Monster Beverage Corporation

90% of sales are 10 and a half, or 11. And the, 92 is not.

You don't hear anything? I don't either. I called you an idiot.

And you know, they're pretty, both new, both not there. It's a similar distribution, one side.

Hello. We appear to be live, we're not sure, but I think we are. Good afternoon, ladies and gentlemen. Thank you for attending this call. I'm Rodney Sachs. Hilton Schlossberg, our Vice Chairman and President, is with me, as is Tom Kelly, our Executive Vice President of Finance. As you may have already noticed, my voice is soft today. That's because I recently had a benign polyp removed from my larynx. The good news is that I am fine, but I have been advised to use my voice sparingly. So I'll save my voice for the Q&A and hand the call over to Hilton.

Thank you. Tom Kelly is going to read the Safe Harbor Statement before we start the call.

Before we begin, we would like to remind listeners that certain statements made during this call 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 and Exchange Act of 1934 as amended and are based on currently available information regarding the expectations of management with respect to revenues, profitability, future business, future events, financial performance, and trends. Management cautions that these statements are based on our current knowledge and expectations and are subject to certain risks and uncertainties, many of which are outside the control of the company, that may cause actual results to differ materially from the forward-looking statements made during this call. Please refer to our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K filed on February 28, 2019, and our most recent quarterly report on Form 10-Q filed on August 8, 2019, including the sections contained therein, risk factors and forward-looking statements for discussion on specific risk and uncertainties that may affect our performance. The company assumes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. An explanation of the non-GAAP measure of gross sales and certain expenditures, which may be mentioned during the course of this call, is provided in the notes and designated with asterisks in the condensed, consolidated statements of income and other information attached to the earnings release dated November 7, 2019. A copy of this information is also available on our website, .monsterbevcorp.com, and the financial information section.

Thank you, Tom. We're going to turn now to the quarter, and we'll move on from there. Consumer beverage preferences and tastes continue to evolve at an increasing pace, and we are endeavoring to address them through our ongoing innovation of new products. In the third quarter of 2019, net sales were $1.13 billion, up .6% from $1.02 billion in the third quarter of 2018. Net sales in the third quarter were negatively impacted by approximately $12.2 million of foreign currency movements. Without these foreign currency movements, net sales for the quarter would have been up 12.8%. The comparative net sales in the 2018 third quarter included approximately $16 million in net sales of advanced purchases as a result of the price increase in the United States, a person of our products, effective November 1, 2018. Adjusting for these advanced purchases and foreign currency movements, net sales for the 2019 third quarter would have been up 14.6%. Turning now to gross profit. Gross profit as a percentage of sales for the 2019 third quarter was .4% compared with .8% in the 2018 third quarter. The decrease in gross profit as a percentage of net sales for the 2019 third quarter was primarily the result of geographical and product sales mix. Such decrease was partially offset by price increases as well as reduced input costs. Distribution costs as a percentage of net sales were .3% for the 2019 third quarter as compared to .1% in the 2018 third quarter. Selling and marketing expenses as a percentage of net sales were .1% for the 2019 third quarter as compared to .2% in the same quarter in 2018. General and administrative costs as a percentage of net sales were .1% for the 2019 third quarter as compared to .1% in the same quarter in 2018. In the quarter, payroll expenses as a percentage of net sales were .5% compared to .2% in the same period in 2018. Payroll costs increased $10.4 million primarily due to headcount growth both domestically and internationally. Stock-based compensation and on-cash items were $16 million in the third quarter of 2019 compared to $14.1 million in the same quarter in 2018. Effective tax rate increased from .8% in the 2018 third quarter to 25% in the 2019 third quarter. The increase in the effective tax rate was primarily due to increased income taxes in certain foreign jurisdictions as well as a decrease in the equity compensation deduction. In addition, the comparative effective tax rate for the 2018 third quarter included a non-recurring tax benefit. Net income was $298.9 million in the 2019 third quarter compared to net income of $267.7 million in the 2018 third quarter, an increase of 11.6%. Diluted earnings per share for the 2019 third quarter increased 14% to 55 cents from 48 cents in the third quarter of 2018. Now we turn to the Coca-Cola Company Transition Update. In the third quarter of 2019, Monster Energy was launched by or transitioned to Coke Bottlers in the Dominican Republic, El Salvador and Honduras. We are planning further international launches later this year. We launched Predator, our affordable energy brand, in the third quarter of 2019 in Botswana and in Slovakia. We are planning to launch Predator in selected additional markets in Eastern Europe and Africa in the fourth quarter of 2019. In China, we complete the rollout of both Monster Ultra White and Monster Mango in the third quarter. We have significantly expanded our shelf space for Monster with these three SKUs in our targeted top 40 cities and key accounts. We continue the rollout of Monster across India and began the launch of Ultra White into approximately 20% of our accounts in September. We will continue Ultra's expansion into the fourth quarter as well as commencing the launch of Mango Loco to leverage consumer taste preferences in India. I will now briefly discuss our litigation with Vital Pharmaceuticals, VPX, the maker of Bang Energy Drinks. Monster filed a lawsuit against VPX in September 2018 for false advertising, and VPX filed a trademark lawsuit against Monster in relation to our rain total body fuel high-performance energy drinks in March 2019. Both proceedings are ongoing. In August 2019, VPX filed another lawsuit in the southern district of Florida alleging a host of legal challenges, including many similar to the claims Monster alleged against VPX. Monster will seek the dismissal of VPX's most recent lawsuit. In October 2019, the U.S. District Court for the southern district denied VPX's motion for preliminary injunction against our rain total body fuel high-performance energy drinks in its trademark lawsuit. In its decision, the court ruled that VPX failed to meet any of the elements of a preliminary injunction and felt established that it is likely to succeed on the merits of its claims. VPX recently announced an intention to launch its own line of rain-branded energy drinks in 16-ounce cans to be sold in convenience stores. We recently filed an expedited motion for a preliminary injunction asking the court to stop this product launch and to prevent VPX from infringing Monster's trademark rights in this way. In one of the court findings in May 2019, we stated that sales of rain beverages from June through December 2019 were projected to exceed $235 million. Our sales of rain through October, while solid, as illustrated by the Nielsen numbers, were lower than our initial expectations. As with any new product launches, sales may be affected by many factors, including retail authorizations, the dates on which listings are secured for products of major retailers, and introductions of new flavors. The company has not changed its practice with respect to projections and will not be providing projections with respect to rain or any other products. As our litigation with VPX is sub-judicat, we will not be answering any questions on this matter on today's call. Now we're going to turn to the Nielsen reports in North America. According to the Nielsen reports, for the 13 weeks through October 26, 2019, for all outlets combined, namely convenience, grocery, drug, mass merchandises, sales in dollars in the energy drink category, including energy shots, increased by .1% versus the same period a year ago. Sales of the company's energy brands, including rain, grew .6% in the 13-week period. Sales of Monster were down 2.4%. Sales of Noz decreased 1.8%. And sales of Full Throttle decreased 12.8%. Sales of Red Bull increased 6.4%. Sales of Rockstar decreased by 10.8%. Sales of 5-Hour decreased 9%. And sales of Amp decreased 42.4%. As there were no comparable sales of our rain products last year, we have not referenced rain. According to Nielsen, for the four weeks ended October 26, 2019, sales in the convenience and gas channel, including energy shots in dollars, increased .5% over the same period the previous year. Sales of the company's energy brands, which include rain, grew .5% in the four-week period in the convenience and gas channel. Sales of Monster decreased by 5% over the same period versus the previous year. Noz was down .3% and Full Throttle was down 11.6%. Sales of Red Bull were up 4.8%. Rockstar was down 11.2%. 5-Hour was down 7.9%. And Amp was down 35.1%. According to Nielsen, for the four weeks ended October 26, 2019, the company's market share of the energy drink category in the convenience and gas channel, including energy shots in dollars, decreased by 1.6 points over the same period the previous year to 40.7%. Monster's share decreased 4.1 share points to 33.5%. Rain's share was 3%. Noz's share declined 0.4 share points to 3.6%. And Full Throttle's share declined 0.2 of a point to 0.7%. Red Bull's share decreased 0.5 points to 33.2%. Rockstar's share was down 1.1 points to 5.4%. 5-Hour's share was lower by 0.9 points at 5.5%. And Amp's share decreased 0.2 points to 0.4%. VPX Bang's share increased 4.2 points to 8.2%. According to Nielsen, for the four weeks ended October 26, 2019, sales of coffee plus energy drinks, which includes Cafe Monster and Espresso Monster in dollars, for the convenience and gas channel, increased .4% over the same period the previous year. Sales of our Monster, Java Monster alone, were .6% higher than in the same period the previous year. Sales of our coffee plus energy drinks were .9% lower, while sales of Starbucks energy were .1% higher. Our company's share of the coffee plus energy category, which includes Java Monster, Cafe Monster, Espresso Monster, Starbucks, Double Shot and Rockstar Roasted, for the four weeks ended October 26, 2019, was .3% down 7 points. Java Monster's share on its own for the four weeks ended October 26, 2019, was .7% down 2.6 points, while Starbucks energy share was 47.9%, up 4.3 points. According to Nielsen, in the convenience and gas channeling in Canada, for the 12 weeks ended September 14, 2019, the energy drink category increased 6% in dollars. Sales of the company's energy drink brands increased 5% versus a year ago. The market share of the company's energy drink brands was .6% down 0.7 points. Monster's market share remained the same at 33.9 share points. Nozz's sales decreased 7% and his market share decreased 0.4 share points to 2.6%. Full Throttle's sales decreased 15% and his market share decreased 0.3 points to 1.1%. Red Bull's sales increased 6% and his market share decreased 0.2 points to 37.5%. Rockstar's sales increased 12% and his market share increased 0.8 points to 15.7%. Turning to Mexico, according to Nielsen, for all outlets combined in Mexico, the energy drink category grew 14% for the month of September 2019. Monster's sales increased 10.5%. A market share in value decreased 0.9 points to .3% against the comparable period the previous year. Sales of Byrne were down 48.0%. Byrne's market share decreased .2.8%. Red Bull's sales decreased .1% and its market share decreased by 1.6 points to 7.8%. Viva 100's sales decreased .3% and its market share decreased by 7.7 points to 27.1%. Bold's sales increased .5% and its market share increased 4.5 share points to 17.5%. While Boo's sales decreased .5% and its market share decreased 1.3 points to 6.9%. Amper, an affordable energy brand launched in March, increased its market share to .7% in the month of September 2019. The Nielsen Statistics for Mexico covers single months, which is a short period that may often be materially influenced, positively and or negatively, by sales in the OXO convenience chain, which dominates the market. Sales in the OXO convenience chain, in turn, can be materially influenced by promotions that may be undertaken in that chain by one or more energy drink brands during a particular month. Consequently, such activities could have a significant impact on the monthly Nielsen Statistics for Mexico. And now we turn to EMEA. I'd like to point out that the Nielsen numbers in EMEA should only be used as a guide because the channels read by Nielsen and EMEA vary from country to country and are reported on varying dates within the month referred to from country to country. According to Nielsen, the 13 weeks ended October 5, 2019. Mance's retail market share value, as compared to the same period the previous year, grew from .3% to .9% in Belgium, from .3% to .6% in France, from .9% to .5% in Great Britain, from .1% to .2% in the Netherlands, from .0% to .7% in Norway, and from .3% to .4% in Spain. In the same period, Mance's retail market share value, as compared to the same period the previous year, declined from .7% to .1% in Sweden. According to Nielsen, the 13 week period ended in September 2019. Mance's retail market share value, as compared to the same period the previous year, grew from .6% to .8% in Germany, and from .7% to 15% in Poland. According to Nielsen, the 13 week period ended in August 2019. Mance's retail market share value, as compared to the same period the previous year, grew from .8% to .9% in the Czech Republic, from .1% to .6% in Greece, from .8% to .3% in Ireland, from .7% to .4% in Italy, and from .8% to .4% in South Africa. Turning to Nielsen in South America, according to Nielsen, for the month of September 2019 in Chile, Mance's retail market share value increased from .5% to 38% compared to the same month the previous year. According to Nielsen in Brazil, Mance's retail market share for the month of September 2019 increased from .7% to .2% as compared to the same month the previous year. According to Nielsen in Argentina, for the month of September 2019, Mance's retail market share value increased from .9% to .9% compared to the same month the previous year. Turning to Asia Pacific, according to IRI in Australia, Mance's market share value for the four weeks ended September 29, 2019, increased from .1% to .6% as compared to the same period the previous year. Mance's market share value decreased from .7% to .9% during the same period. According to IRI in New Zealand, Mance's market share value for the four weeks ended September 29, 2019, increased from .7% to .2% as compared to the same period the previous year. LIV Plus' market share value decreased from .8% to .3% and Mothers' market share value increased from .8% to 8%. According to Nielsen in South Korea, Mance's market share value in all outlets combined for the quarter ended September 2019, grew from .3% to .5% as compared to the same period in the previous year. Monster is now the leading energy brand by market share in value in all measured outlets in South Korea. According to Intage in Japan, Mance's market share value in the convenience store channel for the 13 week period ended September 30, 2019, grew from .9% to .2% as compared to the same period in the previous year. We again point out that certain market statistics that cover single months or four week periods may often be materially influenced by the market share value, positively and or negatively by promotions or other trading factors during those periods. So now we're going to turn to sales and the segments. Net sales for the Monster Energy Drink segment for the third quarter of 2019, which include rain, increased .5% from 935.1 million to 1.06 billion from the comparable period in 2018. Net sales for the Monster Energy Drink segment in the third quarter of 2019 were negatively impacted by approximately 10.8 million of foreign currency movements. Without these foreign currency movements, net sales for the Monster Energy Drink segment for the quarter would have been up 14.7%. The comparative net sales in the 2018 third quarter included approximately 16 million in net sales of advanced purchases as a result of the price increase in the United States on certain of our products effective November 1, 2018. Adjusting for these advanced purchases and foreign currency movements, net sales for the Monster Energy Drink segment for the 2019 third quarter would have been up 16.6%. Net sales for the strategic brand segment, which includes Predator, our affordable energy brand, was 66.3 million for the third quarter as compared to 74.4 million in the same quarter in 2018. Net sales for the company's strategic brand segment in the third quarter of 2019 were negatively impacted by approximately 1.4 million of foreign currency movements. Net sales for the other segments, which includes third party sales made by AFF, were 5.9 million in the third quarter as compared to 6.6 million in the same quarter in 2018. Net sales to customers outside the United States were 379.8 million. That's .5% of total net sales in the 2019 third quarter compared to 283 million or .6% of total net sales in the corresponding quarter in 2018. Foreign currency exchange rates had the effect of decreasing net sales in US dollars by approximately 12.2 million, included in reported geographic sales or our sales to the company's military customers, which are delivered in the US and transship to the military and their customers overseas. Now we turn to sales in EMEA. In EMEA, supply chain and production issues have largely been resolved. In EMEA, net sales in the third quarter increased .1% in dollars and increased .1% in local currencies over the same period in 2018. Gross profit in this region as a percentage of net sales for the quarter was .3% compared to .3% in the same quarter in 2018. Gross profit percentage for the region was impacted by country and product makes as well as increases in manufacturing costs. We're also pleased that Monster continues to perform well and gain market share in Belgium, the Czech Republic, France, Germany, Great Britain, Greece, Ireland, Italy, the Netherlands, Norway, Poland, South Africa and Spain. Now turning to Asia Pacific. In Asia Pacific, net sales in the third quarter increased .6% in dollars and .4% in local currencies over the same period in 2018. Gross profit in this region as a percentage of net sales was .5% versus .1% over the same period in 2018 as a result of country and product makes. In Japan, net sales in the quarter increased 60% in dollars and .5% in local currency. In South Korea, net sales increased .9% in dollars and .5% in local currency as compared to the same quarter in 2018. In Oceania, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea and Guam, net sales decreased .8% in dollars and .2% in local currencies, although I would like to point out that Monster increased .5% in dollars and .7% in local currency as compared to the same quarter in 2018. Now turning to sales in Latin America and the Caribbean. In Latin America, including Mexico and the Caribbean, net sales in the third quarter increased .5% in dollars and 51% in local currencies over the same period in 2018. Gross profit in this region as a percentage of net sales was .0% for both periods. In Brazil, net sales in the quarter increased by .2% in dollars and increased .3% in local currency. Net sales in Chile increased .9% in dollars and increased .2% in local currency in the quarter. So now turning to new products in North America. In the United States, we launched Monster, Mule, Ginger Brew, National, Rain, Orange Dreamsicle, Monster Max, Mango Magic and Monster Max Red Red. In the United States, we launched Monster with extra strength with zero sugar at the end of September. In October, we launched Java Monster Farmers Oats, which contains oat milk and is non-dairy and vegan, as well as two new flavors in the Rain brand family, Strawberry Supply and Mango Magic. In 2020 in the United States, we will be discontinuing a Cafe Monster line of products and repositioning our Espresso Monster line. In Canada, in the third quarter of 2019, we launched Monster Pacific Punch National in July, as well as Monster Mule National in September. During the third quarter of 2019 in Mexico, we launched Pipeline Punch. During the third quarter of 2019 in Brazil, we launched Absorbed Zero Ultraviolet as well as Mango Loco. Now turning to new products in EMEA. Monster Pipeline Punch was launched in Bosnia, Bulgaria, Cyprus, Croatia, Greece, Poland and Slovenia in the third quarter of 2019 and is now available in 15 markets across EMEA. Espresso Monster was made available in six markets in EMEA, France, Great Britain, Germany, Norway, Spain and Sweden in both milk and vanilla variants during the 2019 third quarter. We also recently launched both variants in Belgium and Ireland in October 2019 and will launch both in Poland this month. We are pleased with the performance of Espresso Monster in EMEA. We are planning to roll out two flavors of Espresso Monster into a further 12 markets in the fourth quarter of 2019 and throughout 2020. Additionally, we are looking to launch our new Salted Caramel Espresso variant in eight EMEA markets over the course of the fourth quarter of 2019 and 2020. Rain was launched in Sweden in the third quarter of 2019 and we are planning to launch Rain in a further two markets by the end of 2019. We are planning to launch Monster in Israel in the fourth quarter of 2019. We are planning to launch Predator, our affordable energy brand, in Ethiopia, Kenya, Poland, Uganda and Zambia in the 2019 fourth quarter. Turning to new products in Asia Pacific, we launched Monster Green in 500 milliliters resealable aluminum bottles in Japan during the 2019 third quarter. In Korea, we launched Pipeline Punch with initial positive results. We launched Ultra White in India and completed its rollout in Vietnam during the 2019 third quarter. Ultra Paradise launched in Australia in July and in New Zealand in September and Mango Loco was successfully relaunched in July after resolution of local production capabilities. We are planning to launch a number of products in Asia Pacific over the upcoming months, including a full relaunch of Pipeline Punch in Japan in the spring of 2020. Now turning to the balance sheet, cash and cash equivalents amounted to $717.6 million at September 30, 2019 compared to $637.5 million at December 31, 2018. Short-term investments were $587.4 million at September 30, 2019 compared to $320.7 million at December 31, 2018. Net accounts receivable increased to $648 million at September 30, 2019 from $484.6 million at December 31, 2018. Days outstanding for accounts receivable were $44.6 million at September 30, 2019 compared to $41.4 million at December 31, 2018. Inventory has increased to $317.7 million at September 30, 2019 from $277.7 million at December 31, 2018. Average days of inventory were $62.1 million at September 30, 2019 compared to $67.2 million at December 31, 2018. Now we are going to talk a little about October 2019 growth sales. We estimate October 2019 growth sales to be approximately .3% higher than in October 2018. On a foreign currency adjusted basis, October 2019 growth sales would have been approximately .6% higher than comparable October 2018 growth sales. The comparative growth sales in October 2018 included advanced purchases as a result of the price increase in the United States on certain of our products effective November 1, 2018. Adjusting for these advanced purchases and foreign currency movements, we estimate growth sales for the month of October 2019 would have been approximately .6% higher than in October 2018. In this regard, we caution again that sales over a short period are often disproportionately impacted by various factors, such as, for example, days of the week in which holidays fall, timing of new product launches, and the timing of price increases and promotions in retail space, distributed incentives, as well as shifts in the timing of production in some instances where our bottlers are responsible for production and unilaterally determine their production schedules, which affects the dates on which we invoice such bottlers, as well as inventory levels maintained by distribution partners, which they alter unilaterally for their own business reasons. We reiterate that sales over a short period, such as a single month or even two months, should not necessarily be imputed to or regarded as indicative of results for a full quarter or any future period. Share repurchase programs, during the 2019 third quarter, the company purchased approximately 4.3 million shares of common stock at an average purchase price of $58.60 per share, for a total of $254.3 million, excluding broker commissions. As of November 6, 2019, approximately $36.6 million remains available for repurchase, and our previously authorized repurchase program. On November 6, 2019, the company's board of directors authorized a new repurchase program for the repurchase of up to an additional $500 million of the company's outstanding common stock. In conclusion, I'd like to summarize some recent positive points. Retail sales statistics for many countries around the world demonstrate that the energy category is continuing to grow and that Monster is generally growing ahead of the category in line with earlier periods. Number two, the new additions to the Monster family continue to add to the company's sales. Number three, we are excited about the prospects for our brands and our new product launches this year, as well as our innovation pipeline in 2020. Fourthly, we are encouraged by the prospects for our rain total body fuel high-performance energy drinks, not only within the U.S., but looking further abroad. Number five, we are pleased with our growth and performance in our international markets. Net sales in the third quarter in EMEA increased .1% in local currency. In Asia Pacific, increased .4% in local currency, and in Latin America and the Caribbean, increased .0% in local currency. We reiterate the growth potential for us in China and India. And lastly, we're proceeding with our plans for future launches of our affordable energy drink brands internationally. We're also proceeding with our plans for the launch of rain total body fuel high-performance energy drinks in certain countries outside of the U.S. I'd like to open the floor to questions about the quarter. Thank you.

Thank you. Due to the time limit, please limit yourself to one question. As a reminder, to ask a question, you need to press star one on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. And again, ladies and gentlemen, that is star one.

And

the first question is going to come from Andrea Tierra from JPMorgan. Your line is now open.

Thank you all. And Rodney, I wish you a fast recovery. And so if you can help us with the positioning of the core monster, which I understand correctly was down .4% on outlets and declined 5% in convenience. Do you believe that is related to the promotional environment of your main competitor or just a function of rain gaining more shelf space? And how are you planning to react to that? Will you feel the need for more promotion to become more promotion as well or are you just happy with the total performance? Thank you.

I'll take that together with you. I think that if you look at the category, what we've noticed is you've had an impact on all of the, the SKUs that have been existing in the market over the past couple of months. You're seeing the increases coming from us and our main competitors are coming from new products. So if you look at the total category, the total category remains healthy. It's up 9%, which is really good growth. So the category is growing. There's been a shift within the category. You've got to look at brands and whatever we have in the category. So you look at the fact that we are down or some of the individual SKUs are down. But overall, the category is growing. Our overall corporate sales are growing. We will address obviously individual SKUs. And I think this is an experience that's been experienced by general consumer products for established brands. There's a movement generally on consumers to want to try new products, new flavors, new innovation. And we do have a new innovation, which we've, some of it we've announced we've recently launched. We have plans to launch quite a lot of new innovation. I think that in some cases, some of our new innovation that we launched earlier this year perhaps didn't get enough shelf space or there's been some shelf space taken from our existing product, which I think has affected sales. So looking at one of the sort of main things I think we will look at going forward is improving the quality of our distribution, getting out our innovation more efficiently and more effectively on shelves. And as we go forward, we believe there will be additional space allocated to the performance energy category, which will relieve pressure on the space we're looking for for our existing energy brands and innovation under the Monster line.

So just to add to what Rodney is saying, you know, Alex, you asked if we are happy with the way things are. And obviously we're not. You know, we want to see the Monster brand growing. What we have evidence of is that the price increase is stuck. And when you'll get our cue tomorrow and you can even see it, I think, in the release that the promotional allowances are very much in line with where they should be and we're not over promoting. Having said that, you know, I just want to reiterate that the category, if you look back 52 weeks, the energy credit category has shown incremental growth per Nielsen of $1.3 billion. So this is the growing category and it's a category that now has a new segment, which is performance energy and performance energy is growing within that category. And, you know, as I look at some of our other competitors and this is no defense, but as we look, for example, even at Red Bull, which is growing and we mentioned on the call that it's growing, the Red Bull core brands are also not showing growth. The diet skews are and their additions are. But in general, the Red Bull core brands are also not showing growth and are in decline. Having said that, you know, we have got plans with our distribution, which has been a challenge to dramatically improve distribution and distribution on shelf and in the cuvus.

Perhaps there's just one other aspect I'd like to add to that because it's sort of broad. These comments we've made really focus on the US and the US has been our major market. But as we develop as a company, the opportunity for us, for our energy brands, Monster in particular, plus our other brands, is international. And if you look at the information we just gave on this call about how we've accelerated international growth in existing international markets and new markets, that's where we look to in the future for the company. Our sales as we, you know, US was about 72% of our sales last year this quarter and it's now down to 67%. So if you take that as a growth position, it's going to continue to grow. So we see a lot of runway to grow internationally and to grow the brand and these markets are continuing to grow and are very healthy. So, you know, we need to address challenges we have in the US at the moment, but overall we still believe in the health and we still believe in the growth of the brand, both internationally and even within the US as well and our other energy brands. And

then one thing we really should, turning back to you for a moment, sorry, one thing we really should not forget about is the unmeasured channels, which, you know, we've been absolutely emphatic about. Food service is unmeasured, Amazon is unmeasured, Costco is unmeasured, and a slew of other Home Depot's loads, all of those channels are unmeasured. And the amount of sales that are going through those channels is really, is a significant number. Thanks.

Thank you both.

Thank you. And our next question comes from Steve Powers from Deutsche Bank. Your line is now open.

Yes, thank you. Maybe a little bit more on the US. Can you talk about growth in the quarter coming in a touch below 3% versus the Nielsen data over the course of the quarter pointing closer to 6? You know, I think we all know you had tough comparisons in the year-go quarter, but at the same time there was an extra selling day this quarter. And, you know, so just how do you think about that 3% number in light of those factors, building on Andrea's question? And then if I could, a related question, building on what you just said, but in the context of Coke Energy, I think that we all appreciate what you and Coke have each said about the intended interplay between Monster and really Monster and Rain and Coke Energy and that they're targeted at different consumers and designed to minimize cannibalization risk. But given that they'll be going through common distributors, just how confident are you that those, you know, new Coke SKUs won't take away from some of your smaller SKUs, whether Monster, Rain, NOS, Full Throttle, or otherwise, rather than having them successfully find incremental space in the cooler or take away from competition distributed by others? Thanks.

So let me start with your first question. You know, when you look at Nielsen and you look at our own financial numbers, you cannot draw an exact interpolation from one to the other. Nielsen sales out, our sales are sales to the distributors, the bottlers. We have a slew of unmeasured channels that I mentioned, and while it's a good indication of what's, of the movement of sales, it's not an absolute science. And one has to be very wary, but we've said this on many calls in the past. One's got to be very careful trying to balance our sales to our bottlers and our distributors with sales out to the consumer. Nielsen read a sample, they don't read all the channels, they don't read, as I said, the food service, they don't read Amazon, they don't read Costco, they don't read the Home Depot's and the Lowe's and all the other channels where our products are distributed. So it's difficult to draw a comparison from one to the other. All we can do is give you the facts and you know, you guys make your own assessments from there.

As regards Coke Energy, I think that most of the analysts are very up to date and astute on analyzing Nielsen. Well, you know, they should be looking at analyzing Nielsen around the world, and that would give everybody their own view on what's been happening with the rollout of Coke Energy around the world. We've seen the brand rollout and we've also seen the rate of sales not keeping pace with initial sales. The percentage market share has been small and hasn't really had an impact on us. The main impact that I think we've repeatedly said is that we did have concerns for is the sort of noise in the market and focus from diversion of focus. But ultimately in Europe, things are settling down. Our growth rates of our brands are on track and have continued. And I think that by and large, the Coke system has pretty much focused on not trying to cannibalize our existing products and take facings from us and it's worked reasonably well. There have been a few countries where there have been some challenges and we've addressed them. So again, we don't know, we can't tell what Coke Energy will be in the United States. It's formulated a little differently, it's a little different in sizes, there's two variants. But ultimately, we think that we just need to manage the lack of focus or conflict of focusing to bottleers. Ultimately, we don't think it will have a major impact on our brand and we will manage it going forward.

What I would do if I were an analyst, I would get the information from the markets in which they've launched. And there are a number of them. And frankly, the numbers that I've seen, and I can't talk for numbers that other people may have seen, the numbers that I've seen have shown that they have not performed particularly well and that our brands have continued to grow and our brands have continued to develop in those markets.

But you know, get the homework. We don't know what the US will be, it's its own market. So we'll see how things go and we'll manage it.

Thank you. And our next question comes from Mark Astroshan from Stiefel. Your line is now open.

Thanks. Good afternoon everyone. And Tom, good to hear from you on the call today. Thank

you, Mark.

There it is again. So I guess I wanted to ask about gross margin. International continues to be a bit of a sore spot there. US again, continues to be pretty good. So you touched on some of the supply chain issues in EMEA having been resolved and kind of talking directionally to stabilization, or at least that's maybe my interpretation of it. And the US market is still flat and was obviously flat in gross margins. So is the worst behind you at this point? Do you have any more visibility on that? I'm not asking for guidance. I'd love a personal point of view of kind of how we should all think about that since I think it's one of those areas that is a bit more of a black box than others. So any help there would be appreciated.

You know, it's not really a black box. I mean, you know, we sell concentrates at high margins and through the strategic brands and we sell finished products at different margins that really are based for a number of factors on the relationships we have developed with the bottlers and distributors in various countries and the cost of production. So it's always every quarter the issue is how much do we sell internationally, which has lower margins. I'll get onto that and I think I discussed it on a previous call. And how much strategic brands did we sell as a corporation versus finished goods and monster energy? So when we established our model in the United States, the distributors were allocated a margin, which was satisfactory to them. And we had the last share of the margin. As we've grown internationally in more virgin territories, the bottlers in the coke system where we've transitioned or launched with, they've demanded a higher share of the value chain. And, you know, this is something that we've had to deal with, understanding that if we want to launch in various countries internationally, it's going to cost us more in margin than in the US where we had a very established business and the Coca Cola bottlers One of the other issues that we are facing is that our juice products are doing very well, our coffee products are doing very well, and they in themselves have lower margins than the traditional monster beverages, and of course the diets have the best margin of all. So you have this issue of competing margins. However, there are things we can do with the juice products, we can establish greater efficiencies. We had a big improvement this year, this quarter in the US, in fact in freight getting product and raw materials to our co-packers. That was a big benefit. The other benefit that we had in the US was in aluminum. So, you know, there's a difficult range of factors that go into what the overall consolidated margin is. It's not just a simple one calculation. But we are working on it, and as we've done in the US and as we've done with freight in, we continue to look at our model internationally and see where we can improve on our gross margin percentages. And as I've always said, Mark, we sell products and we make gross profit dollars, we don't make gross profit percentages. I

think that the only thing I would like to add to that is very briefly is that in the international markets, there are a lot of markets and we've had to traditionally shift into many markets or many countries from other countries. We have, and as we continue to expand and have sufficient volumes in countries, we are switching to local production in those countries. We've opened up quite a number of additional production facilities in Europe this year and have got a large number going forward. And as we go forward, we think that will certainly help our margins internationally as well. But, you know, at this point, I don't think there's any numbers we can point you to. And

also the community knows that we purchased a thigh, the concentrate facility from the Coca-Cola company with the intention of producing ingredients in EMEA, which will, you know, reduce, improve efficiencies, improve costs, and reduce the huge distances that we're shipping these ingredients right now. I'll

also address some of the challenges we had last year and a little bit this year even in out of stocks and where we have increased demand for particular products, where we had very long lead times in order to ship ingredients to packers to try and increase volumes. And as this will obviously improve those efficiencies and will help us going forward. So that's been a, we think we're very excited about the fact that that will help us in the whole of EMEA in Middle East and Africa.

Thank you. This concludes today's Q&A session. I would now like to turn the call back to Mr. Rodney Sachs and Mr. Hilton Schlossberg for further remarks.

So thank you. He got my name right. We tested him before that, so well done on that. Thank you. On behalf of Monster, I'd like to thank everyone for their continued interest in the company. We continue to believe in what we're doing in the company and our growth strategy and remain committed to continue to innovate, develop, and differentiate our brands and expand the company both at home and abroad. And in particular, expand distribution of our products through the Coca-Cola bottle system internationally. We're also excited by the new opportunities that we have going forward with a portfolio of energy drink products throughout the world, comprised of our Monster Energy brand together with our strategic brand as well as Hydro, Predator, and Rain, and the new innovation plan for 2020. Thank you very much for your attendance.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day.