Monster reviewing more price increases, looks to expand in wellness space
Looking at its fiscal year for the twelve-month ending Dec. 31, 2022, Monster saw gross profits at 50.3%, down from 56.1% from the same period last year. Additionally, operating expenses rose to $1.59bn from $1.31bn, and operating income decreased to $1.58bn from $1.80bn from the comparable period last year.
For the fourth quarter of 2022, gross profits as a percentage of net sales were at 51.8%, down from 53.9% for the same period in 2021. This dip was attributed to increased cost increases in ingredients, packaging materials, and co-packing fees; geographical and product sales mix; and logistical costs, Sacks said.
Due to these factors, Monster “will continue to review further opportunities for price increases and pricing actions in order to mitigate inflationary pressures,” Sacks said. These increases will be in addition to the price increases that the brand announced last September.
Transitory but certain costs aren’t going away
Some of the increase in manufacturing costs “are likely to be transitory,” and costs like freight expenses have already start to come down, said Sacks.
Monster is also looking to save money by using up its higher cost imported aluminum can inventory, a process that should wrap up in 2023, Sacks added. At the same time, Monster is purchasing more aluminum cans from local sources in the US and other markets, which has led to “a reduction in cost of sales,” he explained.
Additionally, Monster doesn't have "that significant quantity left" in terms of its imported aluminum can inventory, but it's unsure "what the impact will be on [the] gross margin," said Hilton H. Schlosberg, vice chairman and co-CEO at Monster.
Despite these measures to keep costs in check, Monster has “certain costs that are not going away,” Schlosberg noted. Just as co-packing costs are likely to stay high, "sugar is in tight supply,” he added.
Innovating on flavor, releasing multipacks to grow brand
Monster also is expanding into new beverage segments, including wellness, as the brand is “able to secure a little more shelf space across the different channels,” Sacks said.
Last month, Monster launched Monster Tour Water, a line of unflavored sparkling waters in 19.2 oz. cans, and the company is also launching a "total wellness energy drink" with Monster Rainstorm this month in four flavors, Sacks said.
And similar to other beverage companies, Monster is making a bigger push with sugar-free offerings. In January 2023, the company released Monster Energy Zero Sugar, which “was specifically developed an indistinguishable zero sugar analog of [its] original unique monster energy green flavor,” Sacks said.
Monster also is looking to increase how many beverages consumers purchase "by leveraging multipacks, especially in the grocery channel," Sacks said. “There's a whole SKU of multipack and variety packs that …we think will be positive for the brand this year for sales,” he added.