Monster Beverage Q2 2023 Earnings Call Transcript

Participants

Corporate Executives

• Rodney Sacks, Chairman and Co-Chief Executive Officer
• Thomas Kelly, Chief Financial Officer
• Hilton Schlosberg, Vice Chairman and Co-Chief Executive Officer

Analysts

• Peter Grom, UBS Group AG
• Andrea Teixeira, J.P. Morgan
• Filippo Falorni, Smith Barney Citigroup
• Peter Galbo, Bank of America Co.
• Christopher Carey, Wells Fargo Securities
• Bonnie Herzog, The Goldman Sachs Group, Inc.

Presentation

[Operator]

Good day, and welcome to the Monster Beverage Corporation Second Quarter 2023 Financial Results Conference Call. [Operator Instructions]. Please note, this event is being recorded.

I would now like to turn the conference over to Mr. Rodney Sacks and Mr. Hilton Schlosberg, Co-CEOs of Monster Beverage. Please go ahead.

[Rodney Sacks, Chairman and Co-Chief Executive Officer at Monster Beverage]

Thank you. Good afternoon, ladies and gentlemen. Thank you for attending this call. I'm Rodney Sacks. Hilton Schlosberg, our Vice Chairman and Chief Executive Officer, is on the call; as is Tom Kelly, our Chief Financial Officer. Tom Kelly will now read our cautionary statement.

[Thomas Kelly, Chief Financial Officer at Monster Beverage]

Before we begin, I 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 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.

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 March 1, 2023, and quarterly report on Form 10-Q, including the sections contained therein entitled Risk Factors and Forward-Looking Statements for a discussion on specific risks 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 Sacks.

[Rodney Sacks, Chairman and Co-Chief Executive Officer at Monster Beverage]

Thanks, Tom. The company achieved record second quarter net sales of $1.85 billion in 2023 second quarter, 12.1% higher than net sales of $1.66 billion in the 2022 comparable period and 14.4% higher on a foreign currency adjusted basis. Gross profit as a percentage of net sales for the 2023 second quarter was 52.5% compared with 47.1% in the comparative 2022 second quarter. The increase in gross profit percentage of net sales for the 2023 second quarter as compared to the 2022 second quarter was primarily the result of pricing actions, decreased freighting costs and increased aluminum can costs. The increase was partially offset by lower gross margins in the alcohol segment and in which our sales had quite a nice bump as you've seen from the release.

As expected, promotional allowances for the 2023 second quarter were marginally higher than the comparable 2022 second quarter as well as the 2023 first quarter. Operating expenses for the 2023 second quarter were $450.4 million compared with $406.9 million in the 2022 second quarter. As a percentage of net sales, operating expenses for the 2023 second quarter were 24.3% compared to 24.6% in the 2022 second quarter.

Distribution expenses the 2023 second quarter decreased to $82 million or 4.4% of net sales compared to $87.9 million or 5.3% of net sales in the 2022 second quarter. The $5.8 million decrease in distribution expenses was primarily due to decreased freight out expenses of $11.8 million, partially offset by higher warehouse expenses of $4.8 million as a result of higher raw materials and finished product inventories in the United States and EMEA.

The increase in other operating expenses was primarily due to increased payroll expenses. We are purchasing aluminum cans from local sources globally. We have returned to our Orbitz strategy of producing in closer proximity to our customers. The cost of repositioning finished products to distribution centers are included in costs. The company continues to address certain challenges in its supply chain as it navigates the current global supply chain environment. Operating income for the 2023 second quarter eased 40.4% to $523.8 million from $373 million in the 2022 comparative quarter.

The effective tax rate for the 2023 second quarter was 23.2% compared with 25.3% in the 2022 second quarter. The decrease in the effective tax rate was primarily attributable to an increase in deductible interest expense a decrease in the effective state income tax rate as well as an increase in net income in certain foreign jurisdictions, which have lower tax rates compared to the United States.

Net income increased 51.4% to $413.9 million as compared to $273.4 million in the 2022 comparable quarter. Diluted earnings per share for the 2023 second quarter increased 52.8% to $0.39 from $0.26 in the second quarter of 2022. Due to continued cost pressures, the company implemented pricing actions the United States in 2022 as well as in many other international markets in 2022 and in the first half of 2023. The company plans to implement additional increases in a number of other international markets during the remainder of the 2023 year. In the United States, the company implemented an additional price increase on its 18.6-ounce and 24-ounce line -- effect of April 1, 2023. We will continue to review further opportunities for pricing actions in order to mitigate inflationary pressures.

According to the Nielsen report for the 13 weeks through July '22, 2023, for all outlets combined, namely convenience, grocery, drug, mass merchandisers, sales in dollars in the energy drink category, including energy shots, increased by 13.6% versus the same period a year ago. Sales of the company's energy brands, including Reign, were up 12.2% in the 13-week period. Sales of Monster were up 10.5%. Sales of Reign were up 43.7%. Sales of NOS increased to 11.2% and sales of Full Throttle increased 14.7%. Sales of Red Bull increased to 10.2%. The company continues to have market leaders share leadership in the energy drink category for all outlets combined in the United States in both the 13-week and four-week periods ended July 22, 2023.

According to Nielsen, for the four weeks ended July 22, 2023, sales in dollars in the energy drink category in the convenience and gas channel, including energy shots in dollars, increased 13.7% over the same period the previous year. Sales of the company's energy brands, which include Reign, increased 13.8% in the four-week period in the convenience and gas channel. Sales of Monster increased by 11.1% over the same period versus the previous year. Reign sales increased 54.9%. NAS was up 13.2%. Full Throttle was up 23 2%. Sales of Red Bull were up 8.8%.

According to Nielsen, for the four weeks ended July 22, 2023, the company's market share of the energy drink category in the convenience and gas channel, including energy shots in dollars increased from 36% to 36.1%. Monster share decreased from 30.4% a year ago to 29.8%. Reign's share increased 0.8% to 3.1%, NOS's share remained at 2.5% and Full Throttle share remained at 0.7%. Red Bull's share decreased 1.6 points from 36.3% a year ago to 34.7%. VPX Bang's share decreased 4.2 points to 1.8%. Five-hour share was lower by 0.7 points at 3.5%, Rockstar share was down 0.2% to 3.4% -- share is 6.6% and -- share is 3% and Ghosts share is 2.8%. Please note that VPX Bang was in bankruptcy during this period, and we will address our acquisition of Bang later in this call.

According to Nielsen, for the four weeks ended July 22, 2023, sales in dollars in the coffee plus energy drink category, which includes our Java Monster line in the convenience and gas channel decreased 3% and over the same period the previous year. Sales of Java Monster, including Java Monster 300, and Java Monster Nitro Cold Brew were 3.3% higher in the same period versus the previous year. Sales of Starbucks Energy were 7% lower. Java Monster share of the coffee plus energy drink category for the four weeks ended July 22, 2023, was 54.1%, up 3.3 points, while Starbucks Energy's share was 45.6%, down two points.

According to Nielsen, in all measured channels in Canada, for the 12 weeks ended June 17, 2023, the energy drink category increased 14.8% in dollars. Sales of the company's energy drink brands increased 21.6% versus a year ago. The market share of the company's energy drink brands was 42.4%, up 2.4 points. Monster sales increased 25.6% and its market share increased to 3.3 points to 38.1%. NASCAR sales decreased 5.8% and its market share decreased 0.3 of a point to 1.3%. Full Throttle sales decreased 43.2% and its market share decreased 0.3% of 2.3% [Phonetic].

According to Nielsen for all outlets combined in Mexico, the energy drink category increased 23.7% for the month of June 23. Monster sales increased 25.3%. Monster's market share in value increased 0.4 points to 28.8% against the comparable period the previous year. Sales of Predator increased to 75.3% and its market share increased 1.7 points to 5.6%. 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 OXXO convenience chain, which dominates the market. Sales in OXXO 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 June 2023 compared to June 2022, Monster reached our market share in value increased in Greek and Argentina from 50.5% to 55.5%, in Chile from 38.1% to 40.8%, and in Brazil from 41.6% to 44.4%. Monster Energy is the leading energy brand in value in Argentina, Brazil 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 until June 18, 2023, Monster's retail market share in value as compared to the same period the previous year, grew from 16.2% to 16.6% in Belgium, from 32.7% to 33.1% in France, from 29.8% to 31.1 in Great Britain, from 31.8% to 35.2% in Norway, from 28.1% to 30.3% in the Republic of Ireland, from 39.4% to 41.6% in Spain and from 15.6% to 15.9% in Sweden. Monster's retail market share in value as compared to the same period the previous year declined from 6.6% to 5. 5% in the Netherlands.

According to Nielsen, in the 13-week period ended until the end of June 2023, Monster's retail market share in value as compared to the same period the previous year declined from 19.3% to 17.7% in South Africa.

According to Nielsen, in the 13-week period until the end of May 2023, Monster's retail market share in value as compared to period the previous year grew from 18% to 22.1% in the Czech Republic, from 27.4% to 28% in Denmark, from 15% to 16.4% in Germany and from 28% to 29.9% in Italy. Monster's retail market share in value as compared to the same period the previous year declined from 38.7% to 37.5% in Greece and from 20.6% to 18.7% in Poland.

According to Nielsen, in the 13-week period until the end of May 2023, Predator's retail market share in value as compared to the same period the previous year, grew from 26.3% to 31.5% in Kenya and from 15.4% to 19.8% in Nigeria. According to IRI in Australia, Monster's market share in value for the four weeks ending July 9, 2023, increased from 14.1% to 16.9%, as compared to the same period the previous year. Mother's market share in value decreased from 10.4% to 10.3%. According to IRI in New Zealand, Monster's market share in value for the ended July 9, 2023, increased from 12.6% to 14.9% compared to the same period the previous year. Live+ market share in value decreased from 6.5% to 5.6% and Mother's market share in value remained at 5.3%.

According to Intag in Japan in the month ending June 2023, Monster's market share in value in the convenience store channel as compared to the same period the previous year declined from 56.7% to 55.1%. According to Nielsen in South Korea, in the month ending June 2023, Monster's market share in value in all outlets combined as compared to the same period the previous year decreased from 59.9% to 57.6%. 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 these periods.

Net sales to customers outside the U.S. were $715.4 million, 38.6% of total net sales in the 2023 second quarter compared to $649 million or 39.2% of total net sales in the corresponding quarter in 2022. Foreign currency exchange rates had a negative impact on net sales in U.S. dollars by approximately $38.4 million in the 2023 second quarter. Included in reported geographic sales are our sales to the company's military customers, which are delivered in the U.S. and transshipped to the military customers overseas.

In EMEA, net sales in the 2023 second quarter increased 13% in dollars and increased 16.4% in local currencies over the same period in 2022. Gross profit in this region as a percentage of net sales for the second quarter was 34% compared to 26.7% in the same quarter in 2022. We are pleased that in the 2023 second quarter, Monster gained market share in Belgium, the Czech Republic, Denmark, France, Germany, Great Britain, Italy, Norway, the Republic of Ireland, Spain and Sweden.

In Asia Pacific, net sales in the 2023 second quarter increased 17.8% in dollars and increased 26.7% in local currencies over the same period in 2022. Gross profit in this region as a percentage of net sales was 42.4% versus 40.4% over the same period in 2022. Net sales in Japan in the 2023 second quarter increased 11.9% in dollars and increased 21.2% in local currency.

In South Korea, net sales increased 50.3% in dollars and increased 59.5% in local currency as compared to the same quarter in 2022. Monster remains the market leader in Japan and South Korea. In China, net sales in the second quarter increased 3.7% in dollars and increased 10.6% in local currency as compared to the same quarter in 2022. We remain optimistic about the prospects for the Monster brand in China. In the 2022 second quarter, our distribution partners restocked inventories following the easing of the COVID-19 restrictions in China.

In Oceana, which includes Australia and New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea and Guam, net sales increased to 26% in dollars and 36.4% in local currency.

In Latin America, including Mexico and the Caribbean, net sales in the 2023 second quarter increased 0.1% in dollars and increased 9.4% in local currencies over the same period in 2022.

In Brazil, net sales in the 2023 second quarter increased by 2.5% in dollars and 3.6% in local currency. Net sales in Mexico increased 3% in dollars and 10.1% in local currency in the 2023 second quarter. Net sales in Chile decreased 23.8% in dollars and decreased 26% in local currency in the 2023 second quarter. The decrease in sales in Chile were due in part to a normalization of bottler inventory levels. Net sales in Argentina decreased 19.5% in dollars but increased 54% in local currency in the 2023 second quarter.

We will now provide an update on our litigation with Vital Pharmaceuticals, Inc. which will be referred to as VPX, the former maker of Bang energy drinks. We previously discussed the trademark infringement arbitration in which an arbitrator found against VPX and awarded Monster Energy Company or MEC and Orange Bank, $175 million in damages, attorney's fees and costs and an ongoing 5% royalty on future sales of certain Bang Energy products, VPX as a field the judgment. We also previously discussed the false advertising case in the United States District Court for the Central District of California in which the jury returned a verdict awarding MEC approximately $293 million in damages and the District Court granted MEC's motion for a permanent injunction in joining VPX and former CEO, Jack Oak from fastly or receptively claiming that Bang or any other beverages creatine or a form of creatine.

VPX and Jack Oak appealed the injunction. The parties have completed briefing on remaining post-trial issues. On October 10, 2022, VPX along with certain of its domestic subsidiaries and affiliates filed for protection under Chapter 11 of the Bankruptcy Code in the United States District Court for the Southern District of Florida. On June 28, 2023, VPX and certain affiliates entered into an asset purchase agreement with the company, which, among other things, provided for the company's acquisition of substantially all of VPX's assets. The transactions contemplated by the asset purchase agreement closed on July 31, 2023, at which time, the company was deemed to have allowed general unsecured claims VPX' bankruptcy case relating to the arbitration award and the juries award, subject to the potential modification of the Jury of Award [Phonetic] in the light of pending post-verdict motions filed by MEC and VPX.

The asset purchase agreement also includes a mutual release between VPX and MEC, which, among other things, requires VPX to dismiss its appeals of the trademark -- the false advertising case as well as cases that VPX filed against MEC in the United States District Court for the Southern District of Florida. Note that this mutual release does not include any claims that come might have against [Indecipherable] in relation to that jury award. The company will not recognize the allowed general unsecured claims or the jury award as it relates to [Indecipherable] until they are realized or realizable. We will not be answering questions on these legal proceedings on today's call.

In June 2023, the company also entered into an agreement with Orange Bank, Inc. regarding the company's use and registration of certain bank trademarks and trade names subject to the successful closure of the asset purchase agreement. Under this agreement, the company will pay Orange Banking a onetime payment of approximately $12.5 million and a 2.5% royalty on all future sales products bearing the trade name Bank. On June 31, 2023, we completed our acquisition of substantially all of the assets of Vital Pharmaceuticals, Inc.

[Hilton Schlosberg, Vice Chairman and Co-Chief Executive Officer at Monster Beverage]

Rodney that was July; July 31st.

[Rodney Sacks, Chairman and Co-Chief Executive Officer at Monster Beverage]

Sorry, sorry, I apologize. On July 31, 2023, we completed its acquisition of substantially all of the assets of vital pharmaceuticals in and certain of its affiliates collectively Bang Energy for a purchase price of approximately $362 million subject to adjustments. The acquired assets include Bang Energy beverages and a beverage production facility in Phoenix, Arizona. We successfully recruited a limited number of former VPX employees to fill certain open positions within Monster as well as the majority of the team at the manufacturing site in Phoenix. Pursuant to Monster's obligations with the Coca-Cola Company, Bang Energy will be distributed the Coca-Cola bottler network, starting with the United States in the 2023 third quarter.

As a result, there will be a temporary disruption of the product supply of Bang Energy brand energy drinks. Additionally, our intention is to rationalize Bang's product offerings and product lines and to fully integrate Bang into the Monster infrastructure. We do not intend to manufacture or sell Bang's other product lines such as red line or shots beyond liquidating existing inventories at this time. We may consider reintroducing certain of those product lines sometime in the future.

We are excited about our acquisition of the state-of-the-art Bang energy production facility in Phoenix, Arizona, which we intend to utilize for Bang as well as other products in the Monster portfolio. As we only completed the acquisition this week, it is still early days, and we will provide you with further updates on Bang Energy on our next investor call in November.

In the first half of 2023, we launched the Beast Unleashed, which is now available in 28 states through a network of beer distributors. We are pleased with the early results and are continuing to expand distribution with the goal of being national by the end of the year. According to Nielsen Scan data, the Beast Unleashed is currently one of the top new brands in the beer category in 2023. We plan to launch a hard iced tea extension of the Beast Unleashed named Nasty Beast Hardcore Tea later this year or early next year with the goal of national distribution in the first half of 2024.

The brand will have four flavors, original, half and half, Razel berry and green. Nasty Beast Hardcore Tea will be available in 24-ounce single-serve cans as well as in a variety 12-pack and 12-ounce sleek cans. We refreshed the Dales and Double Dale's beer brands in the first half of 2023 and introduced Dale's American Light Lager as part of the refresh. The brand family has performed well since the refresh. The high live brand family, the largest in our beer portfolio from scarcity is also performing well despite overall headwinds in the craft segment and is showing growth in retail scans.

Our alcohol beverage innovation pipeline is robust, and we look forward to sharing use of additional new products in future. In the 2023 second quarter in the United States, we focused on gaining distribution on our first quarter product innovation. Following the success of our recent Monster Zero Sugar launch, we are planning to launch NOS Zero Sugar in 16-ounce cans in the 2023 fourth quarter. In the 2023 second quarter, we expanded our Java Monster portfolio in Canada with the launch of Java Monster 300 triple shot Mocha and vanilla. We launched several new products in Latin America in second quarter. In Argentina, we introduced our Monster Reserve brand with the launch of Reserve White pineapple in June.

In the Caribbean, we continue to expand our portfolio and introduced a number of new products in different countries. After we successfully launched Java Monster Super Coffee, Mean Bean and Loca Mocha in Australia earlier this year, we expanded the launch of such products to the New Zealand market in the 2023 second quarter. We are pleased with the early results in both markets.

In EMEA, in the second quarter of 2023, we launched the Monster Reserve Watermelon, and White Pineapple, Ultra Gold, Ultra Fiesta Mango, Ultra Paradise, Ultra Rosa, Ultra Watermelon, Juiced -- Lemonade and Juiced Chaotic in a number of countries. During the 2023 second quarter, we also launched additional SKUs of BPM, Burn, Nalu, Predator and rain in certain countries. We launched the Monster Energy brand in Egypt in June 2023 to add to Predator, which we launched earlier this year in Egypt.

In EMEA, as part of an ongoing pan-EMEA launch, we expanded in of our Monster Energy Lewis Hamilton 44 Zero Sugar energy drink to an additional eight EMEA markets in the second quarter of 2023 for a total of 35 markets to date. During the second quarter of 2023, we launched Monster Reserve Watermelon in Japan and Monster Ultra Sunrise in Korea and Monster Reserve Pineapple in Turkey. We launched Predator in additional regions in India. We are planning to introduce the Predator brand in additional countries in APAC in the course of 2023.

In July 2023, we launched Monster Ultra Pitocin in Japan and Predator in Iraq, Monster Energy will be launched in the Philippines later this year. We estimate that on a foreign currency adjusted basis, Including the alcohol brand segment, July 2023 sales were approximately 13.7% higher than the comparable July 2022 sales and 12% higher than July '22 excluding the alcohol brand segment. We estimate July 2023 sales, including the alcohol brand segment to be approximately 12.1% higher than in June -- than in July 2022 and 11.2% higher than in July 2022, excluding the alcohol brand segment. July 2023 had the same number of selling days as July 2022.

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, our bottlers are responsible for production and determine their own production schedules. This affects the dates on which we invoice such bottlers. Furthermore, our bottling and distribution partners-maintained inventory levels according to their own internal requirements which they may alter from time to time 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 conclusion, I would like to summarize some recent positive points. First, the energy category continues to grow globally.

Second, we are pleased to report that our pricing actions, which have been implemented to partially mitigate inflationary pressures have not significantly impacted consumer demand.

Third, our AFF flavor facility in Ireland is now providing a large number of flavors to our EMEA region, enabling better service levels and lower landed costs to our EMEA region.

Fourth, we are enthusiastic for our 2023 new product innovations, notably Monster Energy Zero Sugar, Ultra Strawberry Dreams, Rainstorm and [Indecipherable] in the United States and Monster Energy Lewis Hamilton 44 Zero Sugar in EMEA.

Fifth, we are pleased with the early results from the launch of the Beast unleashed. We are continuing to expand distribution with the goal of being national by the end the year.

Sixth, we are excited by the launch of Nasty Beast Hardcore Tea later this year or early next year with the goal of national distribution in the first half of 2024 as well as the additional alcohol opportunities that the [Indecipherable] presents.

Seven, we are pleased with the initial results of our launch of rainstorm, our new line of total wellness energy drinks.

Eight, we are pleased with the rollout of [Indecipherable] our affordable energy drink portfolio internationally. We are proceeding with plans to launch our affordable energy brands in a number -- additional number of international markets. Now we are excited about the opportunities that the of the Bang Energy brand presents to us and believe that the brand will fit well within our broader portfolio of energy drink brands.

I would like to now open the floor to questions about the quarter. Thank you.

Questions and Answers

[Operator]

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. Our first question comes from Peter Grom with UBS. Please go ahead.

[Peter Grom, Analyst at UBS Group]

Thanks operator and good afternoon, guys. I hope you are doing well. So, I wanted to pick up on the gross margin commentary and just get a sense for how the quarter kind of came in versus your expectations. This is the first time you we haven't really seen the sequential improvement on gross margin in about a year. And I know you mentioned promotions, I think you talked about other costs back at the shareholder meeting.

But can you maybe just talk about how you see the drivers of gross margin evolving through the balance of the year? Should we still expect to see sequential progression from here? And then maybe bigger picture, can you just help frame where we are on the long-term margin recovery journey? Thanks.

[Hilton Schlosberg, Vice Chairman and Co-Chief Executive Officer at Monster Beverage]

So, Peter, the difficult answer to your question is that we really don't give guidance. So, if we look at this quarter that we're just reporting, we spoke about some of the drivers behind the improvement in gross margin. But against that, we did have continued increases, and I've said this in previous quarters, in certain ingredients and other input costs as well as co-packing. So that's a factor that will stay with us. And then we have another, obviously, issue that we spoke about, and that is geographical sales mix. So, as we sell more product overseas, so the margin reduces overall, the percentage gross margin reduces overall.

And then as you look at the alcohol business building, the gross margins from that side of the business are less than the gross margins that we enjoy in the energy drink sector. So, you've got pluses and you got minuses. The alcohol brands, you'll see in the Q that will be released in a day or so that the alcohol brands was $60 million of sales and that margin is lower, and we reported it as being lower than in the rest of the business.

So overall, there really is a mix. And then with the bank product coming in, we expect that the Bang product will have the same margins as the kind of Ultra products within our own portfolio, the Rain products, or Ultra products, and that will improve margins. So overall, there's a -- we've got a mix of positive items that are benefiting gross margins and those items that are detracting from gross margins.

[Operator]

The next question comes from Andrea Teixeira with JPMorgan. Please go ahead.

[Andrea Teixeira, Analyst at J.P. Morgan]

Thank you and good afternoon. Can you comment on where you're seeing the energy category demand perspective from a consumer standpoint? And then related to that, obviously, congrats on the acquisition of Bang. How are you planning to lean even more into this wellness energy category with the organic growth through the in-house rain innovation, Rainstorm in particular, continues to grow fast. But now Bang adds more presence into that subsegment. So why are you -- what you can share at this point? I know you're going to share more in the next earnings call. But can you talk about how you can participate even more in that category.

And if I can squeeze just a clarification about Brazil and Latin America, I think Mexico continues to do well, but I was surprised to see a deceleration. I know it's tough compared to where you gain a lot of share in Brazil. but just to make sure that we get those points. Thank you.

[Hilton Schlosberg, Vice Chairman and Co-Chief Executive Officer at Monster Beverage]

So, if I talk about the energy category as such. And we started looking at the one-week data because the community looks at the one-week data, and the energy category is still growing in good double digit, 13% in the last week. So, we're seeing a good increase in the energy category. And as we look at traditional energy and wellness energy and performance energy, obviously, you've seen kind of differences within those segments. Interestingly, Bang started off life as a very much performance energy. And today, if you look at the brand and you analyze what it stands for, it really stands for a different segment, which is really lifestyle energy.

So, you've got all these different brands that are filling different needs within the energy space. But traditional energy is still growing I did a quick analysis and the traditional energy is still going and the number I'm looking at is around 10%. You've got these other wellness energy. And obviously, we are participating in that segment with Rainstorm with -- which we are really excited about. And then performance energy, where we have Rain, which is doing very well. The difficulty in really gained deep dive into performance energy is that the Bang brand has suffered because it's lost so much distribution. And that's a factor that obviously is driving that segment of the market.

And then quickly just turning to Brazil and Chile. The energy category in those countries really grew very rapidly and we grew extensively within those two countries. But there has been -- we're seeing a little bit of a slowdown in both Brazil and in Chile. And we -- as you can see from the numbers that we reported, we are still market leaders.

So, it's something that is part of doing business within Brazil and in Chile. And we're maintaining our market share. And we had product issues in Chile, which have now been sorted. We're bringing in product from Mexico. We're now able to produce locally in Chile. But the market has taken somewhat of a slowing in growth. And we've been -- as a market leader, we've been part of that as well.

[Operator]

The next question comes from Filippo Falorni with Citi. Please go ahead.

[Filippo Falorni, Analyst at Smith Barney Citigroup]

Hey, good afternoon, everyone.

[Rodney Sacks, Chairman and Co-Chief Executive Officer at Monster Beverage]

Hi.

[Filippo Falorni, Analyst at Smith Barney Citigroup]

Few clarification on the Bang acquisition. So first, can you provide us like the last 12 months sales for the brand? And then bigger picture, like how are you guys planning to position the brand in the U.S.? What consumers are you going after? And then internationally, you mentioned the transition to the Coke system in the U.S. you plan that also to transition internationally? And if you can give us any timeline on that? Thank you.

[Rodney Sacks, Chairman and Co-Chief Executive Officer at Monster Beverage]

Maybe I just comment a little bit. Just pretty much Hilton, I think, covered most of that in answer. But we are able to look at the brands. If you've seen what -- how the bank brand has, in fact, developed, it was originally in the black can focus focused on competing with Monster. And then went to a colored can and then more recently, it went to a white can. And then that white can has gone through a new transition as well. So, you then got Rain, which is in a black can and you've got Rainstorm, which is in a 12-ounce white can. And so, we see a definite way of separating the brands, marketing them differently and positioning. And we think they can all basically fit within our broader portfolio completely separate to NAS, which is very much a motor sort of brand Full Throttle and Monster.

So, if you look at that packaging, that's how we do it. We're going to probably change the packaging slightly of the Bang brand, but it will remain principally a wide can and in 16 ounces. And so, we feel that there is a way which we -- all these brands can play quite with each other within portfolio.

[Operator]

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

[Peter Galbo, Analyst at Bank of America]

Hey, guys. Good afternoon. Thanks for taking the question. I guess if I can just to follow back up on Peter Gram's question and understanding give guidance around gross margin. I guess as we looked at it on a gross profit per case basis, you were actually kind of flattish sequentially. So, we the percentage of looking at the dollars. Is that at all a better way to think about the go forward, just as you're managing gross profit per case on a dollar basis relative to the margin. Thanks very much.

[Hilton Schlosberg, Vice Chairman and Co-Chief Executive Officer at Monster Beverage]

So, we always look at gross profit per case. When we launch a product, that's very much part of the way that this company has always examined new product introductions. So know your costs, that phrase has been something that we preached for any number of years. So, as we go forward with new products, with new innovation, even for example, with the Bang acquisition, knowing the costs is vital to really being able to position a product within our portfolio.

Now obviously, some products have lower gross profits per case, like, for example, the coffee products, but they are an important part of our portfolio. So, as we examine products and we examine where we are, we always have to look at what we are delivering to consumers to meet their needs within the overall ambit of a product portfolio.

Now when we went into energy -- into alcohol, I'm sorry, we went into alcohol with our eyes wide open. We knew the margins that were in alcohol would be lower than the margins in the energy drink category. So, we look at margin. I've always said this on calls, I said we bank dollars, we don't bank percentages. And I've always encouraged analysts to just think likewise, that we don't bank percentages, we bank dollars.

[Operator]

The next question comes from Chris Carey with Wells Fargo Securities. Please go ahead.

[Christopher Carey, Analyst at Wells Fargo Securities]

Hey, good afternoon, Rod. How are you doing. So just one quick follow-up there and then just kind of like a capital allocation question. But would you mind providing the Latin American gross margin on the quarter I probably missed it or I'm not sure you gave it, but that would be helpful.

And just on Latin America in general, is there a temporary disruption that we're working through? Or is what we're seeing underlying demand? So just those two follow-ups. And then I realize this is a multipart question. I'm probably get in trouble. But just from a capital allocation standpoint, when can you start buying back stock again? Thanks so much.

[Hilton Schlosberg, Vice Chairman and Co-Chief Executive Officer at Monster Beverage]

So, let's talk a little bit about Latin America. Remember, we sell to the distributors. And the distributors sell to the retailers. And as the demand is somewhat reduced at retail, the distributors cut back their inventory. So if they over-inventoried, they cut back. And unfortunately, we're the recipient of what happens in the distribution channel. So, as I said, all of these issues will resolve themselves because you have these cutbacks, but then we go to a more orderly situation, or we should go to a more lease situation in future quarters. And that's where we are. That's where we are in Latin America. The brand is still, as I said, very strong. We're market leaders in Argentina, we're market leaders in Brazil. We market leaders in Chile is a very big market and market leaders in other countries as well.

So that's an answer to that. And then -- what I would ask you to do is listen to the conference call because I don't want to repeat numbers that we've already said. We're already running out of time. The Q will be out in two days, and that should answer your questions on Latin America.

[Operator]

Our next question comes from Bonnie Herzog with Goldman Sachs. Please go ahead.

[Bonnie Herzog, Analyst at The Goldman Sachs Group]

All right. Thank you. Hi guys. I just wanted to quickly circle back on gross margins and see if you could share what impact the out-of-orbit issue that you highlighted during your shareholder meeting maybe had on margins and whether this issue is now resolved, essentially and I just want to confirm that you guys are now back working within your orbit?

[Hilton Schlosberg, Vice Chairman and Co-Chief Executive Officer at Monster Beverage]

Yeah, Bonnie, there always will be anomalies, and we're in the middle of summer, as you know, and it's been pretty hot out there. And we're doing our very best to stay within our orbits, but there are anomalies from time to time. And our mission in this company has always been to satisfy our customers. So yes, there will be -- we're maintaining within our orbits, but there are times when we will and we do stray from that.

[Operator]

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Rodney Sacks for any closing remarks.

[Rodney Sacks, Chairman and Co-Chief Executive Officer at Monster Beverage]

Thanks very much. On behalf of the company, I'd like to thank everyone for the 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 expand the company both at home and abroad and in particular, capitalizing on our relationship with the Coca-Cola bottler system.

We believe that we are well positioned in the beverage industry and continue to be optimistic about the future of our company. We hope that you all remain safe and healthy and have an enjoyable summer. Thank you very much for your attendance.

[Operator]

[Operator Closing Remarks]