Monster Beverage Corporation

Good afternoon, everyone, and welcome to the Monster Beverage Company fourth quarter 2020 conference call. All participants will be in a listen-only mode. Should you need assistance, please see a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one to join the question queue. At this time, I'd like to turn the conference call over to Mr. Rodney Sachs and Mr. Hilton Schlossberg, co-CEOs. Gentlemen, please proceed.

Thank you. Good afternoon, ladies and gentlemen. Thank you for attending this call. I'm Rodney Sachs. Hilton Schlossberg, our vice chairman and co-chief executive officer, is on the call. Tom Kelly, our chief financial officer. Tom will now read the cautionary announcement statement.

Before we begin, I would like to remind listeners that certain statements made during this call may constitute forward-looking statements within the meeting of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities 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, as well as the future impact of the COVID-19 pandemic on the company's business and operations. 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, 2020, and our most recently quarterly report on Form 10-Q, filed on November 6, 2020, including the sections contained therein entitled Risk Factors and Forward-Looking Statements. for a discussion on specific risk and uncertainties that may affect our performance. The company assumes no obligations to update any forward-looking statements, whether as a result of new information, future events, or otherwise. I would now like to hand the call over to Rodney Sachs.

Thank you, Tom. The company's top priority continues to be the health, safety, and well-being of its employees. Early in March 2020, the company implemented global travel restrictions and work-from-home policies for employees who are able to work remotely. For those employees who are unable to work remotely, safety precautions have been instituted, which were developed and adopted in line with guidance from public health authorities and professional consultants. Throughout this period, the company has engaged with its employees through ongoing communications, online training and personnel development opportunities, to promote their well-being and motivation. The company's flavor manufacturing facilities, its co-packers, warehouses, and shipment facilities are all operating. Certain of the company's bottlers and distributors have implemented modifications to their core points and service levels, but the company's products remain generally available to consumers. In limited countries, the operations of its bottlers and distributors have been more affected. Despite the ongoing impact of the COVID-19 pandemic, the company achieved record fourth quarter net sales. While our performance in EMEA was solid in the fourth quarter, EMEA remained adversely affected by the COVID-19 pandemic. Since mid-March 2020, the company has seen a shift in consumer channel preferences and package configurations, including an increase in at-home consumption and a decrease in food service on-premise consumption. The company's sales in the 2020 second quarter were initially adversely affected as a result of a decrease in foot traffic in the convenience and gas channel, which is the company's largest channel, but improved sequentially from the latter half of the 2020 second quarter and throughout the 2020 third and fourth quarters. The company's sales in e-commerce, club store, mass merchandiser, and grocery and related business continue to increase in the fourth quarter, while its food service on-premise business, which is a small channel for the company, remained challenged. Currently, the company does not foresee a material impact on the ability of its co-packers to manufacture and its bottlers and distributors to distribute its product as a result of the COVID-19 pandemic. In addition, the company is not experiencing significant raw material or finished product shortages, and its supply chain remains intact. companies continually addressing the increase in its aluminum can requirements given the company's volume growth and the current supply constraints in the aluminum can industry. In the fourth quarter of 2020, net sales were $1.2 billion compared with $1.02 billion in the fourth quarter of 2019. Adjusting for foreign currency movements, net sales for the 2020 fourth quarter would have been up 18.3%. Net sales for the 2020 fourth quarter were negatively impacted by $15.2 million related to product returns from our customers as a result of a European formulation issue with a limited number of products in Europe and a labeling issue concerning one product in Japan. We will refer to this on our call as product returns. Gross profit as a percentage of net sales for the 2020 fourth quarter was 57.7%. compared to 60% in the 2019 fourth quarter. The decrease in gross profit as a percentage of net sales for the 2020 fourth quarter was primarily the result of the impact of the product returns, associated inventory provisions, and other related costs. Gross profit as a percentage of net sales, excluding the impact of the product returns, associated inventory provisions, and other related costs, was 59.3% for the 2020 fourth quarter. To a lesser extent, the decrease in gross profit as a percentage of net sales was the result of increased input costs and unfavorable geographical mix during the 2020 fourth quarter, which was partially offset by favorable product mix. Operating expenses for the 2020 fourth quarter were $288.4 million compared to $293.7 million in the 2019 fourth quarter. As a percentage of net sales, operating expenses for the 2020 fourth quarter were 24.1% compared with 28.9% in the 2019 fourth quarter, primarily due to decreased expenditures of 13.5 million for legal settlements and decreased expenditures for sponsorships and endorsements as well as travel and entertainment as a consequence of the COVID-19 pandemic. The cost for certain postponed or rescheduled events have been or may be deferred to future periods. Due to the uncertainty surrounding the COVID-19 pandemic, the company is unable to estimate in which future periods, if any, such deferred sponsorship and endorsement costs will be recognized. The decrease in operating expenses as a percentage of net sales was partially offset by increased payroll expenses of $12.1 million, increased outbound freight and warehouse costs of $11.4 million, and increased expenditures of $8.2 million for social media and digital marketing. Operating income increased 26.9% to $402.3 million, up from $317 million in the fourth quarter of 2019. Operating income for the 2020 fourth quarter, excluding the impact of the product returns, associated inventory provisions and other related costs, increased 35.5% to $429.6 million, from $317 million in the 2019 fourth quarter. Net income increased 85% to $471.7 million as compared to $255 million in the 2019 comparable quarter. Net income for the 2020 fourth quarter was positively impacted by a non-recurring tax benefit of approximately $165.1 million due to an intra-entity transfer of intangible assets between certain of the company's foreign subsidiaries, which resulted in a step-up of the tax-deductible basis in the transferred assets in a foreign jurisdiction and created a temporary difference between the tax basis and the book basis of such intangible assets. Net income for the 2024 quarter, excluding the non-recurring tax benefit, the impact of the product returns, associated immunity provisions and other related costs, increased 28.9%, to 328.6 million from 255 million in the 2019 fourth quarter. Diluted earnings per share for the 2020 fourth quarter increased 87.5% to 88 cents from 47 cents in the fourth quarter of 2019. Diluted earnings per share for the 2020 fourth quarter excluding the non-recurring tax benefit, the impact of the product returns, associated inventory provisions, and other related costs increased 30.6% to $0.62 from $0.47 in the fourth quarter of 2019. According to the Nielsen reports for the 13 weeks through February 13, 2021, for all outlets combined, namely convenience, grocery, drug, mass merchandisers, Sales in dollars in the energy drink category, including energy shots, increased by 11.2% versus the same period a year ago. Sales of the company's energy brands, including rain, were up 10.8% in the 13-week period. Sales of Monster were up 13.2%, sales of rain were down 2.1%, sales of NAS increased 0.7%, and sales of Full Throttle decreased 0.2%. Sales of Red Bull increased 18.7%, sales of Rockstar decreased by 14%, sales of 5-Hour decreased 0.4% and sales of Amp decreased 7.4%. BPX Bangs sales decreased 3.5% and Coca-Cola Energy sales increased 29.5% with a market share of 0.4%. According to Nielsen, for the four weeks ended February 13, 2021, Sales in dollars in the energy drink category in the convenience and gas channel, including energy shots in dollars, increased 8.6% over the same period the previous year. Sales of the company's energy brands, which include rain, increased 9.3% in the four-week period in the convenience and gas channel. Sales of Monster increased by 13% over the same period versus previous year. Rain sales decreased 9.2%. NAS was down 5.2% and Full Throttle was up 0.8%. Sales of Red Bull were up 19%. Rockstar was down 20.9%. Five Hour was up 0.4% and Amp was down 1.1%. VPX Bank sales decreased 9.7% and Coca-Cola Energy was down 52.4%. According to Nielsen, for the four weeks ended February 13, 2021, The company's market share of the energy drink category in the convenience and gas channel, including energy shots in dollars, increased 0.2 points to 39%. Monster's share increased 1.3 share points to 32.5%. Rain's share decreased 0.5 of a share point to 2.7%. Nozzer's share decreased 0.4 of a point to 3%. Full Throttle's share remained at 0.8%. Red Bull's share increased 3.2 points to 36.4%, Rockstar's share was down 1.6 points to 4.4%, Five Hour's share was lower by 0.4 of a point at 4.9%, and Amp's share remained at 0.4 of a percent. BPX Bank's share decreased 1.4 points to 7%, and Coca-Cola Energy's share decreased 0.4 of a point to 0.3%. According to Nielsen, in the four weeks ended February 13, 2021, sales in dollars in the coffee plus energy drink category, which includes our Java Monster line, in the convenience and gas channel increased 18.5% over the same period the previous year. Sales of Java Monster, including Java Monster 300, were 26.7% higher in the same period versus the previous year. Sales of Starbucks Energy were 18.5% higher. Java Monster share, including Java Monster 300, of the coffee plus energy category, which primarily includes Java Monster, Java Monster 300, Starbucks Double Shot and Triple Shot, Rockstar Roasted and Bankito Coffee, for the four weeks ended February 13, 2021, was 52.9%, up 3.4 points, while Starbucks energy share remained at 44.6%. According to Stackline, which tracks energy drink sales by Amazon in the United States, for the four-week period ending February 13, 2021, sales in dollars in the energy category by Amazon, including energy shots, increased 177.8% over the same period the previous year. Sales of Monster increased 193.7%, and its share was 34.2%, up 1.8 share points, versus the same period a year ago. Red Bull's sales increased 171.8%, and its share was 14.7%, down 0.3 points. Celsius's sales increased 224.8%, and its share increased 2.1 points to 14.5%. Five-hour sales increased 56.4%, and its share declined 2.7 points to 3.5%. BPX Bangor's sales increased 272.5%, and its share increased 1.2 share points to 4.9%. Rains' share increased 2.3 share points to 6.4%, and Rockstar's share increased 0.2 of a share point to 3.5%. According to Nielsen and all measure channels in Canada, for the 12 weeks ended January 30, 2021, the energy drink category increased 15.2% in dollars. Sales of the company's energy drink brands increased 24.9% versus a year ago. The market share of the company's energy drink brands was 41.3%, up 3.2 points. Monster's sales increased 18%, and its market share increased 0.8 of a point to 35.7. Nozz's sales increased 3.3%, and its market share decreased 0.2 of a point to 2%. Full throttle sales decreased 6%, its market share decreased 0.2 of a point to 1%. Red Bull sales increased 18.4%, and its market share increased 1 point to 37.6%. Rockstar sales decreased 12.7%, and its market share decreased 3.4 points to 10.5%. Guru sales increased 12.6%, and its share decreased 0.1 of a share point to 4.3%. Coca-Cola energy share was 0.7 of a percent. According to Nielsen, for all outlets combined in Mexico, the energy drink category declined 2.4% for the month of January 2021. Monster sales decreased 0.2 of a percent. Market share in value increased 0.6 points to 28.1% against the comparable period the previous year. Red Bull sales decreased 21.5%. and its market share decreased by 1.5 points to 6.1%. Vive 100's sales decreased 14.7% and its market share decreased by 3 points to 21.1%. Vault's sales increased 7.5% and its market share increased 1.8 share points to 19.3% while Boost's sales decreased 22.4% and its market share decreased 1.5 points to 5.9%. AMPA's sales increased 26.9%, and its market share increased 3.5 points to 15.3%. Coca-Cola Energy's sales decreased 95.7%, and its market share decreased 2.9 points to 0.1%. Predator, which was launched in March 2020, achieved a market share of 2.8%. The Nielsen Statistics for Mexico cover 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. According to Nielsen, for the month of December 2020 compared to December 2019, Monster's retail market share in value increased in Argentina from 34% to 45.5%, in Brazil from 25.2% to 32.2%, and in Chile from 40.3% to 47.2%. Since the launch of Monster Energy in Argentina in the first quarter of 2018, Monster Energy is now the leading energy brand in value in both Argentina and Chile. I would like to point out that the Nielsen numbers in EMEA should only be used as a guide because the channels read by Nielsen in EMEA vary from country to country and are reported on varying dates within the month referred to from country to country. According to Nielsen, in the 13-week period to the end of January 2021, Monster's retail market share in value as compared to the same period the previous year grew from 12.8% to 15.4% in Belgium, from 28.3% to 31.1% in France, from 22% to 27.3% in Great Britain, and from 6.1% to 7.9% in the Netherlands. According to Nielsen, in the 13-week period to the end of December 2020, Monster's retail market share in value as compared to the same period the previous year grew from 13.2% to 15.2% in the Czech Republic, from 22.9% to 26.3% in Denmark, from 34.7% to 37.7% in Greece, from 20.3% to 27.9% in Italy, from 24.2% to 30.5% in Norway, from 14.3% to 21% in Poland, from 22.9% to 28.2% in the Republic of Ireland, from 18.1% to 21% in South Africa, from 35.5% to 37.3% in Spain, and from 12.7% to 14.4% in Sweden, and declined from 16.4% to 16% in Germany. Nielsen numbers in EMEA should only be used as a guide because the channels read by Nielsen in EMEA vary from country to country. According to IRI in Australia, Monster's market share in value for the four weeks ending January 17, 2021, increased from 9.4% to 12.1% as compared to the same period the previous year. Mother's market share in value decreased from 13% to 12.2% during the same period. Market share of the company's brands in Australia for the four weeks ended January 17, 2021, increased from 22.4% to 24.2%. According to IRI in New Zealand, Monster's market share in value for the four weeks ended January 3, 2021, increased from 9.7% to 10.8% as compared to the same period the previous year. Live Plus market share in value decreased from 8.1% to 7% and Mother's market share in value decreased from 6.2% to 6.1%. Market share of the company's brands in New Zealand for the four weeks ended January 3, 2021, decreased from 24% to 23.9%. According to Nielsen in South Korea, Monster's market share in value in all outlets combined for the month of December 2020 grew from 52% to 56.5% as compared to the same period in the previous year. According to Intage in Japan, Monster's market share in value in the convenience store channel for the month of December 2020 decreased from 55.5% to 49.2% as compared to the same period in the previous year, primarily due to the impact of the product returns in Japan, as well as initial trial sales following the launch of new products by two large competitors. Monster remains the market leader in Japan. We again point out that certain market statistics that cover single months or four-week periods may often be materially influenced positively and or negatively by promotions or other trading factors during those periods. We are seeing some recent softness in the performance energy category in the U.S., which we are reviewing. Net sales to customers outside the U.S. were 384.8 million, 32.2% of total net sales in the 2024 quarter, compared to 319.5 million, or 31.4% of total net sales in the corresponding quarter in 2019. Net sales to customers outside the United States for the 2024 quarter were negatively impacted by $15.2 million related to the product returns. Foreign currency exchange rates had the effect of decreasing net sales in U.S. dollars by approximately $7.1 million in the 2024 quarter. Included in reported geographic sales are our sales to the company's military customers, which are delivered in the U.S. and transhipped to the military and their customers overseas. In EMEA, net sales in the fourth quarter increased 25% in dollars and increased 22.8% in local currencies over the same period in 2019. Net sales adjusted for the product returns in this region increased 30.5% in dollars and 27.4% in local currencies. Gross profit in this region as a percentage of net sales for the quarter was 30.2% compared to 38.7% in the same quarter in 2019. Gross profit percentage for the region was negatively impacted by the product returns in this region, associated inventory provisions and other related costs, foreign exchange rates as well as geographic mix. Gross profit as a percentage of net sales excluding the impact of the product returns in this region, associated inventory provisions and other related costs was 40.1% for the 2020 fourth quarter compared with 38.7% in the same quarter of 2019. In local currencies, gross profit as a percentage of net sales for the quarter was 31.7%. We're also pleased that in the fourth quarter, Monster gained market share in Belgium, Czech Republic, Denmark, France, Great Britain, Greece, Italy, the Netherlands, Norway, Poland, the Republic of Ireland, South Africa, Spain, and Sweden. In Asia Pacific, net sales in the fourth quarter decreased 2.1% in dollars, and 5% in local currencies over the same period in 2019. In Asia Pacific, excluding the impact of the product returns in this region, net sales in the fourth quarter increased 5.4% in dollars and 2.5% in local currency over the same period in 2019. Gross profit in this region as a percentage of net sales was 34.9% versus 40.2% over the same period in 2019. Excluding the impact of the product returns in this region, associated inventory provisions and related costs, gross profit as a percentage of net sales would have been 40.3% versus 40.2% in the comparable period in 2019. In Japan, net sales in the quarter decreased 16.4% in dollars and 18.4% in local currency. Without the impact of the product returns in Japan, net sales decreased 6.7%. In December 2020, our distributors in Japan reduced their inventories because of the COVID-19 pandemic restrictions. Distributed depletions increased by approximately 12% during the 2020 fourth quarter. In South Korea, net sales increased 55.8% in dollars and 52.3% in local currency as compared to the same quarter in 2019. China net sales decreased 5% in dollars in the quarter and 9.6% in local currency. As compared to the same quarter in 2019, distributed depletions increased by approximately 29% during the 2024 quarter. In Oceania, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea and Guam, net sales increased 32.6% in dollars and 25.2% in local currencies. Those of the monster brand in Oceania increased 32% in dollars and 24.7% in local currency as compared to the same quarter in 2019. In Latin America, including Mexico and the Caribbean, net sales in the fourth quarter increased 52.2% in dollars and increased 79.9% in local currencies over the same period in 2019. Gross profit in this region as a percentage of net sales was 38.6%, compared to 42.6% over the same period in 2019, primarily as a result of foreign exchange rates as certain raw materials and ingredients for products in this region are purchased in U.S. dollars. In Brazil, net sales in the quarter increased by 74.9% in dollars and 133.6% in local currency. Net sales in Chile increased 72.9% in dollars and 80.3% in local currency in the quarter. Since our last earnings call in November 2020, there have been no significant updates on our litigation with Vital Pharmaceuticals Inc., the maker of Bang Energy drinks. As this litigation and other pending proceedings with VPX are subjudicated, we will not be answering any questions on this matter on today's call. In early October 2020, in the United States, we launched Ultra Watermelon and Juice Monster Papillon to the trade. We also refreshed our Juice Monster Chaos SKU into the new Juice Monster Chaotic. Initial results are positive. In late January 2021 in the United States, we launched Rain, Cherry Limeade and Rain White Gummy Bear as well as Rain Inferno Watermelon Warlord to the trade. We also launched Monster Ultra Gold in singles and in a four-pack. In late February 2021, we launched our core four flavors, Monster Green, Low Carb Monster, Monster Zero Ultra and Monster Ultra Paradise in 12-ounce slim cans targeted to the convenience retail channel and food service. In Canada, in January 2021, we launched Monster Ultra Fiesta and Java Monster with oat milk. In February 2021, we launched Pacific Punch in Mexico and in Honduras, and in Honduras we launched Mean Green, our second flavor of Fury, which is one of our affordable energy brands. We were able to introduce a number of new products across EMEA in the 2024 quarter. Unfortunately, a number of EMEA markets, including some of our largest markets, have recently reintroduced lockdowns, which may adversely impact these and future product introductions. Juice Monster Mangaloka was launched in Botswana in November 2020 and in Israel in January 2021 and is now available in 40 markets across EMEA. Juice Monster Pacific Punch was launched in Italy in February 2021 and is now available in 12 markets across EMEA. Monster Ultra was launched in Serbia and Ukraine in October 2020 and is now available in 44 EMEA markets. Monster Ultra Paradise was launched in the Czech Republic and Slovakia in the fourth quarter of 2020 and is now available in 22 EMEA markets. Monster Ultra Fiesta was launched in Great Britain and Sweden in January 2020 2021, and in Poland, Portugal, the Republic of Ireland, and Spain in February 2021. Monster Ultra Black was launched in the Republic of Ireland in October 2020 and is now available in two EMEA markets. Monster the Doctor was launched in Kenya in December 2020 and is now available in 44 EMEA markets. Monster Mule was launched in the Republic of Ireland in October 2020 and in Great Britain and Iceland in January 2021. and in Austria, Belgium, and Norway in February 2021. Monster Mule is now available in 10 EMEA markets. Burn Zero Raspberry was launched in Hungary in October 2020. Ultra Zero Raspberry was launched in Serbia in November 2020. Predator Purple Rain was launched in Namibia in December 2020 and is now available in three EMEA markets. Rain Sour Apple variant was launched in Iceland and the Republic of Ireland in October 2020. In November 2020, we launched Monster Energy Ultra Rosa in Australia and New Zealand, in addition to BU Energy Island Punch in Papua New Guinea. In China, we piloted our new non-carbonated Monster Energy Dragon's Gold in a number of provinces during the fourth quarter of 2020. Initial consumer feedback has been positive and we will commence with a national rollout of Monster Energy Dragon's Gold during 2021. During the 2020 fourth quarter, We saw additional distribution gains for Monster Energy Dragon Tea, along with Monster Energy Green and Monster Energy Ultra. During the 2024 quarter, we launched Monster Energy Ultra and Monster Manga Loka in Singapore, Monster Manga Loka in Vietnam, and Monster Energy Ultra in the Philippines. We are planning to launch a number of additional products and or product lines in our domestic and international markets in 2021. During the 2024 quarter, no shares were repurchased under the previously authorized repurchase program. As of February 25, 2021, approximately $441.5 million remained available for repurchase under the previously authorized repurchase program. We estimate January 2021 sales to be approximately 18.2% higher than in January 2020. On a foreign currency adjusted basis, January 2021 sales would have been approximately 17.2% higher than comparable January 2020 sales. January 2021 had two fewer selling days than January 2020. In this regard, we caution again that sales over a short period are often disproportionately impacted by various factors, such as, for example, selling days, days of the week in which holidays fall, timing of new product launches and the timing of price increases and promotions in retail stores, distributor 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 our distribution partners, which they alter unilaterally for their own business reasons. We reiterate that sales over a short period, such as a single month, should not necessarily be imputed to or regarded as indicative of results for a full quarter or any future period. In addition, the COVID-19 pandemic remains a serious concern. If the COVID-19 pandemic and related unfavorable economic conditions continue to intensify, the negative impact on our sales, including our new product innovation launches, could be prolonged and may become more severe. In conclusion, I would like to summarize some recent positive points. Firstly, currently the company's flavor manufacturing facilities, its co-packers, warehouses, and shipment facilities, and bottlers and distributors are all operating. We are continually addressing our aluminum can requirements, given our volume growth and the current supply constraints in the aluminum can industry. Two, we are pleased with the new additions to the Monster Energy portfolio and are planning additional launches later in the year. We are planning to continue additional launches of our rain total body fuel high-performance energy drinks in additional international countries. We are pleased with the rollout of Predator and Fury and our affordable energy drink portfolio internationally. We are proceeding with plans to launch our affordable energy brands in a number of international countries during the year. Despite the obstacles of the COVID-19 pandemic, we are pleased with our performance for the quarter and the year. I would like to open the floor to questions about the quarter and the year. Thank you.

Ladies and gentlemen, we'll now begin the question and answer session. To ask a question, you may press star and then one using a touch-tone telephone. If you are using a speakerphone, we do ask that you please pick up the handset before pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star and two. In the interest of time, we do also ask that you please limit yourselves today to a single question. At this time, we will pause momentarily to assemble the roster. Our first question today comes from Dara Messenian from Morgan Stanley. Please go ahead with your question.

Hey, guys. Good afternoon. Hilton, I was hoping you could discuss the commodity cost outlook as you look out to 2021. particularly on the aluminum side. I know you won't get into guidance territory, but just any conceptual thoughts would be helpful. And if we do see sustained higher commodity costs, can you discuss your willingness to potentially take pricing to offset some of the higher costs and how you think about that? Thanks.

Yeah, Darrell, that's a really good question. I mean, you know, in previous calls like this, I've spoken about the fact that we engage in contracts with aluminum cancer suppliers from time to time to fix some of our aluminum costs, and we've done a little bit of that for 2021. Obviously, we monitor aluminum costs every morning, and we've seen, as you've seen and the rest of the group have seen, an increasing situation with regard to aluminum and also with the Midwest premium, which I think has taken place a lot of us by surprise, you know, the aluminum, the, uh, the Midwest premium was, you know, in the, in the upper single digits some months ago. And with the imposition of the tariffs on aluminum, uh, you know, went up and, uh, we, everyone expected that to fall and, and, and, and it hasn't, it's just, uh, you know, sitting at just below 16 cents. So, um, where we are, um, you know, we doing our best to manage, um, aluminum costs and, uh, I'm not sure there's much more I can say other than yes, aluminum costs will increase in 2021 over 2020. So that's a fact of life and it will impact us as it will impact many other beverage companies. And regarding your second question about take your price increase, We're not, at this time, you know, we haven't been looking at taking a price increase over. One never rules out taking a price increase when the, you know, the right opportunity presents itself. And right now, none of our competitors have been looking at price increases. I know we led the market last time, but this time we, you know, we're cautious, as indeed we should be with our market share, and we're examining the the opportunities to take price up, and we will if we find there's an opportunity to do so.

Our next question comes from Kevin Grundy from Jefferies. Please go ahead with your question.

Great. Thanks. Good evening, guys, and congratulations on the strong results. I'd like to ask about the seltzer category. Specifically, you made some comments recently at your analyst day. We could get some news here, either on the alcohol side or even non-alcohol side. I know it's a big decision and certainly not one where you want to be beholden to any sort of timeline that Wall Street may have set, but any updated thoughts here with respect to whether you've decided to enter and what that timing may be? Thank you.

I think that our position there is still much the same as we indicated on our last call. We are reviewing. They're very separate. If you go to the non-alcoholic side, it would be an energy product, obviously. If you go to the alcoholic side, you'd be then competing with all the other alcoholic sets, the White Claw and Trulia and others that are in that category. We are continuing to evaluate both of them. We do believe we'll have some news in the not-too-distant future, but we are looking at the positioning of what we're looking at, opportunities, particularly on the non-alcoholic side. The alcoholic side has become very crowded, and we are reviewing it. We are developing products, but whether we decide to pull the trigger and when and how, we're just looking at where the category is going there before we make a decision. and, you know, on that side. So other than that, I just don't think there's much more that we can really provide to you as an update. You know, as I said, on the non-alcoholic side, we just wouldn't like to get into those discussions and our plans in the clean energy area, which we are addressing and looking at.

Our next question comes from Andrea Teixeira from J.P. Morgan. Please go ahead with your question.

Thank you. Good afternoon there. I was hoping if you can comment on the inventory levels at the bottlers in light, obviously, with the pandemic and obviously not to take away from your strong volumes. Did the bottlers decide to take more inventory in the fourth quarter in January and also driven by your innovation? So perhaps you were taking the new products that I think the pipeline has been stronger than ever. So if you can comment on that or if we should see this space of growth continuing?

So where we are, Andrea, is we're in interesting territory because you can see that our sales are growing, I think, quicker than we had expected that they would. And we are doing everything we can to service our bottlers and get product to our bottlers so they can service the retail trade. Having said that, I'm pretty confident that there's not excess inventories in the bottlers' warehouses because I know that we're doing everything we can to satisfy their demand, and they have not been terribly happy with us in terms of getting product because excess cans are tight, and we're doing everything we can to service customers in an area where the market is growing quicker than our expectations. So from that perspective, you know, I don't believe that the distributors are carrying any excess inventory in their system. And, you know, we also know, of course, we monitor depletions and depletions are in line with our shipments.

With regard to specific countries, I think we've already indicated in the transcript of, you know, we did make mention of the fact that, you know, of the differential in certain selected countries where we saw our contributors, you know, reducing their stockholding slightly because of anticipated slowdowns in retail in those particular countries.

That's correct. That was, you know, we spoke about that in China and Japan, and that is correct.

So we've given you those sort of indications. But other than that, they seem to be, you know, reasonably good shape.

Yeah. Our next question comes from Mark Astrachan from Stiefel. Please go ahead with your question.

Hey, afternoon, everyone. Hope all is well. I guess I'm going to try to cheat and ask a short follow-up and then another question. I guess on the follow-up, what prevents you from working more with the Koch system in procuring aluminum and manufacturing in general so that you have a bit more of sharing of ability to supply bottlers. And, you know, second separate question is just could you update us, Rodney, probably on, you know, where you are from an SKU standpoint in terms of international markets, you know, sort of broadly versus where you are in the U.S., meaning how many do you have on a typical shelf outside the U.S. and, you know, what's the opportunity going forward for that?

So let me start, Mark. In terms of working with the Coca-Cola bottlers and working with the Coca-Cola system on procurement of cans, we're doing what we can to produce within the Coca-Cola network. Obviously, that's something that we like to do because it reduces shipping costs and improves efficiencies. But there are a whole bunch of products that we manufacture that that cannot be manufactured at a Coca-Cola facility. We do a wide range of products, from hot full to retort. And those products cannot be manufactured at a Coca-Cola facility. So where we can, we try and work with the system. And obviously, that's our major focus. And that's been improving over the years. We've opened up a number of Coca-Cola facilities to produce Monster. On the other hand, on procurement, which is a question you asked, that's been a longer-term project, and we haven't resolved that situation yet. The Coke bottlers have their own organization, which is for the Coca-Cola bottling situation. We are not a bottler, and we don't fall within that mandate. That's been a difficult discussion, and It's something that I'm hoping that we'll be able to progress in the future. But right now, we're doing our own procurement of all our raw materials, including aluminum and including cans. Rodney, he asked that you answer the second question. Go ahead.

On the second one, it varies from country to country, Mark. But if you try and take it as an average, the number of SKUs that we have in distribution internationally is substantially less than we have, than our range of SKUs that we have in the US. And so we are continuing to expand the number of SKUs, but it does vary, and in some countries we're trying to start accelerating that instead of doing, you know, just one a year, we're actually increasing the pace of innovation going on shelves. But it does vary quite dramatically from country to country. And where we can get, you know, receptiveness from retailers to increase the energy space, we obviously take advantage of that and increase more. And so we did, as you would have noticed from the call, we went into quite a lot of depth in EMEA and places like that of new products and where we're introducing new flavors because that pace is accelerating. But there is you know, quite a long runway internationally for international markets to get up to the U.S. levels. And there are many products that haven't yet been launched at all in international markets. So, you know, the rehab products are in very few markets internationally. We're just starting to launch some of the hydro products. So there are a number of product lines, or we call them sub-families, that aren't yet in, you know, don't appear in many international markets at all. So there is opportunity there, but it all depends on the appetite of retailers and their willingness to grant additional space. But I think that, as we've seen everywhere, the category does increase on a sales per unit basis. It is a higher ring than a lot of other comparable beverages, competitive beverages. And so we are seeing a receptiveness from retailers to continually recognizing the category and increasing the allocation of space.

Yeah, it's just an evolution. It's a question of time. You know, we generally start with one or two SKUs and we build from there. And if you look across the various countries that we are distributed in, some have more or less, depending on when we started and the appetite for taking on additional products. But as the energy category grows, there is a huge opportunity to be able to do that. And then in some countries, like in China, we've actually launched unique items that are not available in the U.S. In Brazil, we have a tea product, for example, that's also not available in the U.S. So there are a bunch of products under the Monster brand that are not available in the U.S. that are distributed internationally. And of course, our strategic brands or in various countries in the world, many of those, many of the flavors that we sell in other parts of the world are not available in the U.S. So it really is a mixed bag. And, you know, as we see it, opportunity, you know.

Our next question comes from Peter Galbo from Bank of America. Please go ahead with your question.

Hey, guys. Good afternoon. Thank you for taking the question. Rodney, I just want to ask on capital allocation. It's been a couple of quarters, I guess, since we've seen some meaningful share repurchase. You talked about the authorization outstanding. Just help us kind of think about your appetite to do more potentially in 21 and beyond. Thanks.

Thanks, Scott. I think that what we did was we were quite active in the market, and then we saw an increase in uptick in the share prices, so we just sort of sat patiently, and that has moved forward. But again, as part of, I think, our own just review of our own opportunities and what we want to do, we've sort of been a bit patient because we are reviewing a number of additional markets potential product categories and sectors and so until we make up our minds to determine how do we go about or address them you know we're just sort of taking a cautious approach and we'll see later in the year whether you know we have the cash you know and we'll decide on how to employ that whether to use that to repurchase shares or potentially some other purposes but We just wanted to rather be in a position to be flexible in making that decision going forward. But if we don't have any other use for it, depending on our direction, we will continue to resume purchasing, repurchases of shares.

Ladies and gentlemen, this will conclude our question and answer session. I'd like to turn the conference call back over to Mr. Sachs and Schlossberg for any closing remarks.

Thanks very much. On behalf of the company, I'd like to thank everyone for their continued interest. We continue to believe in the company and our growth strategy and remain committed to continuing to innovate, develop, and differentiate our brands and to expand the company both at home and abroad. and in particular to expand distribution of our products through the Coca-Cola bottler system internationally. We believe that we will be able to navigate through the challenges ahead as a result of the COVID-19 pandemic and hope that this unfortunate situation will resolve itself in the not-too-distant future. We believe that we are well positioned in the energy drink category and continue to be optimistic about our total portfolio of energy drink brands. We hope that you will all stay safe and healthy. Thank you very much for your attendance.

Ladies and gentlemen, with that, we'll conclude today's conference call. We do thank you for attending today's presentation. You may now disconnect your lines.