Monster Beverage Corporation — 2024 Q1

So the 2 extra days in April were obviously included in the numbers that we reported for April sales. The second part of your question, I actually didn't really understand. So maybe you can repeat it.

Yes. So we've always spoken in our business about the fact that we sell to the bottlers. And in some cases, the bottlers particularly internationally in manufactured products for us, which we purchase from the bottlers and then sell to them as part of the distribution arrangements. And oftentimes, they determine when they want to produce. So we expect them to produce on such and such a day and such and such a month, they may produce in a subsequent month or they may produce earlier. So when we talk about ourselves, remember, there are sales to the bottlers, they are not sales to -- we do some business at direct to customers, but most of our sales are done to the bottlers.

This is a repeated question from you, and thanks for raising it again. As you know, we have a very strong brand. The brand is an affordable luxury. And it's strategic for us to orchestrate when and if we'll take price. So I think we've done a lot of evaluation on what makes sense and what makes sense to the brand, as we said we would. And in principle, we have really worked hard at really coming to a decision that a pricing opportunity is out there. And we -- I'm not saying how much it's going to be. It's going to be later this year, but we will be announcing to bottlers and retailers sometime in the next few months because there's -- as you know, there's a 30- to 60-day -- mainly 60 days for implementation of a price increase, but we expect it to happen in the fourth quarter.

I think that it's a question of timing. I think that given the recent softness in the market, we believe that it is an opportunistic time to execute an at-scale transaction of this nature. We believe that this structure gives the company the opportunity to repurchase a greater number of shares and do so more quickly than we could under the programs, which we've implemented, as you know, over the -- quarter by quarter, we've continually strategically bought stock back. We think that is a good use of our cash. Obviously, we look at acquisitions from time to time, but we have a lot of excess cash. .

So referring to your first question. And you asked a question about gross margins and we -- and if you look at this quarter, we had a pickup, obviously, in international margins which we've been working on for some time, particularly in EMEA. And we also had a pickup in U.S. margins. So we've been working on improving margins across the board. You'll remember that I spoke in the first -- in the fourth quarter, when we had our final year results, and I said that our gross margin then had a few nonrecurring items in basically true-ups and rebate programs that were recognized in that fourth quarter. And I said that on an ongoing basis, on a stand-alone basis, we expected margins to be at the about the 53.5% level. Well, we did better than that. And it's something we've been working on and we'll continue to work on in trying to improve gross margins.

So Bonnie, we don't report what percentage of our sales is done in the nonmeasured channels. So it's hard for me to give an answer to that since we don't report it, but it's something we can consider doing in the future. But our nonmeasured channels remain strong. And as you know, we have a bunch of really important customers in that category, including FSOP, Foodservice On-Premise. We have one of the big club store chains is in that nonmeasured channel. We have Home Depot, Lowe's, Amazon. So we do have a bunch of customers that operate in those nonmeasured channels. And you can see the discrepancy between the Nielsen numbers and what we report as a company because, a, the Nielsen numbers are sales to consumers, we report on sales to bottlers and our direct customers, and we also include sales to our nonmeasured channels.

First talk a little bit -- there clearly has been a slight slowdown. I mean I think that you guys have followed a lot of the consumer product companies both beverage and non-beverage. And I think that there is -- including a lot of the convenience chains we report as well. And I think there has been a report generally across the board, there is some slowdown. I think you've got to take into account that last year, there was a lot of acceleration. There were increased sales, so you're looking at it on a 2-year basis as well. But there is some softness. We think that inflation and higher gas prices are having an effect on the number of consumers that are going into the stores and traveling.

So if you look at Bang and look at the latest 4 weeks, you'll see that sales are starting to accelerate. And mainly because we've been able to get listings as we move through to this season of listings in the chains. As you know, the brand was discontinued for a number of reasons last year. And it's been a real impetus to get the brand up and running. We believe it has, and we believe it's moving positively. The marketing for the brand is -- has really been a low ebb and it's gaining momentum as we move into the summer. We're in the process of accelerating, and I'm going to be careful what I say, but a large influencer platform to help move and accelerate the brand. So the marketing is underway. It's just taking a little bit of time to get it up and moving. As I said earlier -- or I said in previous calls, it's positioned as a lifestyle brand. And we believe that too -- we have to invest in the market, we accept that and to achieve the positioning that we're looking for.

Well, on the one hand, we took a conscious decision to build up inventories. So in doing so, we really had this objective of satisfying demand, which we really did not do very well at in previous years. So we have significant inventories now, and we -- our in-stock rates are climbing in the 95-plus percent levels. So we're able to service much better, but obviously, there's a cost to it. And freight, as you know, has gone up. And -- so that's one factor. Warehousing has gone up. So that's one factor in the -- in our operating expenses. There's nothing that's really that's tied to any particular period. These are all expenses that were incurred within the quarter and they reported as being in the quarter.

The only thing I would add is that when you look at the costs, and we've had increases in sponsorship and marketing and social media, those probably are the biggest cost increases. But we are diverting or focusing a little more on the social media platforms because of the full array of our brands that are more aligned to social media consumers. Those are going to take effect and we have these programs being put in place, and we're obviously expensing those costs as we incur. But I think some of the benefits will start -- we're hoping we'll start seeing them in the second and third quarter as we go into summer, and those programs become more, more active.

Need Rodney to do that.

Yes, Mark, thanks for that question. I want to put you in that position. It's dealing with the bottlers and you've got a lot of experience, I know in talking to them, but that's really a tough egg to crack. So we have to do it in different ways. We've got to look at commodities. We have to look at it in terms of pricing. And we've got to look at it in a very judicious manner with the bottling community. We have a great business going and we've got to be very careful not to jeopardize the motivation behind the brands.

Peter, it's really difficult because we've come to an assessment, and before we go out to our bottlers and our retailers, it would be -- it would not be appropriate for me to talk about that at this stage.

Thanks. Thank you. On behalf of Monster, I'd like to thank everyone for their continued interest in the company. We continue to believe in the company and our growth strategy and remain committed to continue to innovate, to develop and differentiate our brands and to expand the company both at home and abroad, and in particular, capitalizing on our relationship with the Coca-Cola Bottling System. We believe that we are well positioned in the beverage industry and continue to be optimistic about the future of the company. We hope that you remain safe and healthy. Thank you very much for your attendance.