CORONA, CALIF. — The Monster Beverage Corp. launched its Mutant carbonated soft drink as an alternative to PepsiCo, Inc.’s Mountain Dew brand in 2016. Nearly two years later it has become clear conquering the mountain was far more of a challenge than anticipated, and Monster management is shifting its attention away from the Mutant brand.
“We’re sort of reevaluating Mutant,” said Rodney C. Sacks, chairman and chief executive officer of Monster Beverage, during an Aug. 8 conference call to discuss second-quarter financial results. “We think that Mutant in the U.S. is probably something that’s — we’re probably going to tailor off and sort of refocus our attention. We’re actually spending, we think, too much time and effort on the brand, and we just don’t feel that, that’s where we would be best spent going forward.
“So, I think that we’ve got to focus on a new approach. We have some additional new product lines and some positioning in the Monster brand in the U.S., I think we’re going to focus on that.”
Mr. Sacks emphasized the Mutant brand will live on in international markets. The brand is positioned as an affordable energy option overseas and was introduced in Pakistan and Cambodia during the quarter.
While management is changing its strategy regarding Mutant, the company’s flagship Monster brand is thriving. Monster Beverage net income for the second quarter ended June 30 rose to $270,116,000, equal to 48c per share on the common stock, and an improvement over the same period of the previous year when the company earned $222,633,000, or 39c per share.
Sales were $1,015,873,000 during the quarter, up from $907,068,000 the year prior.
Net sales during the quarter in the company’s Monster Energy Drinks business unit rose 14% to $929.4 million.
“According to the Nielsen reports, for the 13 weeks through June 30, 2018, all outlets combined, namely convenience, grocery, drug, mass merchandisers, sales in dollars in the energy drink category, including energy shots, increased by 9% versus the same period a year ago,” Mr. Sacks said. “Sales of Monster grew 16.7% in the 13-week period, while sales of NOS increased 8%, and sales of Full Throttle decreased 1.6%. Sales of Red Bull increased 6.5%, sales of Rockstar decreased by 3.9%, sales of 5-Hour decreased 3.8% and sales of Amp decreased 18.4%.”
The company did see a sales deceleration in international markets, but Mr. Sacks attributed the slow down to being a part of “normal operations.”
“There has been some noise; some countries were higher than others,” he said. “We are looking at it, but we think that it’s, again — also distorted in some cases by monthly numbers. We are seeing quite big differences in the monthly numbers as we see them come through from overseas markets. So, I think we just wait and see what the trend is going to be when we go through this third quarter.”
The company raised prices during the second quarter in the United States. The increase is intended to cover the costs of aluminum and freight.
“…The price increase should cover increases in input cost and the increases in freight, but who knows where they’re going to go from there,” said Hilton H. Schlosberg, president and chief financial officer. “I mean, today, aluminum shot up again based on a number of factors. So, as we sit here now, the pricing should contain our cost increases. Will we get more? I don't know.”
Mr. Sacks said Monster Beverage will consider raising prices in international markets in the new year.
“…With all of the uncertainty that’s been happening in the world with the aluminum price and some other raw material price increases, we are keeping a watch in different countries, and as and when there are price adjustments by leading brands and other competitors in those markets, we will react to that and obviously, look at the opportunities as well, individually, for taking up pricing as and when we think that, that's appropriate,” he said.