Hansen Keeps Growin’ in Q3, amid Signs that Energy Category May Be
on Mend; Transition to Bottlers Advances; More Overseas Markets Added; Asahi
Soon a Partner? Amid a few
signs that once-booming energy segment may be emerging from year-long funk,
Hansen Natural continued to hit new sales and profit peaks in 3d qtr, with net
sales rising 8.1% to $307.9 mil, and operating income surging 13.6% to $92.9
mil. Net sales for co’s DSD segment, where
Monster Energy sales are concentrated, grew by 9.6% to $282.4 mil. Case sales rose to 29.8 mil from 28
mil, and despite what some report to be intense promotional activity in markets
like Southwest and Calif, avg price per case rose to $10.33 from $10.17. For 9
mos, net sales increased 9.4% to $852.4 mil and operating inc
increased 24% to $251.5 mil.
Still, partly because
promotional costs run higher in overseas markets, co missed earnings
expectations for 1st time this year, sending shares skidding $2-3 in early
trading Fri from $37 close on Thurs, just before earnings were announced. “Disappoints, but still gaining share,” wrote
Stifel Nicolaus’ Mark Astrachan, adding: “We believe current valuation underestimates
Hansen's earnings power.”
As usual on conference call with
investors, chmn/ceo Rodney Sacks offered panoply of scanner data to make case
that Monster continues to outgrow rivals, with Red Bull also turning in strong
performance and smaller NOS brand continuing surge, but Rockstar, Amp and Full
Throttle all losing ground. Full
Throttle, NOS and Monster are generally in Coke stable, Rockstar and Amp in
Pepsi stable, and Red Bull independent.
Tho economy’s prospects are still
cloudy, Rodney offered encouraging insight that, per Nielsen scanner data,
energy drink sales in convenience-and-gas and grocery channels grew for 1st
time since Mar, edging up 0.9%. Still,
downturn in construction hit Monster’s blue-collar base heavily, exacting
biggest impact on that demo’s favored 24-oz can. By contrast, Monster’s core 16-oz can was up
in Q3. Asked why Red Bull did so well,
too, Rodney guessed that it’s because of attention co has been focusing on
weaker areas, as well as higher register ring as its 16-oz can garners greater
traction. In C&G, Monster was up
5.4%, Red Bull 5.3%, while Rockstar slipped 4%, Amp 4.4% and Full Throttle
13.1%. Smaller NOS brand grew by 23.2%.
Progress Cited in Transition to
Coke Bottlers Sacks made case
that, after earlier bumps in road, various transitions to Coke bottlers and Bud
wholesalers are gettin’ on track. In
both Atlanta and Fla, share is now higher than pre-transition but share still
lags in Tex, where brands exited powerful Dr Pepper Snapple distribution
system. In Houston, heavily independent
c-stores “continue to be a challenge.”
Detroit has also shown “softness” since transition, he said. Overall, tho, revamped distribution map “is
paying dividends.”
Extensions: Java Monster Ails;
Import, Espresso, Nitrous Racking Up Sales Among extensions to core Monster brand,
Java Monster continued to lose share at hands of Pepsi/Starbucks Doubleshot,
with silver lining that smaller chunk of sales by expensive-to-make items helped
boost Monster gross margin to 53.6% from 51.4%. Newer entries are chalking up
meaningful revenue #s: Monster Import, $8.4 mil in Q3, noncarb Espresso $4.3
mil, 12-oz Nitrous $13 mil. (At recent
NACS c-store expo, Monster execs noted that can shortage has Nitrous shipping
with Rexam resealable “cap can” in western markets but in non-resealable Ball
cans in East.)
Hitman Shot Adopts Lower-Price
Strategy; Evaluates Other Options
Like every other rival to 5 Hour shot line, Hansen is struggling to make
meaningful impact in still-growing sector.
Sacks credited 3-oz Hitman with sales that are “close to Red Bull” and
way ahead of NOS, Amp and Full Throttle, but he’s “not satisfied with sales
rate.” (Recall that behind scenes Hansen
has been challenging 5 Hour claims and even trying to force name change to
less-specific claim.) He also decries
“irrational” pricing. So, as anticipated
(BBI, Sep 25), co has embarked on lower-price push that’s putting Hitman on
shelf at $1.99, more in line with canned entries. But it’s also evaluating other unspecified
alternatives, he said.
Peace Tea Line Gets Coke Partner
into Game Peace tea line,
prepriced at 99 cents per 23.5-oz can, offers “our largest single customer”
(meaning Coke) a value line with which to challenge dominant players (AriZona,
Lipton). Brand, whose debut caused stir
at NACS, will go into Coke system, adding potentially hi-volume leg to Hansen
biz and better profits as higher-margin items are intro’d down road. Hansen figures its big energy drink biz and
ties to Coke and Anheuser-Busch give it scale unavailable to others, like New
Age (with Xingtea), that have similarly tried to challenge AriZona on its
turf. At same time, it offers chance to
restore margins beaten down by AriZona pricing policies. Recall that in past KO has tried to acquire
AriZona to buttress tea offering.
Monster Accelerates Offshore Push; Asahi a
Potential Partner in Asia? Outside US, brand is gaining share in Canada
and Mexico. Continental Europe
“progressing satisfactorily” and UK is doing a bit better after bumpy
start. Sacks said Hansen execs are
sitting down with CCE folks to explain why Monster entries should be viewed as
complement to their other brand (higher-margin Relentless). New distributor has been recruited for
Ireland and Australia went live in Q3 via Schweppes. Finland also aboard in Q3. All told, sales to customers outside US
came to $50 mil vs $30.7 mil in 08 period.
Despite some delays, Brazil
remains in plans for launch later this year.
Sacks said co is considering other Latin American markets as well as
Asia, tho no fixed plans yet. Sacks hopes to announce “meaningful” new
relationship in near future. Sources
said co has been in talks with Asahi Brewing; attendees at NACS show spotted
Asahi execs visiting with Monster brass, so deal may be close.
Company Experiments with Owning
Some Properties With costs of
participating in extreme sports soaring as other marketers bid up athlete
sponsorships, Monster has embarked on experiment in owning some of properties
it employs. Push, which mimics strategy
that energy pioneer Red Bull has employed for decade, includes activities like
Epicenter 09 concert in Pomona, Calif, which lost $$ but should break even in future,
Rodney said.