Monster Beverage Corp. co-CEO Rodney Sacks said the company’s recent quarterly year-over-year volume declines are “relatively unprecedented”.
In a call with analysts yesterday (7 August), Sacks touched on the struggles of the energy-drink category in the US of late, echoing the thoughts of domestic competitor Celsius Holdings earlier this week.
“The energy drink category in the US and in certain other countries experienced lower growth rates in the second quarter,” he said.
“We see this decline primarily driven by a reduction in consumer spending and the lower foot traffic in the convenience channel. We’ve seen reports of foot traffic convenience channel being down by as much as 3% to 3.5%. And then a swing towards more grocery mass online purchasing.
“So 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 added, stressing still that consumers view energy drinks as an “affordable luxury”.
Sacks noted that, barring the “financial crisis and Covid lockdowns in the US”, the North American country had rarely seen quarterly volume declines. Monster did not disclose regional volume sales figures in its recent results.
“The current situation in the US is actually relatively unprecedented. And we haven’t seen inflation levels… and interest rates for one heck of a long time. And we believe that those have contributed to the slowdown.”
In the three months ended 30 June, Monster’s total net sales grew 2.5% to $1.9bn, while its energy drinks segment, including brands like Monster Energy and Reign Storm, saw sales increase 3.3% to $1.74bn in the three-month period.
Total energy drink case sales increased 6.9% year-on-year in the quarter for the group to 212 million 192oz cases. They were up 11.2% on 2023 for the six-month period, at 423.6 million 192oz cases.
The Bang Energy owner also said that it will take an “approximately 5% price increase on our core brands and packages” from the beginning of November in the US, while “continuing to monitor opportunities for further pricing actions”.
When asked to explain the rationale for a price increase during a category slowdown, Sacks compared Monster’s prices to its competitors and claimed they had “dramatically expanded” their prices in comparison.
“We’ve passed the price index to Monster products, and we still see it as an opportunity. The extent is not that significant. We still will retain a very competitive price for consumers,” he told analysts.
Robert Moskow, an analyst at TD Cowen, said in a note today (8 August) the price increase “risks exacerbating the elasticity impact.”
He added: “While we agree with their logic, the risk of exacerbating the elasticity impact will go higher. Ultimately, we think MNST [Monster] will need to promote back a significant portion of the higher pricing as it goes into the market.”
The US company’s operating income for the 2024 second quarter was $527.2m, compared with $523.8m in the same period in 2023. Meanwhile, net income for the second quarter increased 2.8% on last year to $425.4m.
Monster’s share price fell 9% to $46.04 in post-market trading on Wednesday.
