Monster Reports Solid Q4 Sales, Talks “Strategic” Mutant Rollout

Monster Energy surprised analysts Wednesday with its unexpectedly solid Q4 financial results report, which showed the company’s net sales up 16.8 percent from the previous year to $753.8 million. Although CEO and Chairman Rodney Sacks noted on the earnings call that 2015’s Q4 sales were impacted by a pre-announced price increase that year, 2016’s numbers adjusted for the advance sales still produced a 14.8 percent net sales increase.

The report comes despite supply struggles with Monster Java and Muscle Monster costing the company an estimated $22 million in lost sales in the quarter. The problems stem from a lack of available retort production capacity in the U.S., according to Sacks, who said that it will be at least several months before capacity returns to normal.

Q4 also included what many convenience retailers and analysts saw as a botched launch of Mutant, Monster’s new “super soda.” Developed as a competitor to Mountain Dew the product debuted in September, however, according to a Wells Fargo Securities survey of C-store retailers, Monster offered little promotion or sales guidance to stores.

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Despite a rocky start, Sacks called the more questionable aspects of Mutant’s launch, such as limited promotion, a deliberate “strategic” decision and was optimistic about the new beverage’s first returns. He noted that Nielsen reported the line had the highest dollar share gain for single-serve soft drinks in the convenience channel over the 13-week period ending January 21. Mutant rolled out in select convenience store chains and Monster plans to expand distribution for 2017.

“We have strategically not promoted Mutant during the winter period, we are taking steps to deal with expanded distribution, we will obviously increase our promotion and other activities around the brand as we continue to go into spring and summer,” Sacks said. “When we look at the numbers and we look at the sales per point, we think the sales per point are pretty good in relation to a lot of the other well-established brands in the area.”

Some analysts, however, still remained skeptical about Mutant’s potential after the call, particularly as it is entering the market in a time when carbonated soft drink sales remain in decline.

“[Monster’s] growth has always relied on innovation to sustain strong double-digit top-line growth,” said Bonnie Herzog of Wells Fargo Securities. “However, we continue to have concerns in the near term about … Mutant, irrespective of [management’s] statements about the deliberately slow launch of the product given the concerns we have heard from retailers ahead of any March plan-o-gram resets.”

In addition to Mutant, Monster is also pushing several other new or previously limited products, including the hyped sports energy water Hydro, which will launch in late March or early April, Sacks said. Monster is also preparing to expand its Sam’s Club-exclusive Monster Energy Ultraviolet line to all channels and will launch Full Throttle Orange, both at the end of March.