Monster: Sales Rebounding, Despite Slow C-Store Recovery

Monster Beverage Corp. told shareholders at a meeting on Monday that energy drink sales are rebounding as the country begins to loosen restrictions related to the COVID-19 pandemic.

After falling around 15% in late March and early April, U.S. energy drink sales across all outlets increased 2.1% during the week ending May 16, according to sales data from Nielsen.

While several key metrics are trending positively for energy drinks, the speed at which velocities and retail foot traffic return to pre-pandemic levels is far from clear. As consumer behavior shifts towards stockpiling and large-format stores, that change is reflected in c-stores, a segment which generated $2.1 billion in category sales last year. Despite improving, Credit Suisse reported that category sales fell 1.7% in the week ending May 16, with Monster “slightly underperforming.” Overall non-alcoholic beverages sales were down 2.2% year-over-year through the week ending May 17 (compared to a 23.4% drop for the week ending April 12), according to third-party data cited by Goldman Sachs.

However, the brand has seen a stronger performance in e-commerce; according to Stackline, Monster grew its market share on Amazon from 41.7% over a four-week period ending May 16, up from 36.7% in April.

Analysts believe Monster may see near-term benefits as rival brand Bang completes its transition to PepsiCo’s distribution network, announced in April. In a recent survey of 22,000 c-store retailers nationwide, Goldman Sachs reported that approximately 55% of respondents indicated the transition was “likely to be disruptive” to Bang’s business performance, with Monster being the primary beneficiary. However, all retailers surveyed noted that Pepsi’s national distribution system and strong track record in getting products on shelves will ultimately see Bang recover any lost sales.

In that survey, around 41% of respondents said that Monster sales have accelerated since mid-April, compared to 65% for the category as a whole. Retailers also noted that they expect Monster’s sales to grow 3% this year. Credit Suisse projected that, despite estimating a 15% decline in sales for Q2, new innovations previously scheduled for earlier this year will help the company recover in the latter half of this year.

Monster’s expansion into international markets has also been encouraging, though “generally underappreciated by investors,” according to Goldman Sachs. Based on its analysis, Monster’s non-U.S. business is expected to exceed 50% by 2023 and drive company topline compounded annual growth 12% through 2025. While the company has made gains in Asia, which has begun to lift lockdown restrictions, in current COVID-19 hotspots in Latin America, particularly Mexico and Brazil, sales have continued to decelerate.

In response to the meeting, Goldman Sachs analysts wrote that they remain “bullish” on Monster stock. “We continue to see a favorable risk reward and see any [near-term] weakness as a buying opportunity.”