Though finishing slightly below some analyst expectations, Monster Beverage Company reported strong double-digit growth in its Q4 and full year 2023 earnings report yesterday, as improved expenses boosted gross profit even as headwinds from its alcohol business and Bang acquisition impacted results.
- Q4 net sales were up 14.4% to $1.73 billion, while full year net sales grew 13.1% to $7.14 billion.
- Gross profit margin rose to 54.2% in Q4 and 53.1% for the full year.
- Net income in Q4 improved 21.6% to $367 million; full year net income was up 36.9% to %1.63 billion.
- Competition in the energy category may be taking its toll: Monster’s market share in the convenience and gas channel, including energy shots, fell from 36.9% to 35.5%, excluding Bang. Including Bang, market share was 37%.
- Net sales of the core Monster Energy Drinks segment were up 15.1% in Q4, while alcoholic brands grew 30.6%.
Managing Costs
The company’s gross profit benefited in Q4 from decreased costs of freight and raw materials. On yesterday’s earnings call, co-CEO Hilton Schlosberg said that the company has seen some expenses improve as the price of aluminum and freight comes down, he cautioned that some other undefined “commodities” are increasing.
In January, the company initiated pricing increases across a number of markets and will continue to roll out price hikes throughout global markets this year. But for the U.S., Schlosberg said Monster is “waiting and evaluating.”
According to NielsenIQ, in the 52-weeks ending December 30, 2023, average pricing of Monster products in U.S. retail grew 6.7%.
“We run a very sizable business here,” Schlosberg said. “We have a number of customers that we deal with and we want to make the right decision. So we’re not saying no to a price increase, and we’re not saying yes to a price increase [at] this time. What we are saying is that we are honestly really evaluating and constantly evaluating the retail pricing environment. And if we believe there are opportunities, we will take them.”
Any future price increases will be within range of the rest of the category. Schlosberg noted that Monster aims for its pricing to keep within “a particular percentage of Red Bull pricing,” cautioning that “the minute we stray from that, we find that our market share really suffers.”
Co-CEO Rodney Sacks noted on the call that its pricing actions “have not significantly impacted consumer demand.”
Innovations Roll Out
Most of Monster’s 2024 innovation slate was announced last month during the company’s annual investors meeting. Some of those items are now on shelves across the country.
In the U.S., Q4 saw the launch of NOS Zero Sugar, and during Q1 2024 the company has rolled out two new flavors of Reign Storm (Guava Strawberry and Citrus Zest) with two more flavors (Apricot Strawberry and Mango) planned to hit the streets in March, which will bring the performance energy sublime to eight total varieties.
This month saw the introduction of Monster Energy Ultra Fantasy Ruby Red in 16 oz. and 12 oz. cans, Sacks noted. As well, the brand launched Monster Rehab Green Tea, Reign Total Body Fuel Sour Gummy Worm, Monster Juice Rio Punch, Java Monster Irish Cream and Monster Reserve Peaches and Cream flavors.
The earnings release made little mention of plans for Bang, aside from Schlosberg reiterating on the call the company’s points from last month’s investors meeting that Monster is continuing to regain old retail accounts that had dropped Bang during its bankruptcy turmoil last year.
Alcohol Ambitions Charge Ahead
Monster is continuing to emphasize its expansion into the alcohol sector, and during Q1 2024 the company renamed its CANarchy Craft Brewery Collective business to Monster Brewing Company, further aligning the core business with its ambitions in hard beverages.
Malt beverage brand The Beast Unleashed saw expanded distribution during Q4, Sacks said on the call, and is now available in 48 states through a network of beer distributors. The company has also begun rolling out the line in 24 oz. single-serve cans, an innovation announced during Monster’s annual investor’s meeting last month.
Nasty Beast Hard Tea also finally hit shelves last month and is now available in 40 states “with a goal of national distribution by midyear,” Sacks added. The line is available in four flavors in 24 oz. cans and variety 12-packs of 12 oz. cans.
However, the company did face increased costs from the alcohol brands segment, with Sacks citing impairment charges of around $39.9 million in Q4 “due in part to the continuing challenges in the craft beer and seltzer categories.”
Outlook Appears Positive
Although Goldman Sachs Equity Research said the results came in slightly below expectations, the firm remained positive on Monster’s earnings and future prospects. Goldman highlighted strong volume growth and the international pricing strategy as benefits for the business, as well as “upside from Bang.”
The firm has been repeatedly bullish on Monster’s purchase of Bang, which under Monster’s stewardship received a brand refresh last month, and argued that investors have “underappreciated” the potential Bang has to drive incremental growth for the company (projecting approximately 1.5 points of topline and 2 points of bottom-line growth this year).
Goldman was also positive on the company’s broader slate, stating Monster has “One of the best innovation pipelines we’ve seen in the past several years, and see upside from the continued roll-out of Monster Energy Zero Sugar internationally.”
Investment banking firm Jeffries also reacted positively to the earnings noting that Monster’s “Core energy [business] remains strong, the international opportunity is significant, and new growth vectors are underappreciated, setting the stage for robust earnings growth.”