Boosted by triple-digit growth from its nascent alcohol division, Monster Energy beat analysts’ predictions in reporting an 11.9% year-over-year rise in net sales in its Q1 2023 earnings report on Thursday afternoon.
Net sales totaled $1.7 billion in the period, as pricing actions, tumbling freight costs and cheaper aluminum cans helped boost gross profit as a percentage of net sales to 52.8%, a full point higher than the same period in 2022.
Monster’s core Energy Drinks segment reported an 11.2% increase in year-over-year net sales ($1.56 billion) during the first quarter, with net changes in foreign currency exchange rates resulting in a negative hit of around $49 million. Its Strategic Brands segment decreased 6.7% to $86.4 million.
After last year’s hikes, Monster raised prices on its 18.6 oz. and 24 oz. can lines on April 1. Monster co-CEO Rodney Sacks said the company “will continue to review further opportunities for pricing actions in order to mitigate inflationary pressures.”
“Gross profit margin percentages continued to increase on a sequential quarterly basis, primarily as a result of pricing actions, decreased freight-in costs and decreased aluminum can costs, as well as the moderation of certain other challenges in our supply chain,” said Hilton H. Schlosberg, Vice Chairman and co-CEO. “The increases in certain ingredients and other input costs, as well as co-packing fees, remain challenging.”
The company has been active since the start of the year, releasing multiple new products including Monster zero sugar, Reign Storm and Tour Water. Sacks said the former product has not resulted in SKU cannibalization with the core line, while noting it was too early to judge the reception for Reign Storm following its recent debut.
Monster’s foray into beverage alcohol appears to be working, thus far. The company’s Alcohol Brands segment — comprising The Beast Unleashed (6% ABV) and various brands acquired through its 2022 purchase of CANarchy — grew net sales 204.4% ($46.3 million) year-over-year, with $20.5 million coming in Q1 2023. Initially released in six states, The Beast Unleashed is continuing to build its network of national distribution partners, which it hopes to have fully in place by the end of the year.
During the call, Sacks called the brand’s alcohol innovation pipeline “robust,” and shared plans to launch a new flavored malt beverage line within “the next few months.” He also said the company is trying to pace the rollout of The Beast Unleashed “in a cautious way,” adding that “so far… some of the repeat sales have also been encouraging.”
Sacks noted that the margins for Beast were stronger than with some of CANarchy’s legacy craft brands, and that the business was impacted by a drop off in demand for Wild Basin Hard Seltzer, which was recently redesigned and reformulated. Oskar Blues’ Dale’s brand is also set for a refresh, along with the introduction of Dale’s American Light Lager. Margins have been improving, however, and the company is working to both increase production capacity for Beast products while also expanding co-packing operations to help control costs.
“We do think there will be additional margin going forward, but it is a thinner margin product than we obviously are traditionally used to seeing on the Monster side,” he said.
Not included in the formal numbers: a $3.6 million royalty payment from Bang Energy manufacturer Vital Pharmaceuticals, which Sacks confirmed in his comments. It’s the company’s first since a judge imposed a 5% fee on future sales of certain Bang products following the two companies’ much-chronicled legal dispute. Vital is appealing that judgment.