Monster Beverage Earnings Call Insights: Domestic Trends vs Nielsen Data and Shipment Patterns

Monster Beverage Corp (NASDAQ:MNST) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.

Domestic Trends vs Nielsen Data

Kaumil Gajrawala – UBS: You tend to track Nielsen much more closely in the quarter and years in the past. You had a – that wasn’t the case in this quarter. Was there something unique going on in this quarter on why trends in the U.S. were – seemed to be materially different from what was in the Nielsen data?

Rodney C. Sacks – CEO: We just don’t know.

Kaumil Gajrawala – UBS: Could it be something maybe tied to inventory levels or particularly with the change of the distributor in New York?

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Rodney C. Sacks – CEO: We don’t think so. I mean we did take back some inventory from our previous distributors. But we don’t think those would have materially affected the numbers. So we just don’t have, we just had no reason for the differences.

Kaumil Gajrawala – UBS: As you look at the Nielsen data that you cited on the call earlier today it did feel like as you went country-by-country that the current data seems to be in line with how your trends are doing?

Rodney C. Sacks – CEO: Generally, also that seem to be lagging a little bit in North America, not by much. But they do seem to be generally in line.

Kaumil Gajrawala – UBS: Then finally on Zero Ultra is the shelf space incremental or is it coming from maybe pruning some of the brands in your portfolio?

Rodney C. Sacks – CEO: It’s very difficult to tell you, it varies from store to store in order to get the product on shelf quickly obviously lot of our distributors cut into existing shelf space because we have a certain a number of shelves that we’ve agreed that we have the shelf space so they would have cut into that to get single facing and then because of velocity 2 facings. But as we continue to get shelf programs for 2013 we have continued to expand to take that into account so in some cases it, we have had to sort of juggle the shelf space because there is only so much space available on shelves. In other cases, we have picked up some incremental space through that end the other sort of line extension. So it’s mixed I don’t have any express answer.

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Shipment Patterns

John Faucher – JPMorgan: Just wanted to talk a little bit about the cadence within the quarter. Most companies we get concerned when we feel like okay, trends are better in the last month of the quarter because they are struggling to make the numbers. You guys have had sort of the opposite situation where the first month of the quarter starts out really strong and then maybe not as strong as we go through the quarter. Do you guys have any thoughts in terms of maybe what’s causing that type of shipment pattern, is it new product launches, is it new distributors starting in the beginning of the quarter, any color so we can get a biter handle in terms of why the trend seems to decelerate through the quarter?

Rodney C. Sacks – CEO: We really don’t have any explanation. It changes from quarter-to-quarter. They simply are what they are and sometimes the quarters end stronger and sometimes they don’t. The trends just change from months-to-months. We really do have a volatile set of numbers from months-to-months and that’s why we continue to caution that these numbers are single months and we just – they just are what they are. As you indicated, they changed from quarter-to-quarter…

John Faucher – JPMorgan: Got it. Then with Red Bull launching their first flavored new products in a long time, you are getting a sense from your retail customers, it seems though there’s an opportunity that that could bring more news to the category and potentially reaccelerate the category. I realized it’s still early days from that standpoint. Are you seeing any impact to the category trends from these competitive launches? Thanks.

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Rodney C. Sacks – CEO: Not really. I think that Red Bull has got a lift in their sales. As you can see from some of the Nielsen numbers. We think that, that is largely due to the introduction of these new additional flavors. A lot of that is trial, a lot of that is you know, they’re different for the first time, it’s the first time they’ve had a new flavor for a long time. They’re other flavors. Even their Total Zero was very similar to the profile of their existing Red Bull. So, these are, this was a complete change and so ultimately that you’re going to get far extra shelf space from a lot of promotion going around the 8 ounce we can see. The promotional activity in the Red Bull sales numbers and dollar sales, they have, they’re all promoting quite heavily. They rated down quite heavily, so it’s too soon to tell where it’s going to go. In Europe, generally, they’ve not really succeeded in driving incremental sales and even shelf space, but certainly incremental sales on a longer-term basis. But we are seeing some trial and so we’ve just got to wait a little while. I think it’s just premature, and so – that overall I think that you make help category to bring in additional consumers. I think that will be so. But the extent of that we don’t know.