MONSTER BEVERAGE CORPORATION Our Business
When this report uses the words "the Company", "we", "us", and "our", these
words refer to
CANarchy Acquisition
On
Russia-Ukraine Conflict
During the first quarter of fiscal 2022, the
The COVID - 19 Pandemic
The COVID-19 pandemic has directly and indirectly impacted our business. The duration and severity of this impact will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information regarding the COVID-19 pandemic, as well as the emergence of new variants, the actions taken to limit its spread and the economic impact on local, regional, national and international markets. See "Part I, Item 1A - Risk Factors" in our Form 10-K.
We continue to address the COVID-19 pandemic with a global task force team working to mitigate the potential impacts on our people and business.
We are incredibly proud of the teamwork exhibited by our employees, co-packers and bottlers/distributors around the world who are endeavoring to maintain the integrity of our supply chain. Despite the ongoing impact of the COVID-19 pandemic, we achieved record first quarter net sales in 2022.
As countries continue to combat the COVID-19 pandemic, and as governments and/or local authorities impose regulations regarding COVID-19 testing, vaccine mandates and related workplace restrictions, there remains a risk that the COVID-19 pandemic may continue to impact our business and supply chain, including our ability to recruit and/or retain our employees as well as impact our co-packers, bottlers/distributors and/or suppliers.
A reduction in demand for our products or changes in consumer purchasing and consumption patterns, as well as continued economic uncertainty as a result of the COVID-19 pandemic, could adversely affect the financial conditions of retailers and consumers, resulting in reduced or canceled orders for our products, purchase returns and closings of retail or wholesale establishments or other locations in which our products are sold.
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Distribution and Supply Chain
In the first quarter of 2022, we experienced a significant increase in cost of sales relative to the comparative 2021 first quarter, primarily due to increased freight rates and fuel costs, including cost relating to the importation of aluminum cans, as well as aluminum can costs attributable to higher aluminum commodity pricing. We also experienced a significant increase in ingredient and other input costs, including secondary packaging materials, co-packing fees and production inefficiencies, which adversely impacted costs of sales. Furthermore, we experienced significant increases in distribution expenses including increased fuel, freight and warehousing costs which adversely impacted operating costs.
We continue to address the controllable challenges in our supply chain and are focused on increasing our finished product inventory levels in proximity to our customers, where possible, to reduce the excessive cost of freight to satisfy consumer demand.
We continue to implement measures to mitigate our increased product and distribution costs through pricing actions and reductions in promotions.
Liquidity and Capital Resources
As of the date of this filing, we expect to maintain substantial liquidity as we manage through the current environment as described in the "Liquidity and Capital Resources" section below.
Overview
We develop, market, sell and distribute energy drink beverages and concentrates for energy drink beverages, primarily under the following brand names:
? Monster Energy® ? NOS® ? Monster Energy Ultra® ? Full Throttle® ? Monster Rehab® ? Burn® ? Monster Energy ® Nitro ? Mother® ? Java Monster® ? Nalu® ? Muscle Monster® ? Ultra Energy® ? Espresso Monster® ? Play® and Power Play® (stylized) ? Punch Monster® ? Relentless® ? Juice Monster® ? BPM® ? Monster Hydro® Energy Water ? BU® ? Monster Hydro® Super Sport ? Gladiator® ? Monster HydroSport Super Fuel® ? Samurai® ? Monster Super Fuel® ? Live+® ? Monster Dragon Tea® ? Predator® ? Reign Total Body Fuel® ? Fury® ? Reign Inferno® Thermogenic Fuel ? True North®
We also develop, market, sell and distribute craft beers and hard seltzers under a number of brands, including, Jai Alai IPA, Florida Man IPA, Dale's Pale Ale, Wild Basin Hard Seltzers, Dallas Blonde, Deep Ellum IPA, Black Ale, Hop Rising Double IPA, Juicy IPA, Apricot Hefeweizen and a host of other brands.
We have four operating and reportable segments: (i) Monster Energy® Drinks
segment ("Monster Energy® Drinks"), which is primarily comprised of the
Company's Monster Energy® drinks, Reign Total Body Fuel® high performance energy
drinks and True North® Pure Energy Seltzers, (ii) Strategic Brands segment
("Strategic Brands"), which is primarily comprised of the various energy drink
brands acquired from The Coca-Cola Company ("TCCC") in 2015 as well as the
Company's affordable energy brands, (iii) Alcohol Brands segment ("Alcohol
Brands"), which is primarily comprised of the various craft beers and hard
seltzers purchased as part of the CANarchy Transaction on
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During the three-months ended
? Java Monster® Cold Brew Latte
? Java Monster® Cold
? Juice Monster® Aussie Style LemonadeTM
? Monster Energy® Ultra Peachy Keen®
? Rehab® Monster® Watermelon
? Reign Total Body Fuel® Reignbow Sherbet
? Live+® Watermelon ? Mother® Kiwi Sublime ? Play® Peach ? Predator® Peach ? Predator® Red Apple ? Relentless® Peach ? Relentless® Raspberry
In the normal course of business, we discontinue certain products and/or product
lines. Those products or product lines discontinued in the three-months ended
Our net sales of
The vast majority of our net sales are derived from our Monster Energy® Drinks
segment. Net sales of our Monster Energy® Drinks segment were
Our growth strategy includes expanding our international business and expanding
our business in new sectors, such as the alcohol beverage sector. Net sales to
customers outside
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Our customers are primarily full service beverage bottlers/distributors, retail
grocery and specialty chains, wholesalers, club stores, mass merchandisers,
convenience chains, foodservice customers, value stores, e-commerce retailers
and the military. Percentages of our gross billings to our various customer
types for the three-months ended
Three-Months Ended
March 31,
2022 2021
U.S. full service bottlers/distributors 49 % 50 %
International full service bottlers/distributors 39 % 38 %
Club stores and e-commerce retailers 9 % 10 %
Retail grocery, direct convenience, specialty chains and wholesalers
2 % 1 %
Direct value stores and other 1 % 1 %
Our customers include
Coca-Cola Consolidated, Inc. accounted for approximately 9% and 12% of our net
sales for the three-months ended
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Results of Operations
The following table sets forth key statistics for the three-months ended
Three-Months Ended Percentage
(In thousands, except per share amounts) March 31, Change
2022 2021 22 vs. 21
Net sales1 $ 1,518,574 $ 1,243,816 22.1 %
Cost of sales 741,907 528,881 40.3 %
Gross profit*1 776,667 714,935 8.6 %
Gross profit as a percentage of net sales 51.1 % 57.5 %
Operating expenses 377,178 300,789 25.4 %
Operating expenses as a percentage of net
sales 24.8 % 24.2 %
Operating income1 399,489 414,146 (3.5) %
Operating income as a percentage of net
sales 26.3 % 33.3 %
Interest and other expense, net 7,300 759 861.8 %
Income before provision for income taxes1 392,189 413,387 (5.1) %
Provision for income taxes 97,986 98,193 (0.2) % Income taxes as a percentage of income before taxes 25.0 % 23.8 % Net income$ 294,203 $ 315,194 (6.7) % Net income as a percentage of net sales 19.4 % 25.3 % Net income per common share: Basic$ 0.56 $ 0.60 (6.9) % Diluted$ 0.55 $ 0.59 (6.8) % Case sales (in thousands) (in 192ounce case equivalents) 168,793 138,566 21.8 %
1Includes
*Gross profit may not be comparable to that of other entities since some entities include all costs associated with their distribution process in cost of sales, whereas others exclude certain costs and instead include such costs within another line item such as operating expenses. We include out-bound freight and warehouse costs in operating expenses rather than in cost of sales.
Net sales for the Monster Energy® Drinks segment were
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Net sales for the Strategic Brands segment were
Net sales for the Alcohol Brands segment were
Net sales for the Other segment were
Case sales for our energy drink products, in 192-ounce case equivalents, were
168.8 million cases for the three-months ended
Barrel sales for our craft beers and hard seltzers, in 31 US gallon equivalents,
were 0.05 million barrels for the three-months ended
Gross Profit
Gross profit was
Gross profit as a percentage of net sales decreased to 51.1% for the
three-months ended
In addition, gross profit as a percentage of net sales for the three-months
ended
Operating Expenses
Total operating expenses were
The increase in operating expenses was primarily due to increased out-bound
freight and warehouse costs of
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Operating Income
Operating income was
Operating income for the Monster Energy® Drinks segment, exclusive of corporate
and unallocated expenses, was
Operating income for the Strategic Brands segment, exclusive of corporate and
unallocated expenses, was
Operating loss for the Alcohol Brands segment, exclusive of corporate and
unallocated expenses, was
Operating income for the Other segment, exclusive of corporate and unallocated
expenses, was
Interest and Other Expense, net
Interest and other non-operating expense, net, was
Provision for Income Taxes
Provision for income taxes was
Net Income
Net income was
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Key Business Metrics
We use certain key metrics and financial measures not prepared in accordance with United States Generally Accepted Accounting Principles ("GAAP") to evaluate and manage our business. For a further discussion of how we use key metrics and certain non-GAAP financial measures, see "Non-GAAP Financial Measures and Other Key Metrics".
Non-GAAP Financial Measures and Other Key Metrics
Gross Billings**
Gross billings were
Gross billings for the Monster Energy® Drinks segment were
Gross billings for the Strategic Brands segment were
Net changes in foreign currency exchange rates had an unfavorable impact on
gross billings in the Strategic Brands segment of approximately
Gross billings for the Alcohol Brands segment were
Gross billings for the Other segment were
Promotional allowances, commissions and other expenses, as described in the
footnote below, were
**Gross Billings represent amounts invoiced to customers net of cash discounts and returns. Gross billings are used internally by management as an indicator of and to monitor operating performance, including sales performance of particular products, salesperson performance, product growth or declines and is useful to investors in evaluating overall Company performance. The use of gross billings allows evaluation of sales performance before the effect of any promotional items, which can mask certain performance issues. We therefore believe that the presentation of gross billings provides a useful measure of our operating performance. The use of gross billings is not a measure that is recognized under GAAP and should not be considered as an alternative to net sales, which is determined in accordance with GAAP, and should not be used alone as an indicator of operating performance in place of net sales. Additionally, gross billings may not be comparable to similarly titled measures used by other companies, as gross billings has been defined by our internal reporting practices. In addition, gross billings may not be realized in the form of cash receipts as promotional payments and allowances may be deducted from payments received from certain customers.
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The following table reconciles the non-GAAP financial measure of gross billings with the most directly comparable GAAP financial measure of net sales:
Three-Months Ended Percentage
March 31, Change
(In thousands) 2022 2021 22 vs. 21
Gross Billings $ 1,743,927 $ 1,450,036 20.3 %
Deferred Revenue 10,020 10,440 (4.0) %
Less: Promotional allowances, commissions
and other expenses*** 235,373 216,660 8.6 %
Net Sales $ 1,518,574 $ 1,243,816 22.1 %
***Although the expenditures described in this line item are determined in
accordance with GAAP and meet GAAP requirements, the presentation thereof does
not conform to GAAP presentation requirements. Additionally, our definition of
promotional and other allowances may not be comparable to similar items
presented by other companies. Promotional and other allowances for our energy
drink products primarily include consideration given to our
bottlers/distributors or retail customers including, but not limited to the
following: (i) discounts granted off list prices to support price promotions to
end-consumers by retailers; (ii) reimbursements given to our
bottlers/distributors for agreed portions of their promotional spend with
retailers, including slotting, shelf space allowances and other fees for both
new and existing products; (iii) our agreed share of fees given to
bottlers/distributors and/or directly to retailers for advertising, in-store
marketing and promotional activities; (iv) our agreed share of slotting, shelf
space allowances and other fees given directly to retailers, club stores and/or
wholesalers; (v) incentives given to our bottlers/distributors and/or retailers
for achieving or exceeding certain predetermined sales goals; (vi) discounted or
free products; (vii) contractual fees given to our bottlers/distributors related
to sales made by us direct to certain customers that fall within the
bottlers'/distributors' sales territories; and (viii) certain commissions based
on sales to our bottlers/distributors. The presentation of promotional and other
allowances facilitates an evaluation of their impact on the determination of net
sales and the spending levels incurred or correlated with such sales.
Promotional and other allowances for our energy drink products. constitute a
material portion of our marketing activities. Our promotional allowance programs
for our energy drink products with our numerous bottlers/distributors and/or
retailers are executed through separate agreements in the ordinary course of
business. These agreements generally provide for one or more of the arrangements
described above and are of varying durations, ranging from one week to one year.
The primary drivers of our promotional and other allowance activities for our
energy drink products for the three-months ended
Sales
The table below discloses selected quarterly data regarding sales for the
three-months ended
Sales of our energy drinks are expressed in unit case volume. A "unit case" means a unit of measurement equal to 192 U.S. fluid ounces of finished beverage (24 eight-ounce servings). Unit case volume means the number of unit cases (or unit case equivalents) of finished products or concentrates as if converted into finished products sold by us.
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Our quarterly results of operations reflect seasonal trends that are primarily the result of increased demand in the warmer months of the year. It has been our experience that beverage sales tend to be lower during the first and fourth quarters of each calendar year. However, our experience with our energy drink products suggests they may be less seasonal than the seasonality of traditional beverages. In addition, our continued growth internationally may further reduce the impact of seasonality on our business. Quarterly fluctuations may also be affected by other factors including the introduction of new products, the opening of new markets where temperature fluctuations are more pronounced, the addition of new bottlers/distributors, changes in the sales mix of our products and changes in advertising and promotional expenses. The COVID-19 pandemic including new variants may also have an impact on consumer behavior and change the seasonal fluctuation of our business.
Three-Months Ended
March 31,
(In thousands, except average net sales per case) 2022 2021
Net sales $ 1,518,574 $ 1,243,816
Less: Alcohol Brands segment sales (15,207) -
Less: Other segment sales (5,927) (5,727)
Adjusted net sales1 $ 1,497,440 $ 1,238,089
Case sales by segment:1
Monster Energy® Drinks 140,126 117,936
Strategic Brands 28,667 20,630
Total case sales 168,793 138,566
Average net sales per case - Energy Drinks $ 8.87 $ 8.94 1Excludes Alcohol Brands segment (effectively from
Sales of our Alcohol products are expressed in barrel volume. A "Barrel" means a
unit of measurement equal to 31 US gallons. Barrel sales were 0.05 million for
the three-months ended
See Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations" for additional information related to the increase in sales.
Liquidity and Capital Resources
Cash and cash equivalents, short-term and long-term investments. At
Of our
We believe that cash available from operations, including our cash resources and
access to credit, will be sufficient for our working capital needs, including
purchase commitments for raw materials and inventory, increases in accounts
receivable, payments of tax liabilities, expansion and development needs,
purchases of capital assets, purchases of equipment, purchases of real property
and purchases of shares of our common stock, through at least the next 12
months. Based on our current plans, at this time we estimate that capital
expenditures (exclusive of common stock repurchases) are likely to be less than
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Purchases of inventories, increases in accounts receivable and other assets, acquisition of property and equipment (including real property, personal property and coolers), leasehold improvements, advances for or the purchase of equipment for our bottlers, acquisition and maintenance of trademarks, payments of accounts payable, income taxes payable and purchases of our common stock are expected to remain our principal recurring use of cash.
The following summarizes our cash flows for the three-months ended
Net cash (used in) provided by:
2022 2021
Operating activities $ (351) $ 175,473
Investing activities $ (303,630) $ (149,083)
Financing activities $ (4,223) $ (5,701) Cash flows (used in) provided by operating activities. Cash used in operating
activities was
For the three-months ended
For the three-months ended
Cash flows used in investing activities. Cash used in investing activities was
For both the three-months ended
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Cash flow used in financing activities. Cash used in financing activities was
The following represents a summary of the Company's contractual commitments and
related scheduled maturities as of
Payments due by period (in thousands)
Less than 13 35 More than
Obligations Total 1 year years years 5 years
Contractual Obligations1 $ 335,356 $ 255,348 $ 79,935 $ 73 $ -
Finance Leases 1,251 1,214 31 6 -
Operating Leases 37,268 7,277 11,160 6,924 11,907
Purchase Commitments2 384,111 377,290 6,537 284 -
$ 757,986 $ 641,129 $ 97,663 $ 7,287 $ 11,907 1Contractual obligations include our obligations related to sponsorships and other commitments.
2Purchase commitments include obligations made by us and our subsidiaries to various suppliers for raw materials used in the production of our products. These obligations vary in terms, but are generally satisfied within one year.
No unrecognized tax benefits have been recorded as liabilities as of
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with GAAP. GAAP
requires us to make estimates and assumptions that affect the reported amounts
in our consolidated financial statements. Critical accounting estimates are
those that management believes are the most important to the portrayal of our
financial condition and results and require the most difficult, subjective or
complex judgments, often as a result of the need to make estimates about the
effect of matters that are inherently uncertain and that have had, or are
reasonably likely to have, a material impact on our financial condition or
results of operations. Judgments and uncertainties may result in materially
different amounts being reported under different conditions or using different
assumptions. There have been no material changes to our critical accounting
policies or estimates from the information provided in "Part II, Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Part II, Item 8 - Financial Statements and Supplementary Data -
Note 1 - Organization and Summary of Significant Accounting Policies", included
in our Annual Report on Form 10-K for the fiscal year ended
Recent Accounting Pronouncements
There have been no material changes in recently issued or adopted accounting
pronouncements from those disclosed in our Annual Report on Form 10-K for the
fiscal year ended
Inflation
Inflation had a negative impact on our results of operations for the
three-months ended
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Forward-Looking Statements
Certain statements made in this report may constitute forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended) (the "Exchange Act") regarding the expectations of management with respect to revenues, profitability, adequacy of funds from operations and our existing credit facility, among other things. All statements containing a projection of revenues, income (loss), earnings (loss) per share, capital expenditures, dividends, capital structure or other financial items, a statement of management's plans and objectives for future operations, or a statement of future economic performance contained in management's discussion and analysis of financial condition and results of operations, including statements related to new products, volume growth and statements encompassing general optimism about future operating results and non-historical information, are forward-looking statements within the meaning of the Exchange Act. Without limiting the foregoing, the words "believes," "thinks," "anticipates," "plans," "expects," and similar expressions are intended to identify forward-looking statements.
Management cautions that these statements are qualified by their terms and/or important factors, many of which are outside our control, and involve a number of risks, uncertainties and other factors, that could cause actual results and events to differ materially from the statements made including, but not limited to, the following:
? Our ability to absorb, mitigate or pass on to our bottlers/distributors and/or
consumers increases in commodity, fuel, freight and other costs;
? The impact of rising costs and inflation on the discretionary income of our
consumers, particularly the rising cost of gasoline;
The impact of the military conflict in
? disruptions, volatility in commodity prices, increased economic uncertainty and
escalating geopolitical tensions;
The human and economic consequences of the COVID-19 pandemic, including new
variants, as well as the measures taken or that may be taken in the future by
? governments, and consequently, businesses (including the Company and its
suppliers, bottlers/ distributors, co-packers and other service providers) and
the public at large to limit the COVID-19 pandemic;
Fluctuations in growth and/or growth rates and/or declining sales in the
domestic and international energy drink and alcohol beverage categories
? generally, including in the convenience and gas channel (which is our largest
channel) and the impact on demand for our products resulting from deteriorating
economic conditions and/or financial uncertainties due to the COVID-19
pandemic;
The impact of temporary plant closures, production slowdowns and disruptions in
? operations experienced by our suppliers, bottlers/distributors and/or
co-packers as a result of the COVID-19 pandemic, including any material
disruptions on the production and distribution of our products;
The impact of potential future reductions of our sponsorship and endorsement
? activities as well as our sampling activities as a result of COVID-19 or other
pandemics on our future sales and market share;
? The impact of countries being in lockdown due to the COVID-19 pandemic at
various times;
The impact of vaccine mandates on our business and supply chain, including our
? ability to recruit and/or retain employees, and disruptions in the business of
our co-packers, bottlers/distributors and/or suppliers;
? Closures of, and continued restrictions on, on-premise retailers and other
establishments which sell our products as the result of the COVID-19 pandemic;
? The limitation or reduction by our suppliers, bottlers/distributors and/or
co-packers of their activities and/or operations during the COVID-19 pandemic;
? The impact of the COVID-19 pandemic on our product sampling programs;
? Our ability to introduce new products and the impact of the COVID-19 pandemic
on our innovation activities;
Our ability to successfully adapt to the changing landscape of advertising,
? marketing, promotional, sponsorship and endorsement opportunities created by
the COVID-19 pandemic;
? Other effects of the COVID-19 pandemic on our employees, such as mental health
challenges that employees may face;
? The impact of any reductions in productivity and disruptions to our business
routines while most office-based employees of the Company are working remotely;
? The impact of logistical issues, including shortages of shipping containers,
port of entry congestion and increased freight costs;
We have extensive commercial arrangements with TCCC and, as a result, our
? future performance is substantially dependent on the success of our
relationship with TCCC;
The impact of TCCC's bottlers/distributors distributing Coca-Cola brand energy
? drinks and possible reductions in the number of our SKUs carried by such
bottlers/distributors and/or such bottlers/distributors imposing limitations on
distributing new product SKUs;
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? The effect of TCCC being one of our significant stockholders and the potential
divergence of TCCC's interests from those of our other stockholders;
? Our ability to maintain relationships with TCCC system bottlers/distributors
and manage their ongoing commitment to focus on our products;
Disruption in distribution channels and/or decline in sales due to the
? termination and/or insolvency of existing and/or new domestic and/or
international bottlers/distributors;
? Lack of anticipated demand for our products in domestic and/or international
markets;
? Fluctuations in the inventory levels of our bottlers/distributors, planned or
otherwise, and the resultant impact on our revenues;
Unfavorable regulations, including taxation requirements, age restrictions
? imposed on the sale, purchase, or consumption of our products, marketing
restrictions, product registration requirements, tariffs, trade restrictions,
container size limitations and/or ingredient restrictions;
The effect of inquiries from, and/or actions by, state attorneys general, the
"FDA"), municipalities, city attorneys, other government agencies,
quasi-government agencies, government officials (including members of
?
the foreign countries in which our products are manufactured and/or
distributed, into the advertising, marketing, promotion, ingredients, sale
and/or consumption of our energy drink products, including voluntary and/or
required changes to our business practices;
Our ability to comply with laws, regulations and evolving industry standards
? regarding consumer privacy and data use and security, including with respect to
the General Data Protection Regulation and the California Consumer Privacy Act
of 2018;
? Our ability to achieve profitability and/or repatriate cash from certain of our
operations outside
Our ability to manage legal and regulatory requirements in foreign
? jurisdictions, potential difficulties in staffing and managing foreign
operations and potentially higher incidence of fraud or corruption and credit
risk of foreign customers and/or bottlers/distributors;
Changes in
?
change or repeal the 2017 Tax Cuts and Jobs Act and the federal corporate
income tax rate reduction;
? Our ability to produce our products in international markets in which they are
sold, thereby reducing freight costs and/or product damages;
? Our ability to effectively manage our inventories and/or our accounts
receivables;
Our foreign currency exchange rate risk with respect to our sales, expenses,
? profits, assets and liabilities denominated in currencies other than the
dollar, which will continue to increase as foreign sales increase;
? The long-term impact of the
(or "Brexit");
? Changes in accounting standards may affect our reported profitability;
? Implications of the
base erosion and profit shifting project;
Any proceedings which may be brought against us by the Securities and Exchange
? Commission (the "SEC"), the FDA, the
bodies;
The outcome and/or possibility of future shareholder derivative actions or
? shareholder securities litigation that may be filed against us and/or against
certain of our officers and directors, and the possibility of other private
shareholder litigation;
The outcome of product liability or consumer fraud litigation and/or class
action litigation (or its analog in foreign jurisdictions) regarding the safety
? of our products and/or the ingredients in and/or claims made in connection with
our products and/or alleging false advertising, marketing and/or promotion, and
the possibility of future product liability and/or class action lawsuits;
? Exposure to significant liabilities due to litigation, legal or regulatory
proceedings;
? Intellectual property injunctions;
? Unfavorable resolution of tax matters;
? Uncertainty and volatility in the domestic and global economies, including risk
of counterparty default or failure;
? Our ability to address any significant deficiencies or material weakness in our
internal controls over financial reporting;
? Our ability to continue to generate sufficient cash flows to support our
expansion plans and general operating activities;
Decreased demand for our products resulting from changes in consumer
preferences, including changes in demand for different packages, sizes and
? configurations, obesity and other perceived health concerns, including concerns
relating to certain ingredients in our products or packaging, product safety
concerns and/or from decreased consumer discretionary spending power;
Adverse publicity surrounding obesity and health concerns related to our
? products, product safety and quality, water usage, environmental impact and
sustainability, human rights, our culture, workforce and labor and workplace
laws;
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Changes in demand that are weather related and/or for other reasons, including
changes in product category and/or package consumption and changes in cost and
? availability of certain key ingredients including aluminum cans, as well as
disruptions to the supply chain, as a result of climate change and extreme
weather conditions;
The impact of unstable political conditions, civil unrest, large scale
? terrorist acts, the outbreak or escalation of armed hostilities, major natural
disasters and extreme weather conditions, or widespread outbreaks of infectious
diseases (such as the COVID-19 pandemic);
The impact on our business of competitive products and pricing pressures and
our ability to gain or maintain our share of sales in the marketplace as a
? result of actions by competitors, including unsubstantiated and/or misleading
claims, false advertising claims and tortious interference, as well as
competitors selling misbranded products;
The impact on our business of trademark and trade dress infringement
proceedings brought against us relating to our brands, including our Reign
? Total Body Fuel® high performance energy drinks, which could result in an
injunction barring us from selling certain of our products and/or require
changes to be made to our current trade dress;
? Our ability to implement and/or maintain price increases, including through
reductions in promotional allowances;
? An inability to achieve volume growth through product and packaging
initiatives;
Our ability to sustain the current level of sales and/or achieve growth for our
? Monster Energy® brand energy drinks and/or our other products, including our
Strategic Brands and Alcohol Brands;
? Our ability to implement our growth strategy, including expanding our business
in existing and new sectors, such as the alcoholic beverage sector;
The inherent operational risks presented by the alcoholic beverage industry
? that may not be adequately covered by insurance or lead to litigation relating
to the abuse or misuse of our products;
? Our ability to successfully integrate CANarchy and other acquired businesses or
assets;
The impact of criticism of our energy drink products and/or the energy drink
market generally and/or legislation enacted (whether as a result of such
criticism or otherwise) that restricts the marketing or sale of energy drinks
? (including prohibiting the sale of energy drinks at certain establishments or
pursuant to certain governmental programs), limits caffeine content in
beverages, requires certain product labeling disclosures and/or warnings,
imposes excise and/or sales taxes, limits product sizes and/or imposes age
restrictions for the sale of energy drinks;
Our ability to comply with and/or resulting lower consumer demand and/or lower
profit margins for energy drinks and/or alcohol beverages due to proposed
and/or future
proposed or existing laws and regulations in certain foreign jurisdictions
and/or any changes therein, including changes in taxation requirements
(including tax rate changes, new tax laws, new and/or increased excise, sales
and/or other taxes on our products and revised tax law interpretations) and
environmental laws, as well as the Federal Food, Drug, and Cosmetic Act and
regulations or rules made thereunder or in connection therewith by the FDA, as
? well as changes in any other food, drug or similar laws in
and internationally, especially those changes that may restrict the sale of
energy and/or alcohol drinks (including prohibiting the sale of energy drinks
at certain establishments or pursuant to certain governmental programs), limit
caffeine or alcohol content in beverages, require certain product labeling
disclosures and/or warnings, impose excise taxes, impose sugar taxes, limit
product sizes, or impose age restrictions for the sale of energy and/or alcohol
drinks, as well as laws and regulations or rules made or enforced by the Bureau
of Alcohol, Tobacco, Firearms and Explosives and/or the
counterparts;
Disruptions in the timely import or export of our products and/or ingredients
? including flavors, flavor ingredients and supplement ingredients due to port
congestion, strikes and related labor issues or otherwise;
Our ability to satisfy all criteria set forth in any model energy drink
guidelines, including, without limitation, those adopted by the American
?
beverage associations and the impact of our failure to satisfy such guidelines
may have on our business;
? The effect of unfavorable or adverse public relations, press, articles,
comments and/or media attention;
Changes in the cost, quality and availability of containers, packaging
materials, aluminum cans, the Midwest and other premiums, raw materials,
? including flavors and flavor ingredients, and other ingredients and juice
concentrates, and our ability to obtain and/or maintain favorable supply
arrangements and relationships and procure timely and/or sufficient production
of all or any of our products to meet customer demand;
Any shortages that may be experienced in the procurement of containers and/or
other raw materials including, without limitation, flavors, flavor ingredients,
? supplement ingredients, aluminum cans generally, PET containers used for our
Monster Hydro® energy drinks, 24-ounce aluminum cap cans and 550ml BRE aluminum
cans with resealable ends;
Limitations in securing the supply of sufficient quantities of aluminum cans
may cause us to focus on producing higher volume products. As a result, certain
? of our lower volume products may be temporarily discontinued by our
bottlers/distributors and/or their retail customers, and we may not be able to
reinstate all, or any, of such lower volume products in the future;
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In order to secure sufficient quantities of aluminum cans and sufficient
co-packing availability in the future, we may be required to commit to minimum
? purchase volumes and/or minimum co-packing volumes. In the event that we
over-estimate future demand for our products and therefore may not purchase
such minimum quantities in full, or utilize such minimum co-packing volumes in
full, we may incur claims and/or costs or losses in respect of such shortfalls;
? The impact on our cost of sales of corporate activity among the limited number
of suppliers from whom we purchase certain raw materials;
Our ability to pass on to our customers all or a portion of any increases in
? the costs of raw materials, ingredients, commodities and/or other cost inputs
affecting our business;
Our ability to achieve both internal domestic and international forecasts,
which may be based on projected volumes and sales of many product types and/or
? new products, certain of which are more profitable than others; there can be no
assurance that we will achieve projected levels of sales as well as forecasted
product and/or geographic mixes;
Our ability to penetrate new domestic and/or international markets and/or gain
? approval or mitigate the delay in securing approval for the sale of our
products in various countries;
The effectiveness of sales and/or marketing efforts by us and/or by the
? bottlers/distributors of our products, most of whom distribute products that
may be regarded as competitive with our products;
Unilateral decisions by bottlers/distributors, buying groups, convenience
chains, grocery chains, mass merchandisers, specialty chain stores, e-commerce
retailers, e-commerce websites, club stores and other customers to discontinue
? carrying all or any of our products that they are carrying at any time,
restrict the range of our products they carry, impose restrictions or
limitations on the sale of our products and/or the sizes of containers of our
products and/or devote less resources to the sale of our products;
The impact of certain activities by competitors and others to persuade
? regulators and/or retailers and/or customers in certain countries to reduce the
permitted or maximum container sizes for our products from those currently
being sold and marketed by us;
The impact of possible trading disputes between our bottler/distributors and
? their customers and/or one or more buying groups which may result in the
delisting of certain of the Company products, temporarily or otherwise;
? The effects of retailer consolidation on our business and our ability to
successfully adapt to the rapidly changing retail landscape;
? Our ability to adapt to the changing retail landscape with the rapid growth in
e-commerce retailers;
? The effects of bottler/distributor consolidation on our business;
? The costs and/or effectiveness, now or in the future, of our advertising,
marketing and promotional strategies;
? The success of our sports marketing, social media and other general marketing
endeavors both domestically and internationally;
? Unforeseen economic and political changes and local or international
catastrophic events;
Possible product recalls and/or reformulations of certain of our products
? and/or market withdrawals of certain of our products due to defective and/or
non-compliant formulas or production in one or more jurisdictions;
Our ability to make suitable arrangements and/or procure sufficient capacity
? for the co-packing of any of our products both domestically and
internationally, the timely replacement of discontinued co-packing arrangements
and/or limitations on co-packing availability, including for retort production;
? Our ability to make suitable arrangements for the timely procurement of
non-defective raw materials;
Our inability to protect and/or the loss of our intellectual property rights
? and/or our inability to use our trademarks, trade names or designs and/or trade
dress in certain countries;
Volatility of stock prices which may restrict stock sales, stock purchases or
? other opportunities as well as negatively impact the motivation of equity award
grantees;
Provisions in our organizational documents and/or control by insiders which may
? prevent changes in control even if such changes would be beneficial to other
stockholders;
? The failure of our bottlers and/or co-packers to manufacture our products on a
timely basis or at all;
Any disruption in and/or lack of effectiveness of our information technology
? systems, including a breach of cyber security, that disrupts our business or
negatively impacts customer relationships, as well as cybersecurity incidents
involving data shared with third parties; and
? Recruitment and retention of senior management, other key employees and our
employee base in general.
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The foregoing list of important factors and other risks detailed from time to
time in our reports filed with the
© Edgar Online, source
