Hansen Shares Bust, Then Boom, as Investors Weigh Current Costs vs Future Growth    Hansen Natural shares performed like motocross rider plunging into ravine and then hurtling out, initially falling upon report that earnings narrowed in Q4 but then surging to new high as investors digested management argument that those costs are being incurred to assure future of fast-growing brands.  Shares plunged from $56 at close of market Thurs, when earnings were released, only to surge to nearly $60 this morning as investors rethought views.  “Future Bright as Ever,” headlined UBS’ Kaumil Gajrawala, who remained bullish on co despite disappointments contained in latest report.  As of late afternoon today, shares had settled at around $59.

“We have done some advance spending,” chmn/ceo Rodney Sacks said in concluding investor conference call last night.  “And obviously, we’d like to try and manage it more carefully, which we are proposing to do going forward.  But the principal focus for us is to make sure the brand is healthy and it continues to grow.  And that for us is important as a company, looking at the long-term health of the brand.”

HANS turned in another strong sales performance relative to bev peers, with Q4 net sales surging 9.5% to $318.7 mil, tho some analysts found it disappointing.  Net sales within DSD segment (mainly Monster Energy) rose 10.4% to $297.5 mil but slipped to $21.2 mil from $21.6 mil in smaller warehouse segment where natural juice lines reside.  On conference call, Sacks indicated that 2011 is off to even better start, with sales rising more than 50% in first 2 mos (+35% once effect of late 2009 load-in, which decreased Q1 sales in 2010, is factored in).  “We believe this growth demonstrates the value of the brand reinvestment spending over the last few years,” wrote UBS’ Gajrawala.  Overseas biz continued to grow, advancing 53% to $66.4 mil in Q4.  For full year 2010, oper inc edged up 3.1% to $347.8 mil on net sales gain of 14.1% to $1.3 bil.

But investors initially were spooked by Q4 operating income decline of 7% to $79.8 mil.  Net income was down 7.9% to $49.1 mil.  Gross margin slipped to 51.6% from 53.4% in prior year, depressed by higher selling expenses, up to 12.2% of net sales vs 10.4%, as co sought “to further promote the Monster Energy brand in existing markets, as well as to increase awareness and to establish the brand in new international markets.”  Those activities appear to have ranged from deep discounts in some US chain retailers (in recent mos distributors of rival energy brands have complained about frequent deals putting Monster at 99 cents per 16-oz can in chains like Ralphs and Food 4 Less) to augmented sales force in countries where distributors don’t do so well in reaching crucial indie retailers.  Also factors were shift to lower-margin items like Peace Tea line, in 99-cent big can.

On innovation front, Monster Absolutely Zero, launched in Q3, seems to have been well-received by distribs, retailers and consumers with limited cannibalization of Lo Carb, Rodney indicated, and Worx Energy Shots have achieved “reasonable distribution thru CCR,” new entity established within Coca-Cola following acquisition of CCE’s N Amer operations.  Line is backed by national TV ads that broke several days ago (story below).  Rodney expressed high hopes for Monster Rehab, forthcoming next mo, but conceded there seems to be resistance to glass-bottle M3 Super Concentrate and said co is taking additional steps to secure further distribution.  Sales of Peace Tea line, which like Worx goes thru Coke network, continue to meet expectations, with further lift anticipated from pending Caddyshack tea/lemonade launch challenging AriZona’s Arnold Palmer franchise.