Vending

Monster Beverage boosts Q2 income despite COVID-19 sales hit

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August 5, 2020

COVID-19 shaved Monster Beverage Corp.'s net sales for the second quarter ending June 30, but the company managed to improve income as it responded to changing customer behavior.

Net sales for the 2020 second quarter dipped to $1.09 billion compared with $1.10 billion in the same period last year, while gross sales were $1.27 billion as compared to $1.29 billion in the same period last year, according to an earnings report.

The company's second quarter net and gross sales were adversely impacted by the COVID-19 pandemic, in part due to certain bottlers and distributors reducing their inventory levels.

However, the company experienced a sequential improvement in sales in the latter half of the quarter as certain countries and states began to gradually re-open.

The COVID-19 pandemic's impact was more pronounced in EMEA during the 2020 second quarter, particularly in the strategic brands segment. Net changes in foreign currency exchange rates had an unfavorable impact on net and gross sales for the 2020 second quarter of $18.2 million and $21.6 million, respectively.

"Now that certain countries and states are gradually reopening, our teams are working to ensure the implementation of our 2020 product innovation launches, which were disrupted due to the COVID-19 pandemic," Rodney Sacks, chairman and CEO, said in a prepared statement.

Since mid-March 2020, the company has seen a shift in consumer channel preferences and package configurations, including an increase in at-home consumption and a decrease in immediate consumption.

The company's sales in the second quarter of 2020 were initially adversely affected as a result of a decrease in foot traffic in the convenience and gas channel, which is the company's largest channel, but improved sequentially throughout the quarter.

The company's e-commerce, club store, mass merchandiser and grocery and related business continued to increase in the quarter while its foodservice on-premise business, which is a small channel for the company, remained challenged.

Currently, the company does not foresee a material impact on the ability of its co-packers to manufacture and its bottlers/distributors to distribute its products as a result of the COVID-19 pandemic. In addition, the company is not experiencing raw material or finished product shortages in its supply chain.

Net sales for the Monster energy drinks segment, which primarily includes the Monster Energy drinks and Reign Total Body Fuel high performance energy drinks, increased 0.8% to $1.03 billion for the 2020 second quarter, from $1.02 billion for the 2019 second quarter.

The COVID-19 pandemic had an adverse impact on net sales of the Monster energy drinks segment for the second quarter. Net changes in foreign currency exchange rates had an unfavorable impact on net sales for the segment of approximately $16.8 million.

Net sales for the strategic brands segment, which primarily includes the various energy drink brands acquired from The Coca-Cola Co., as well as the company's affordable energy brands, decreased 24.7% to $59.6 million for the 2020 second quarter, from $79.1 million in the 2019 second quarter.

The COVID-19 pandemic impact was more pronounced in the strategic brands segment, particularly in EMEA, as the company's larger revenue generating countries for this segment experienced extended lockdowns.

Net sales for the other segment, which includes certain products of American Fruits and Flavors, LLC, a wholly-owned subsidiary of the company, sold to independent third party customers were $6.6 million for the 2020 second quarter, compared with $5.8 million in the 2019 second quarter.

Net sales for the six months ended June 30, 2020 increased 5.2% to $2.16 billion, from $2.05 billion in the comparable period last year. Gross sales for the six-months ended June 30, 2020 increased 5.6% to $2.51 billion, from $2.38 billion in the comparable period last year.

For an update on how the coronavirus has affected convenience services, click here.