Monster Energy sees strong demand for energy drinks while anticipating ongoing supply chain challenges
For Q1 2022, Monster Energy saw net sales increase 22.1% to $1.52bn.
Net sales for the company's energy drink segment which includes its core energy drink brands (Monster, Reign, NOS, etc.) increased 20% to $1.4bn for the quarter while its 'Strategic Brands' segment registered a 36.6% increase in net sales to $92.6m.
“The global energy drink category continues its growth trend, and we remain well placed to capitalize on this growth with our Monster Energy family of brands," said Monster Energy CEO Rodney Sacks in a press statement.
Building domestic aluminum supply
While the company did see a strong year-over-year increase in net sales for Q1 2022, its total operating expenses also increased significantly as it dealt with external factors such as volatility in shipping and freight costs and rising prices for ingredients and packaging materials.
Operating expenses for Q1 2022 came in at $377.2m, up from $300.8m in Q1 2021.
"Increased commodity and raw materials costs, including aluminum, other ingredient costs and secondary packaging incurred during the quarter, amounted to approximately $45m, and increases in freight rates and fuel impacted gross profits by approximately $6m," Sacks said on the company's Q1 2022 earnings call last week.
"The company continued to address the challenges in its supply chain as it navigates through the uncertainty of the current global supply chain environment."
Sacks shared that Monster has made strides in stabilizing the procurement and supply of one of its major manufacturing inputs -- aluminum -- by adding additional domestic capacity in the US.
"Our two new suppliers of aluminum cans in the United States are now operational. And as a result, we are able to decrease our reliance on the use of imported aluminum cans in the United States," said Sacks who said the company expects to see a reduction in cost of sales in the latter half of 2022 as the company reduces its reliance on imported aluminum cans and works through current inventories.
"While we believe that we will be able to address many of the supply chain challenges we have faced, we anticipate still having to face certain ongoing challenges in the future."
Brand performance
According to Nielsen MULO xAOC data for the 13 weeks ended April 23, 2022, provided on the call, dollars sales for the energy drink category (including energy shots) were up 11.5% vs. the same period last year.
Sales of Monster's energy drink portfolio were up 8.6% in the 13-week period with Monster Energy sales leading the growth in dollar sales (+10.6%) followed by Full Throttle (+5.5%) while a few of the company's other brands saw dollar sales declines including Reign (-6.1%) and NOS (-3.5%).
Looking at Nielsen dollar sales for the competitive set over the same 13-week period, Monster tracked ahead of most other brands in the category including Red Bull (+7.8%), PepsiCo-owned Rockstar (+0.4%), 5-Hour Energy (-1.2%), and VPX Bang (-8.1%).
Coffee + Energy drink category
As Monster Energy continues to delivery positive growth for most of its energy drink portfolio, the company is attempting to grow its position in the niche sub-category of coffee + energy drinks with its RTD Java Monster line.
According to Nielsen data for the four weeks ended April 23, 2022, in the convenience and gas channel, dollar sales of the full Java Monster line declined 5.3% vs. the same period last year.
However, within the line some SKUs increased dollars sales including Java Monster 300 and Java Monster Nitro Cold Brew which saw a 2.4% increase in dollar sales during the same period.
Comparatively, Starbucks Energy saw a steeper decline in dollar sales of 11.7% during the same four weeks vs. the year prior.
By category share of the burgeoning coffee + energy set, Monster held a 55.3% share (up 4.2% since 2021) vs. Starbucks Energy which held a 42.9% (a 3.1% year-over-year decline) as of April 23, 2022.
International expansion
Sacks commented that while supply chain disruptions have delayed some new product innovation, the company is committed to expanding certain parts of its portfolio over the coming year to offer consumers more variety and affordable options.
"We are pleased with the new additions to the Monster Energy portfolio. We are planning to continue additional launches of our Reign, Total Body Fuel high-performance energy drinks in additional international countries. We are pleased with the rollout of Predator and Fury, our affordable energy drink portfolio internationally. We are proceeding with plans to launch our affordable energy brands in an additional number of international countries," added Sacks.
