Monster Energy is drawing up plans for Bang.
After completing its acquisition of Bang manufacturer Vital Pharmaceuticals’ (VPX) assets on July 31 for $362 million, Monster co-CEO Rodney Sacks said during the company’s Q2 2023 earnings call yesterday that it is now preparing to fully integrate its former rival into the Monster Energy system.
According to Sacks, Coca-Cola’s bottling network will begin distributing Bang in the U.S. as early as this quarter, a pivot that he warned will lead to a temporary disruption of the brand’s supply as it once again transitions from a diversified DSD network and into a strategic-owned distribution system.
As well, Monster has recruited “a limited number” of former VPX employees for open positions within the company, in addition to keeping on most of the team at VPX’s manufacturing plant in Phoenix, Arizona, which will be used to manufacture Bang alongside other Monster portfolio products, Sacks said.
However, Monster intends to be judicious in which VPX products will survive the transition. Sacks said the company intends to “rationalize Bang’s product offerings and product lines” as it folds the brand into its system and does not intend to manufacture or sell any of VPX’s non-Bang brands, including Redline, Quash and its various shots offerings – aside from liquidating its current inventory – but “may consider reintroducing certain of those product lines sometime in the future.”
Monster will also likely be updating the Bang branding and can design, said co-CEO Hilton Schlosberg, during the call’s Q&A session. In order to better differentiate Bang from its Monster and Reign brand designs, he said the company will “probably change the packaging slightly of the Bang brand, but it will remain principally a white can and in a 16 oz. [format].”
As Monster has leaned into its Reign and Reign Storm lines to build a share in the rising performance energy section, Schlosberg suggested that Bang’s evolution under its original owners has already pushed the brand outside of that segment. While he didn’t specify how Monster will reposition Bang, he made it clear the company does not want to sow confusion or interfere with the sales of other portfolio brands like NOS or Full Throttle, either.
“Interestingly, Bang started off life as very much performance energy, and today, if you look at the brand and you analyze what it stands for, it really stands for a different segment, which is really Lifestyle Energy,” Schlosberg said.
Discussing gross margins, Schlosberg said the company anticipates that Bang products will have comparable margins to its Monster Ultra line and Reign.
In settling legal matters with VPX, Sacks said Monster has agreed to pay its litigation partner Orange Bang Inc. a one-time payment of around $12.5 million with a 2.5% royalty on all future sales of products using the Bang name – halving the 5% royalty VPX was ordered to pay the small beverage company in the ruling on its trademark infringement case.
As part of the closing of its acquisition, VPX will dismiss its appeal of the trademark infringement arbitration ruling and the false advertising lawsuits, as well as cases that VPX filed against Monster in Florida. However, that mutual release does not include any claims Monster may have against VPX’s ousted founder, Jack Owoc, in relation to its jury award from those cases.
Monster reported Q2 net sales growth of 12.1% to $1.85 billion, up from $1.66 billion in 2022.
The Monster Energy Drinks segment, which includes all Monster and Reign branded products, rose 9.7% to $1.69 billion in the quarter, while sales of its Strategic Brands segment – including products like NOS and Full Throttle – grew 26% to $99.7 million.
“Gross profit margins in the quarter improved significantly as compared to the 2022 second quarter, primarily as a result of pricing actions, decreased freight-in costs and decreased aluminum can costs,” Schlosberg said in a statement. “As expected, promotional allowances as a percentage of net sales for the 2023 second quarter were marginally higher than the comparable 2022 second quarter as well as marginally higher than the 2023 first quarter.”
Net sales for alcohol brands, which currently includes The Beast Unleashed and “the various craft beers and hard seltzers purchased as part of the CANarchy transaction” from last year were up 88.2% to $61.1 million.
In a statement, Sacks said that the company has a “robust” innovation pipeline in alcohol, including its upcoming Nasty Beast Hardcore Tea line set to launch either later this year or early next year with aims to be in national distribution within the first half of 2024. That line will include four flavors – Original, Half & Half, Razzleberry and Green – and will be sold in variety 12-packs and 24 oz. single-serve cans.
Monster is looking to expand distribution of The Beast Unleashed nationwide by the end of 2023 and select flavors in 24 oz. single-serve cans are slated to roll out in the convenience and gas channels.
The company is also pushing forward with Zero Sugar innovations, following a strong performance for its Monster Energy Zero Sugar product launched earlier this year. Sacks said the business will now launch NOS Zero Sugar in 16 oz. cans in Q4 this year.