The paragraph outlines the commencement of the Monster Beverage Company's Third Quarter 2024 Conference Call. An operator introduces the session, noting it is in a listen-only mode and will include a Q&A section. The conference is hosted by Co-CEOs Rodney Sacks and Hilton Schlosberg, alongside CFO Tom Kelly. Kelly issues a cautionary statement that some remarks made during the call may be forward-looking and subject to risks and uncertainties, potentially leading to different actual results. He advises listeners to refer to the company's SEC filings for more detailed information on these risks.

The paragraph discusses the energy drink market, noting its global growth and resilience, despite slower growth rates in the United States. It highlights that, except for convenience stores, the energy drink category is growing faster across other retail channels. In October, the convenience channel began to show improvement, with a 3.7% increase in energy drink sales reported by Nielsen for the week ending October 26, 2024. The company's energy brands, including Bang and Monster, saw sales increases of 2.9% and 2.2%, respectively. The paragraph also mentions tighter consumer spending and weaker demand affecting many consumer goods companies, as well as the impact of Hurricanes Helene and Milton on retail sales in some states, though the specific impact on the company's business is unclear.

The paragraph discusses the partial operational status of a brewery in Brevard, North Carolina, due to recent flooding, with full operations expected by November 2024. It highlights the growth potential of the energy drink market as an affordable luxury, with significant growth trends in household penetration and per capita consumption reported across different regions: 11.1% in EMEA, 13.6% in APAC, and 21.1% in LatAm, as per Nielsen and INTAGE data. It also mentions that the company's third-quarter gross profit in 2024 was negatively affected by $10.6 million in excess inventory reserves in the Alcohol Brands segment. Additionally, operating expenses were impacted by a $16.7 million provision and $1.2 million in legal expenses due to an intellectual property claim related to the use of the Hubert Hansen name.

In the 2024 third quarter, specific items reduced net income by $21.5 million and earnings per share by $0.02. When adjusted on a pro forma basis, earnings per share were $0.40. On July 31, 2023, the company acquired assets from Vital Pharmaceuticals Inc., leading to a fair value inventory adjustment referred to as the Bang Inventory Step-Up. This led to a $7.8 million impact on gross profit in Q3 2023. A $45.4 million gain was recorded due to the transaction, alongside $8 million in acquisition costs, ultimately boosting Q3 2023 net income by $22.7 million and earnings per share by $0.02. Pro forma earnings per share for Q3 2023 were $0.41. The company provided both GAAP and non-GAAP financial statements for Q3 2024, stating the non-GAAP figures help shareholders evaluate financial performance but should not replace GAAP results.

In the 2024 third quarter, the company reported record net sales of $1.88 billion, a 1.3% increase from the 2023 third quarter, or 4.7% higher when adjusted for foreign currency. Excluding the Alcohol Brand segment, foreign currency-adjusted net sales rose 5%. Gross profit as a percentage of net sales improved slightly to 53.2%, or 53.7% excluding Alcohol Brands inventory reserves, driven by lower input costs and pricing actions, despite higher promotional allowances. Operating expenses grew to $519.9 million from $473.2 million in the previous year, due mainly to increased payroll, sponsorship, and endorsement costs, as well as intellectual property claims. When adjusted, operating expenses increased by 8% to $502 million from $464.8 million in the 2023 comparable period.

In the 2024 third quarter, distribution and warehouse expenses decreased slightly to $82.7 million, or 4.4% of net sales, compared to the previous year's $85.7 million and 4.6% of net sales. Operating income fell by 6% to $479.9 million, and adjusted operating income decreased by 3.5% to $508.4 million. The effective tax rate also dropped to 21.8% from 22.2%. Net income experienced an 18.1% decline to $370.9 million, and adjusted net income decreased by 8.8% to $392.4 million. Diluted earnings per share fell by 11.7% to $0.38, while adjusted diluted earnings per share slightly decreased by 1.6% to $0.40. The financial results were negatively affected by unfavorable foreign currency exchange rates, reducing net sales by $62.8 million and impacting earnings per share by approximately $0.03. A 5% price increase on certain brands and packages is set for November 2024 in the U.S., with possible further pricing adjustments in international markets.

In the 13-week period ending October 26, 2024, the company maintained market share leadership in the U.S. energy drink category, despite a mixed performance across its brands. Overall sales in the energy drink category rose 4.9%, excluding convenience outlets, and 1.9% including all outlets. The company's energy brands, including Bang, experienced a 0.6% decline in sales; Monster decreased by 1.8%, Reign by 2.9%, and Full Throttle by 5.4%, whereas NOS sales increased 2.9%. Red Bull saw a sales increase of 5%. In the convenience and gas channel, the company's overall sales were flat, with Monster declining by 1.6% and Reign by 4.4%, while NOS saw a 3.9% increase. The company's market share in this channel fell slightly from 37.3% to 36.8%, with most brands experiencing a decrease in share, except for NOS.

In the four weeks ending October 26, 2024, Red Bull's market share increased to 35.9%, while competitors like CELSIUS, C4, and 5-Hour held smaller shares. The Coffee + Energy Drinks category saw a 7.9% decline in sales, with Java Monster's sales down 3% and Starbucks Energy down 14.8%. Java Monster's category share rose to 58.6%, whereas Starbucks Energy's share fell to 40.8%. In Canada, energy drink sales increased by 7.7%, with the company's brands growing 8.3% and Monster's sales up 3.9%, despite a slight market share loss. In Mexico, the energy drink category grew 16.3% in September, with Monster sales rising 11.3%, but its market share decreased. Predator's sales increased 18.6%, with a slight market share gain. The Nielsen data for Mexico is influenced by the dominant Oaxaca convenience chain.

The paragraph discusses the performance of Monster Energy in various countries according to Nielsen statistics for September 2024 and the 13-week period ending October 6, 2024. In Brazil, the energy drink market grew by 19.9% while Monster's sales increased by 28%, raising its market share to 48.2%. In Argentina, the market surged 202.5% partly due to inflation, with Monster sales rising 182.5%, though its market share decreased to 53%. In Chile, the category grew 11.7% with Monster's market share increasing slightly to 40.3%. Monster Energy remains the leading brand in Argentina, Brazil, and Chile. In EMEA, Monster’s market share increased in Great Britain, the Netherlands, and Spain, but decreased in Belgium, France, and Norway. The paragraph also notes that Nielsen's EMEA data should be used cautiously due to variations in reporting across countries.

In the 13-week periods ending in August and September 2024, Monster's retail market share showed mixed performance across several countries. It decreased in Germany, Sweden, Greece, Italy, and Denmark, remained flat in the Czech Republic, and increased in Poland, the Republic of Ireland, and South Africa. In addition, the Predator brand, also known as Fury in some markets, saw significant market share growth in Egypt, Kenya, and Nigeria. Overall, the energy drink category in the EMEA region grew by 11.1% during these periods.

In the period ending October 20, 2024, the energy drink market demonstrated significant growth across various regions. Western Europe saw a 6.2% increase, Eastern Europe 4.2%, and Africa/Middle East a substantial 27.5% rise. In Australia, the energy drink category rose 8.7% with Monster's sales climbing 19.9%, boosting its market share by 1.8 points to 19.1%. However, Mother experienced a minor sales increase but a market share drop. In New Zealand, the energy drink category grew 11.9%, with Monster maintaining its 13.2% market share. Mother’s sales fell, reducing its market share, while Live+ saw a slight sales increase but also a market share decline. In Japan's convenience channels, the energy drink market grew 6.6%, while Monster's sales improved by 5.6%, resulting in a small market share decrease. In South Korea, the energy drink market surged 28.3%, with Monster's sales up 31.3%, increasing its market share by 1.2 points to 53.1%. Certain monthly and four-week market statistics might be affected by promotional activities. International net sales reached $760.1 million, comprising 40.4% of total sales in Q3 2024, up from $733.7 million or 39.5% in Q3 2023.

In the third quarter of 2024, foreign currency exchange rates negatively impacted net sales by $62.8 million, with $26.5 million from Argentina. In EMEA, net sales increased 6.8% in dollars and 10.4% on a currency neutral basis, despite disruptions in Western Europe and South Africa reducing sales by 2.9%. Gross profit margin increased to 35.4% from 31.1% in 2023, and Monster gained market share in several countries. In Asia Pacific, net sales grew 4% in dollars and 8.8% currency neutral, with a gross profit margin drop from 43.2% to 40.2%. Sales in Japan and South Korea decreased due to specific factors, though Monster remains a market leader in both. China saw a significant net sales increase of over 15% both in dollars and currency neutral, and the company is optimistic about future prospects, particularly with the rollout of the Predator brand in China.

In the third quarter of 2024, net sales in Oceania increased by 13.5% in dollars and 13.8% on a currency-neutral basis. Latin America's sales decreased by 5% in dollars but rose 20.1% currency-neutral, excluding Argentina's impact, which notably decreased 56.5% in dollars but rose 48.5% currency-neutral. Brazil saw strong growth with a 16.7% increase in dollar sales and a 33.3% increase currency-neutral. In contrast, Mexico and Chile experienced decreases in dollar sales, though both saw increases on a currency-neutral basis. Despite this, market share in the region increased to 40.8%, with Argentina maintaining a 55.1% market share. Monster Brewing faced challenges, with a 6% decrease in net sales due to lagging craft beer sales and had to increase inventory reserves. Management changes were made to improve efficiency, including rebranding The Beast Unleashed to The Beast.

The paragraph details various product launches and expansions by a brand across different regions. In the United States, a new variety pack for The Beast is available in 48 states and a non-alcoholic brew will be available next month. Internationally, multiple Monster Energy drinks were launched in Latin America, Australia, EMEA, Japan, Singapore, and China, with more expansions planned for 2025. The initial response to these launches has been positive.

The company expanded its Predator Gold Strike product to new regions in India in 2024 and plans more expansions in 2025. It remains positive about the Monster brand's prospects in China and India. In Q3 2024, the company repurchased 11.3 million shares for $534.7 million, with $500 million still available for buybacks. October 2024 sales increased by around 4.8% compared to October 2023, with one more selling day than the previous year. Sales figures have been adjusted for foreign currency effects and exclude the Alcohol Brand segment. Hurricanes in 2024 affected sales in some states, and customer stockpiling ahead of a planned price increase may have influenced sales, though exact impacts are uncertain.

The paragraph highlights factors affecting short-term sales, such as selling days, holidays, product launches, price changes, and production schedules influenced by bottlers' inventory management. It warns against viewing monthly sales as indicative of longer-term results. Positively, it notes global growth in the energy drink sector, increased household penetration, and non-Nielsen channel expansion. A U.S. price increase was implemented on November 1, 2024, with ongoing international reviews. The AFF flavor facility in Ireland is enhancing service in the EMEA region, with a juice plant set to start production in early 2025. The launch of Monster Ultra Vice Guava is also anticipated.

The paragraph discusses a positive response to the recent Call of Duty gaming promotion, noted as the franchise's biggest release. The company is exploring international opportunities for their alcohol products and has observed growth in sales and market share for Bang Energy. They are also pleased with the international rollout of their affordable energy drinks, Predator and Fury, and are planning further launches. During a Q&A session, Andrea Teixeira from JPMorgan asked about the impact of pricing on sales and the state of the energy drink market, noting potential softness in sales due to one extra selling day in October. Thomas J. Kelly explained the complexity of pricing strategies and their effects on demand.

The paragraph discusses the uncertainty surrounding the impact of various factors on sales and the energy drink market. There is speculation about whether inventory buy-ins by Coca Cola distributors ahead of a price change in October affected sales, but it's unclear. Additionally, the potential impact of Hurricanes Milton and Helene is acknowledged, with a noted 1% difference in Nielsen activity between affected territories and the rest of the U.S., but the precise effect on the company’s business is indeterminate. The conversation also touches on the state of the energy drink market, with Rodney C. Sacks suggesting that convenience store foot traffic, which makes up 62% of energy drink sales, may have reached a low point.

In the paragraph, executives from Monster Beverage discuss their optimism about the recovery of consumer demand following a rate cut and post-election stability. They note that consumer preferences for energy drinks have remained constant, though consumption frequency may have slightly decreased. They highlight positive trends in sales growth, as evidenced by recent Nielsen data showing a gradual increase in the energy drink category over the past weeks. The executives also mention high hurdle rates from the previous year as a context for evaluating current performance. Lastly, Chris Carey from Wells Fargo Securities inquires about inventory levels, questioning whether distributors were hesitant to stock more products despite positive consumption trends, potentially leading to increased inventory in the remainder of the quarter.

In the paragraph, Rodney C. Sacks discusses the operations of their business, explaining that they fulfill orders based on sophisticated systems used by Coke distributors that account for factors like consumption and weather. He emphasizes that their business doesn't face inventory issues like competitors because they supply according to customer orders. Additionally, Sacks responds to a question from Filippo Falorni about the role of innovation in the October market improvement. He acknowledges that innovation does drive consumption and mentions the introduction of a new SKU at the end of October, but he believes it hasn't had a significant impact overall.

The paragraph discusses the positive trends observed in SKUs and foot traffic, suggesting an improvement in consumer behavior and macroeconomic conditions. Despite a period of stagnation, there's a sense of re-emergence in consumer activity. Mark Astrachan poses a question about gross margin trends in the EMEA region, noting improvement but still below 2021 levels. He inquires about the possibility of returning to 2021 levels and the sustainability of these trends. Hilton H. Schlosberg responds by indicating that price adjustments have been made.

In the paragraph, the company discusses its strategy for addressing rising production costs, particularly focusing on aluminium, which is a significant expense. They are employing a "ladder" hedging strategy to manage aluminium exposure and are continuously exploring price adjustments in international markets. The company is focused on improving profit margins, especially in regions like EMEA, where margins have been gradually improving over the last four quarters. They anticipate further margin improvements with the upcoming production of a juice plant and other measures, although they are uncertain if it will reach the levels of 2021. The focus on improving margins extends to different areas of their business, including alcohol, which currently has lower margins.

In the paragraph, Peter Grom from UBS asks about the advanced purchases ahead of a price increase, comparing the current situation to a similar event in 2018 when impacts could be estimated. Hilton H. Schlosberg explains that unlike before, the recent price increase took effect in mid-October, making it difficult to determine its impact on October sales. As a result, they have chosen not to estimate the effect for now, preferring to wait until the quarter ends for a clearer picture. Schlosberg also briefly touches on commodity concerns, specifically mentioning the situation with aluminum.

The paragraph discusses the impact of tariffs and price changes on commodities, particularly highlighting aluminium, which is seeing significant price increases. While some commodities have experienced price hikes, others have remained steady or decreased slightly. The overall climate for commodity prices, excluding aluminium, is relatively manageable. The section concludes with Rodney C. Sacks of Monster expressing gratitude for the company's support and confidence in its growth strategy, emphasizing continued innovation, brand differentiation, and international expansion, and noting an optimistic outlook for the company's future in the beverage industry.

This summary was generated with AI and may contain some inaccuracies.