Monster Beverage Earnings Call Insights: Sales Analysis and Brands Dynamic

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

Sales Analysis

Alton Stump – Longbow Research: I just wanted to ask, I think you mentioned that Monster’s sales were up 16.4% as per AC Nielsen. In the last four weeks of July. But your overall gross sales were up 7.9%. Is there any reason for that disconnect, or is it just the timing of actual wholesale inventory levels any color that you could give us there?

Rodney C. Sacks – CEO: The periods are slightly different. It is for the convenience channel which is stronger channel. I think the brand has better in the convenience channel than in the drug and grocery channels, particularly in the quarter. We simply don’t have any other explanation.

Alton Stump – Longbow Research: Just a quick follow-up on the margin front, it is sort of one of your better gross margin performances quite some time year-over-year. I mean obviously the sales overseas were part of that, but was there anything in the U.S. specifically, if you strip out the regional mix that drove those margins higher?

Rodney C. Sacks – CEO: No, I think it was – I mentioned it – I didn’t mention it earlier. It was a product mix. We think that a higher proportion of our sales are coming from the Ultra line, and Rehab, and those product lines have better growth, lower costs and better gross margins through certainly input costs ingredients and some other costs.

Brands Dynamic

Amit Sharma – BMO Capital Markets: Rodney, can you address the fact that some of the non- Red Bull Monster brands, if you look at the major channel, the sales and share for those brands are declining pretty rapidly there as Monster and Red Bull are continuing to gain share. Is there a dynamic that those brands are impacted by the noise a little bit more than Red Bull and Monster or anything else going on there?

Rodney C. Sacks – CEO: I don’t know. I just think that, what is happening is, there are – if you look at some of the brands, even some of our SKUs are also slowing and they’ve been a little negative. I just think that the market is sort of dividing, and then you’ve got the major two brands that have got the major space they seem to have the major variety. Red Bull’s got some lift due to their new innovation there. They introduced three new SKUs, sort of flavor extensions and so, if you take their innovation and our innovation together which has been the bulk of innovation in the category, I think that’s sort of probably the main driver of the fact that those two brands that are driving the growth in the category.

Amit Sharma – BMO Capital Markets: And if I may ask one more, the panel hearing that you talked about earlier in the call, are you or the industry as a whole participating in that?

Rodney C. Sacks – CEO: Which panel hearing, are you talking about the IRM hearing?

Amit Sharma – BMO Capital Markets: Yes, IRM hearing?

Rodney C. Sacks – CEO: As the IRM hearing is really run by the IOM. You know there are diversions, but lots of views. We did have some representatives at the IOM some medical representative made some points which we believe counts as some misconception are inaccurate views that may have been made or given by some of the speakers. Other speakers were clearly positive, and we feel comfortable based on the science of – on the safety of our products. And obviously you know that is what we try to communicate in. So far as we – we stood up at the meeting, but that panel has had a hearing. They are going to make some recommendations to the FDA and then we’ll hear from that and just see where that goes to. And the American Beverage Association was also represented at the panel. And also add medical representatives there to correct certain inaccurate or incorrect statements or views.

A Closer Look: Monster Beverage Earnings Cheat Sheet>>