Monster records elevating beverage prices due to higher packaging material cost

Monster Beverage reported an exponential US$1.66 billion in sales in the second quarter, reportedly 13.2 per cent greater than the accumulated amount of the same time span the previous year. If the foreign currency effect was not put under consideration, the earnings were experiencing a 16.9 per cent hike.

On the other hand, the company’s Strategic Brands failed to reach such substantial growth numbers, falling by 9 per cent to US$79.1 million. The category differentiates all those energy drink brands either acquired from Coco-Cola or any other affordable energy drink provider.

The company also denoted that it had been subjected to a ‘significant increase’ as per the cost of products was concerned, ultimately resulting in the decrease of gross profit margin level from 57.2 per cent to 47.1 per cent.

The soaring prices were basically the outcome of increased freight rates and fuel costs. Moreover, the transportation of aluminium cans from one place to another and within other geographical boundaries also increases the price of an individual product.

The recent turmoil in the world economy is due to the conflict between powerful nations and their strategy to wear each other out, financially and natural resource-wise. The rising prices of commodities and other goods draw a great picture to make us recognise the inevitable. The escalating cost of energy is ultimately heightening the price of raw materials like aluminium which is the most suitable non-ferrous metal preferred in food packaging due to its recyclability and malleability.

Beverage cans are made of an untainted version of aluminium that can be recycled infinitely to make more cans, but half of the time, the amount of cans produced is not equal to the number of cans returned.

Monster thus stated that the decline in gross profit was apparently due to rising prices of raw materials and other auxiliary packaging requirements.

The company’s primary products from the Monster Energy Drinks rack, like the Monster, Reign Total Body fuel and True North energy drinks, witnessed a heightened sales of 12.5 per cent to US$1.54 billion.

Monster notified that excluding the US customer base, sales to other regions have augmented by 18.8 per cent to rest at US$649 million. The number of such sales amounted to 39 per cent of the net sales in the entire second quarter when compared with the 37 per cent gain one year back.

The Vice Chairman and Co-Chief Executive Officer, Hilton H. Schlosberg, exclaimed: “We are pleased to report continued strong revenue growth, driven by consumer demand. Ensuring product availability for our customers and consumers remains a priority.”

“Following many quarters of supply chain challenges, we have been able to rebuild inventories on a global basis while at the same time meeting strong customer demand, despite operating in an extremely challenging, unprecedented and costly supply chain environment,” he continued in zest.

Schlosberg added: “Significant increases in freight-in and fuel costs, including costs relating to the importation of aluminium cans, as well as other input costs continue to impact costs of sales. We believe that some of the increased costs that we are experiencing are likely to be transitory as we begin to decrease our reliance on the use of imported aluminium cans, as well as increase our inventory levels in closer proximity to our customers. Furthermore, the sharp run-up in aluminium commodity pricing appears to be currently moderating.”

To explain further, he said: “Increases in distribution costs, particularly freight and fuel, continued to adversely impact operating expenses.”

“We have implemented measures to mitigate the impact of increased costs experienced in our supply chain through reductions in promotions and other pricing actions in the United States and in EMEA. In the United States, we are implementing a market-wide increase in pricing, effective September 1, 2022. In certain international markets, price increases will also be implemented in the second half of 2022, some in addition to price increases or pricing actions already taken earlier in 2022,” Schlosberg concluded.