Monster ‘Pleased’ with Early Alcohol Performance

Monster Beverage Corporation reported net sales growth of 13.9% to $6.31 billion – up from $5.54 billion the year before – in its Q4 and full year 2022 earnings report yesterday. The results arrive as the company pushes forward with its expansion into new beverage categories, including alcohol.

For Q4 2022, Monster reported record net sales growth of 6.2% to $1.51 billion. The growth benefited from a price increase implemented in the U.S. on September 1, followed by additional hikes in various international markets throughout the quarter. Additional pricing increases in international markets will be implemented throughout this year.

Monster acquired the CANarchy Craft Brewery Collective in February 2022 in large part to facilitate its expansion into alcohol. Speaking to investors and analysts during an earnings call yesterday, Monster co-CEO Rodney Sacks said CANarchy “sustained margin pressures, costs of acquisition and integration” impacting the Q4 and full year earnings, but that the company has so far seen positive results from its first forays into the alcohol sector.

In particular, he said the company has been “pleased” with early sales results for its flavored malt beverage (FMB) line The Beast Unleashed, which has launched in six states so far in Q1 2023 with distribution through a network of beer distributors. Sacks said the 6% ABV offering will expand into additional markets in Q2, “with the goal of being national by the end of the year.”

Through CANarchy, Monster also recently launched Wild Basin Hard Seltzer in new packaging and flavors, Sacks said. Oskar Blues’ Dale’s brand family will receive a refresh in Q2 along with the launch of Dale’s American Light Lager, a 4.2% ABV easy-drinking lager.

Beyond alcohol, Monster has continued to expand its core energy drink offerings with new flavors across various product lines – including Monster Reserve Orange Dreamsicle, which launched in Q4 2022, and Monster Energy Zero Sugar which rolled out to stores in January. In February, the company extended into the canned water segment with Monster Tour Water, an unflavored water available in still and sparkling varieties in 19.2 oz. cans.

“I think that we’ve actually got a really broad base of innovation,” Sacks said during the call’s Q&A portion. “I think that it has sort of improved over the last few years, and I think we’re sort of getting it right. I think that will be positive for the brand.

“We also are able to secure a little more shelf space across the different channels, which is helping us with innovation,” he added. “Because in some cases, we didn’t get shelf space in some of the years past, and it was sort of difficult to actually get the innovation to achieve the benefits that we had hoped for.”

Sacks noted that in order to secure shelf space, the company has taken to SKU rationalizations to cut underperforming products, but did not specify any flavors or lines that were impacted.

Following rapid inflation last year, however, Sacks said during the Q&A that he believes pricing throughout the economy has begun to settle and consumer activity is once again picking up, particularly in the convenience channel as the price of gasoline drops.

“Convenience was always ahead of the grocery and mass channels and last year that sort of reversed and convenience was a little slow. That seems to be coming back a little bit,” Sacks said. “And we just think that, again, pricing has sort of settled down a bit. But you can see across the whole category, there has been an increase in the Nielsen numbers across the category for most people and our competitors. So, we’re seeing just a little bit of resurgence of confidence again.”

Earlier this week, Monster filed a motion in a California court requesting an additional $167 million in damages from its false advertising lawsuit against Bang Energy producer Vital Pharmaceuticals, Inc. (VPX). Monster was initially awarded $293 million following a jury trial last fall. VPX was previously ordered to pay Monster $175 million plus a 5% royalty on all future sales of certain Bang Energy products in a trademark infringement suit with the brand Orange Bang.

Speaking on the earnings call, Sacks said VPX made its first royalty payment of about $3.6 million on February 14, but noted that due to Bang’s ongoing Chapter 11 bankruptcy process and post-trial proceedings Monster “will not recognize either award of the royalty payments until such time as they are realized or realizable.”