Monster gains sales with price hike, leans on innovation to recover units in 2023

By Elizabeth Crawford

- Last updated on GMT

Source: Monster Beverage Corp.
Source: Monster Beverage Corp.

Related tags Monster energy Energy drinks functional beverage clean energy

Monster Beverage Corporation executives predict that sales growth across its energy drink portfolio will pick up and continue to outpace overall category growth in the coming months following a long-delayed and category-leading price increase that went into effect this fall.

At the same time, they say units, which have dipped in recent weeks like many food and beverage CPGs in the tightening economy, will also recover as the company introduces new products targeting a more diverse consumer base, which should also bolster its large but flat market share.

“While we do face challenges on the cost side, there is optimism going forward,”​ co-CEO Rodney Sacks told investors earlier this month at an event hosted by the energy drink company.

Based on his belief that the threat of COVID is not as severe, he said he believes the “the world will start normalizing,”​ including increased consumer activity, more reliable supplies and levelling inflation, which will allow the company to “carefully … start implementing our strategy in diversification,”​ explore additional innovation and ultimately drive growth across the board.

And this growth, he added, will come off a strong foundation for the business, which continues to lead in dollar share across all measured channels and is driving strong sales growth off of a large base compared to competitors.

The company maintained 36.4% of the total energy drink market dollar share in the last 13 weeks of 2022 across all measured channels – barely edging out its largest competitor Red Bull, which saw its dollar share dip 0.8% to 35.1% in the period, according to Nielsen data. It also saw dollar sales climb 11% to $1.73bn in the period – again notably higher than Red Bull’s 8.3% increase to $1.66bn in the same time.

Much of this growth came from a price increase that went into effect Sept. 1 – a move that executives said they delayed as long as they could and which could have contributed to the company’s 1.2% unit drop in the last three months of 2022. However, they add, the benefit from this increase already is visible in the company’s financials and likely will continue to deliver benefit as 2023 progresses.

“Things are definitely very positive with regard to the price increase. There was some concern, as you know, because what we were trying to do in the early part of 2022 was to implement reductions in promotions [to help manage the impact of inflation], and then the way the cost environment ran, it became inevitable that we would have to have a price increase and it would have to lead the price increase [for the energy drink category],”​ co-CEO and Vice Chairman Hilton Scholsberg said at the company’s special investor event. But he added, he expects other category players will likely follow Monster's lead and implement price increases of their own in the near future, helping to close the gap between Monster's options and competitors.

Retailers, consumers accept price hike

Despite initial concern, he added, the price increase “is in fact sticking”​ and the company is seeing “some good performance on that score”​ as retailers begin to reset the energy drink segment.

Looking forward, he said, Monster will continue to introduce price increases on a rolling basis in Europe, but may not need to raise them again in the US.

“We will evaluate further opportunities, or not, in 2023 as the year goes by bearing in mind the fact that costs are coming now under control and there’s also a big concern, not only in the energy drink category, but in other categories as well that consumers may well be resisting some of these increased prices. And there is a lot of pressure now that is focusing on that,”​ Scholsberg said, adding: “What we’ve always done and will continue to be is cautious and careful with regard to price increases.”

While Scholsberg stopped short of providing guidance with regard to the balance of pricing and ongoing inflation, he noted the cost of aluminum and freight both domestically and internationally are easing. But he added other commodities, like sugar, are going up, so inflation is “not a zero sum game.”

From Zero Sugar to clean energy – Monster diversifies appeal through innovation

Like many CPG companies, Monster is looking to offset any negative impact or consumer perception of price increases by reinforcing the value of its products – primarily through innovation, which executives say will increase the appeal of their brands among new consumers.

For example, the company recently launched a new Monster Energy Zero Sugar, which at least one analyst noted at the event tastes nearly identical to the original Monster Energy offering.

“The zero sugar product is very much an analogue of our successful original Monster. We’ve decided to launch it in a black can with a green claw, but with some distinguishing features, because the taste profile of this product is almost indistinguishable from a regular Monster, but we believe this will broaden our core consumer base, which we’ve established over the last 20 years,”​ Sacks said.

Adding that “many of our consumers prefer, for whatever reason, to have a zero-sugar product,”​ Sacks said the company plans to extend the product rollout internationally as well.

Celsius in Monster's crosshairs

As a complement to Monster Zero Sugar, the company also will introduce this year a new line of clean energy beverages under its Reign brand. Reign Storm will include four fruit flavored options, including Kiwi Blend, Peach Nectarine, Valencia Orange and Harvest Grape, in 12-ounce cans featuring softer colors and fruit imagery that Sacks says may be more approachable to consumers with whom Monster’s aggressive image does not resonate.

“We think it’s a little more neutral, not quite as aggressive in personality as the main brand. We think it’ll reach a broader demographic audience … and enable us to compete more directly in some of the performance categories or what they would call clean energy or healthier, perceived sort of, energy categories where you’ve got a number of new entrants”​ in the past year or two, he said.

The most notable of these entrants likely is Celsius which is positioned as a fitness drink that blends energy and key vitamins and which features fruit images on 12-ounce cans and is associated more with active women.

While Celsius is still relatively small with about $200m in sales in the last quarter of 2022, it is one of the fastest growing with dollar sales up 124.8% in the period and units up 92%, allowing it capture 4.2% of the highly fragmented category’s dollar share, according to Nielsen data.

Monster also is planning to introduce innovations within its Rehab, Juice, Ultra and Java lines – all of which Schlosberg noted target different consumer segments from each other and allow the company to expand its reach without cannibalizing the influence and sales of its original products.

The company also will expand into the alcoholic beverage sector in select markets this month with a second wave planned for March.

Internationally, Monster is expanding its offering of more accessibly priced beverages, but it has no intention of including the US in this play as it does not want to compete with its well established and strong performing premium products.

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