Well, the days of wondering if or when Monster would flex its brand equity in the bev alc space are over. In the company’s Q2 earnings report Thursday, Monster co-CEO Rodney Sacks revealed an imminent new bev alc product to hit in late Q4.
It’s called The Beast Unleashed. And it’s Monster’s first hard FMB.
“The Beast Unleashed” will be 6% ABV, and initially available in four flavors. Initial packages include 16 oz. single serve cans (hello c-stores) as well as variety offerings in 12-pack 12 oz. sleek cans. It will come in “four great-tasting bold flavors,” based on “Monster’s well-known and popular flavor profiles,” said Rodney.
The company said it will launch through beer distributors in the United States (theoretically, via the network it inherited earlier this year, when it bought craft platform CANarchy for $330 million [see CBD 01-13-2022]). The Beast Unleashed will roll out via “a phased state launch approach,” with the goal of being national by the end of 2023. “Our innovation pipeline of both alcoholic and non-alcoholic beverages is robust and exciting,” said Rodney, who promised more news “at a later date.” On the call, he added that the product seeks to carve out “its own unique space” in bev alc, “distinguishable” from the line of “ubiquitous” hard seltzers. We expected some analyst questions on the call regarding the new brand. Surprisingly, nobody asked about it.
RECORD NET SALES BUT CRAZY COGS HIKES MADE FOR %7 DROP IN GP. Otherwise, Monster earnings were marked by rising costs of goods sold, which weighed on margins.
The company achieved record Q2 net sales of $1.66 billion, up 13.2%. But it also saw a “significant increase” in cost of sales, resulting in a material decrease in both gross profit and gross profit as a percentage of net sales. Gross profit went to $780 million, down from $837 million the prior year (down almost 7%).
COGs were up across many segments, including freight rates and fuel costs, (and costs relating to aluminum cans importation); increased ingredient and other input costs; increased aluminum can costs attributable to higher aluminum commodity pricing; geographical and product sales mix; and production “inefficiencies.”
The company also cited “significant increases in distribution expenses,” including “increased fuel, freight and warehousing costs, which adversely impacted operating costs.”
6% PRICE INCREASE. Due to such cost increases, the company also said that it would implement a net sales price increase “in the range of 6% market-wide” in the U.S. effective September 1.
ETC: SNAGGING SHELF SPACE FROM BANG? One caller asked if they expect to snag incremental shelf space as brands like Bang transition to other wholesalers.
“So generally, in transitions, there’s always upheavals,” said Monster co-CEO Hilton Schlosberg. “Transitions never happen cleanly overnight. . And remember, that Bang is in a lot of the Pepsi shelf space and a lot of the Pepsi coolers; and despite that, you guys have seen their shares decrease over the last 24 months or so.
“So, I don’t want to say any more than that,” he said. But “obviously, we continue to grab as much shelf space as we can. We contract for a lot of our own shelf space, and we work with the Coke bottlers . and then Bang, on the other hand, would work with the Pepsi space and with the Pepsi coolers,” which they should be transitioning out of (while of course, Celsius transitions into the Pepsi system).
Obviously, “there will be a lot of fighting going on,” said Rodney, adding A-B’s Ghost and Nutrabolt’s C4 to the mix of contenders. Stay tuned.
Source: Beer Business Daily