb Monster, Monster Zero Ultra and Monster Ultra Paradise) in 12 oz. slim cans targeted at c-stores and foodservice.
Monster Vice Chairman and Co-Chief Executive Officer Hilton H. Schlosberg offered no further details on Monster’s much-rumored potential entrance into alcoholic hard seltzers, restating that the company is “reviewing” the opportunity and “looking at where the category is going” prior to making any commitments.
However, Goldman Sachs analysts noted that, as of June 2020, Monster is no longer restricted via its distribution agreement with Coca Cola from launching non-energy beverages outside of the Coke bottling network. This has sparked speculation amongst the group’s retailer contacts that further non-alcoholic innovation may be coming this year, potentially a “clean/super-premium energy” product; during the earnings call, Scholsberg acknowledged that the space was one that Monster was “addressing and looking at.”
Based on its strong start to sales this year (+18.2% year-over-year in January), Goldman Sachs is adjusting its forecast for Q1 2021 from +8.4% to +20.2%.
“Overall, we remain bullish on the stock and are encouraged that Monster has a robust innovation pipeline this year, which should drive incremental shelf space,” analysts reported this morning.
Credit Suisse was equally positive on Monster, writing that the company is “gaining share in [a] faster growing category behind a retooled retail execution team, a robust innovation pipeline, and an international expansion story that delivers both growth and profitability.” Analysts reiterated their projection of 14% organic topline growth for this year.