Monster Beverage Corp. struggled to overcome weak sales growth for its energy drinks in Q2, while its nascent beverage-alcohol division also took a step back.
In prepared remarks Wednesday, Monster Vice Chairman and Co-CEO Hilton Schlosberg admitted that energy drinks “experienced lower growth rates” in Q2 as consumers have turned away from c-stores in search of higher-value channels like mass and dollar.
In response to a question from Morgan Stanley analyst Dara Mohsenian, co-CEO Rodney Sacks blamed persistent inflation for the downturn in consumer spending and c-store traffic, describing the situation as “actually relatively unprecedented.”
“It’s kind of a situation where we are a blue collar brand, and our consumers are more hard pressed than consumers in other categories,” he said.
Still the company reiterated its previously stated intention to raise prices 5% this November. When asked if the planned increase aligned with the needs of Monster’s “more hard pressed” consumers, Sacks defended pricing as “relative to other beverages that we would regard as comparative.”
“We [have] had one increase in the last two years and our competitors in the ready-to-drink beverage space have had multiple,” he said, according to a transcript of the call. “So we still see it as an opportunity and we think it is something that we should pursue and move forward with.”
The Corona, Calif.-based company’s quarterly earnings report showed net sales increasing 2.5%, to $1.9 billion. Within its RTD Energy Drinks segment – its core Monster line, plus Reign Total Body Fuel, Reign Storm, Bang Energy and Monster Tour Water – rose +3.3% from the same period last year to $1.74 billion.
Monster’s soft sales are part of an overall slowdown in energy drinks – net sales are up just 0.6% in the 13-week period ended on July 20, per NIQ data cited on the earnings call, with core Monster (-3%), Bang (-2.5%) and Reign (-0.5%) all experiencing downturns.
Monster’s Alcohol Brands segment – which includes The Beast Unleashed, Nasty Beast Hard Tea, and various craft beers and hard seltzers – also took a hit, with decreasing FMB volumes pushing net sales down -31.9% to $41.6 million, from $61 million in Q2 2023. The company reported a write-down of around $8.1 million related to brewery closures in the quarter.
In late May. The company announced it would shutter its Deep Ellum Brewing taproom and brewery in Dallas, shifting production to the company’s other breweries.
Twenty-five employees’ positions were eliminated due to the closure.
Earlier this year, Monster transitioned Cigar City’s Tampa, Florida-based production hub into a cross-category innovation center, resulting in the termination of 12 positions. In November 2023, Monster closed the 50,000 sq. ft. Oskar Blues brewery and taproom in Austin, Texas.
On a global scale, Argentina’s economic malaise is having an outsized impact on Monster’s bottom line. Net changes in foreign currency exchange rates had a negative impact on the Energy Drinks segment of around $53.6 million, with $34 million related to Argentina. The country also contributed 4.5% out of the total 6.5% increase in net sales on a foreign currency adjusted basis.
Monster’s earnings reflect a general slowdown in energy drinks as also seen by decelerating growth from Celsius, the category’s third-largest brand.