Despite pandemic headwinds, can shortages and supply chain disruptions, Monster Energy Corp. saw net sales rise 33.6% to $1.46 billion in Q2, according to an earnings report this week.
Second quarter net income rose 29.7% to $403.8 million and net income per diluted share was up 28.6% to $0.75 per share. Gross profit as a percentage of net sales was 57.2%, compared to 60.3% in Q2 2020, with the decline resulting from increased materials costs and geographical sales mix. As of June 30, the company reported it had $1.58 billion in cash and cash equivalents, $969 million in short term investments and $91 million in long-term investments.
Net sales for Monster Energy and Reign branded products were up 33% in the quarter to $1.37 billion, while its strategic brands segment (including NOS and Full Throttle) grew 45.9% to $86.9 million. Sales for its “Other” segment, including American Fruits and Flavors, LLC products, grew to $7.9 million in Q2.
Operating expenses in the quarter were $310.9 million, up from $252.2 million last year. Net income rose 29.7% to $403.8 million.
The growth came in the face of fulfillment issues in the U.S., Europe, the Middle East and Africa, largely due to the aluminum can shortage. In a press release, vice chairman and co-CEO Hilton Schlosberg said Monster has secured a surplus of cans from the U.S., South America and Asia with deliveries expected to increase “sequentially during the latter half of the year.” However, a shortage of shipping containers does threaten to delay the arrival of the imported cans.
“To meet such increased demand, we experienced freight inefficiencies in the United States and in [Europe, the Middle East and Africa], which resulted in increased costs of sales as well as increased operating expenses in the 2021 second quarter,” Schlosberg said in the release. “We are continuing to experience increased input costs including from aluminum.”
According to Nielsen, dollar sales for the energy drink category in MULO and convenience rose 14.2% in the 13-week period ending July 24. In that period, Monster dollar sales increased 11.1% and Full Throttle rose 7.9%, while Reign fell 6.1%, NOS decreased 4.1%.
During a call with investors and analysts yesterday, co-CEO Rodney Sacks also announced that Monster has won a lawsuit filed in March 2019 by VPX Pharmaceuticals, the maker of Bang, which alleged that Monster had stolen Bang’s trademarks and trade dress when it launched fitness energy drink Reign. A trial was held last year and on August 3, Sacks said the court issued an order “denying all of VPX’s claims and holding that VPX is entitled to no relief whatsoever.”
“Monster always believed and maintained that VPX’s claims were frivolous, and we are extremely pleased that the court rejected all of VPX’s claims while vindicating Monster’s rights,” Sacks said on the call.
Sacks also announced several new product innovations, including the rollout of True North, a new line of organic plant-based energy drinks in 12 oz. sleek cans. The brand includes added ingredients for immunity support and will be available in six flavors including Cucumber Lime, Black Cherry, Grapefruit Lemonade, Watermelon Mist, White Peach Pear and Mandarin Yuzu. According to Sacks, the line is receiving a limited rollout now but Monster will move to expand the products into mainstream channels next year.
The True North announcement comes on the heels of the launch of Monster Ultra Fiesta, a 24 oz. line extension, in May. As well, Sacks said the company has delayed its launch of Java Monster Cold Brew Coffee+ until early 2022.
Analysts reacted positively to the earnings, with Goldman Sachs Equity Research reporting that the results “exceeded our bullish expectations.” Credit Suisse noted that Monster’s ability to capture “the energy drinks rebound in spite of serious global logistical obstacles” underscored its ability to “execute under pressure.” Both firms were optimistic that supply issues will normalize during the fourth quarter, putting the company in a strong position as it prepares to launch new products next year.