Monster Beverage Corporation continued to show resilience in the face of ongoing production issues in the first quarter of 2017. During an investor conference call on Thursday, the company reported net sales of $742.1 million, an increase of 9.1 percent over the same period last year.
Net sales for the company’s Monster Energy Drinks segment increased 8.8 percent in Q1 to $845.5 million as compared to $777.5 in 2016, while net sales for Monster’s Strategic Brands segment — which includes NOS, Full Throttle and several other energy drink brands gained under the company’s 2015 partnership agreement with Coca-Cola — were also up to $68 million as compared to $58.5 million for the same period in 2016.
On the conference call, Monster Chairman and CEO Rodney C. Sacks highlighted the company’s growth internationally, its continued progress in realigning its distribution with Coca-Cola bottlers, and the potential of its forthcoming new product innovations.
“We’re excited about the prospects for our new product launches,” he said. “We are pleased with our performance in our international markets and reiterate the growth potential for us in China, one of the largest energy drink markets globally.”
In a Wells Fargo Securities report issued earlier today, Bonnie Herzog, managing director for equity research, wrote that she “sees some encouraging signs” from Monster going into Q2, noting solid April gross sales growth of 10.6 percent and positive momentum for the brand internationally.
The numbers will be welcome news for Monster as it prepares for the nationwide launch of its new enhanced energy water product Hydro, which is slated for the end of this month after being pushed back from its original release date in March. Sacks said that Monster had begun limited deliveries of the beverage, which he described as a “non-carbonated, lightly sweetened energy drink,” to bottlers and full service distributors at the end of the quarter ahead of its launch at general trade at the end of this month.
Herzog, while noting she expected Hydro to be a relative success, tempered that prediction by pointing out that the product’s growth will be limited by the company’s capacity for manufacturing Hydro’s unique 16.9 oz. clear-walled PET can, which will will be exclusive to Monster in the U.S., and that delays may negatively impact shelf placement.
Much of the discussion around Monster over the last several months has surrounded the company’s big new product launch from last year, the neon green “super soda” Mutant, which was introduced to a select limited group of retailers last fall.
Sacks said that Mutant would be supported by a combination of increased marketing and sampling initiatives this year. In addition to in-store price promotions and sampling activities, he explained that Mutant would also be further integrated into Monster-backed properties, such as the Vans Warped Tour and Monster Jam motorsport events.
Sacks said the the company was beginning distribution of Mutant White Lightning, a zero-calorie version of the drink, in certain limited retailers prior to moving to the general market by the beginning of July. He said the line extension “will then give us better positioning on the shelf” and give consumers the choice of full or zero calorie options.
Herzog was less bullish about Mutant, noting persistently negative retailer feedback and weak tracked channel sales as causes of concern in the near-term.
Sacks also addressed the production issues that have been plaguing Monster’s retort products, such as Java Monster and Muscle Monster, and significantly impacting the company’s overall financial performance for several quarters. Net sales in the quarter were negatively impacted by approximately $12 million as a result of production capacity shortages.
“We anticipate that it will still be a number of months before production availability allows us to restore normal supply patterns and fully meet consumer demand that exists for these products,” he said, explaining that the company is working to reduce the shortfall by manufacturing certain flavors of Java Monster in Europe while waiting for additional U.S. production scheduled to come online early in the third quarter.
In a four-week period ending on April 22, sales of Monster Java were down 19.5 percent from the same period last year, according to Nielsen.
Herzog said that the issues around Java Monster will also affect Monster’s plans for Caffe, a Frappuccino-style product, which “won’t launch until later this year at best.”