MNST (2019 - Q1)

Good day, ladies and gentlemen, and welcome to the Monster Beverage Corporation First Quarter 2019 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Rodney Sacks, Chairman and CEO. Sir, you may begin. Rodney Sacks Good afternoon, ladies and gentlemen. Thank you for attending this call. I’m Rodney Sacks. Hilton Schlosberg, our Vice Chairman and President is with me today, as is Tom Kelly, our Executive Vice President of Finance. Before we begin, I’d like to remind listeners that certain statements made during this call may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities 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 forward-looking statements made during this call. Please refer to our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K filed on February 28, 2019, 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 obligation to update any forward-looking statements whether as a result of new information, future events or otherwise. An explanation of the non-GAAP measure of gross sales and certain expenditures, which may be mentioned during the course of this call, is provided in the notes and designated with asterisks in the condensed consolidated statements of income and other information attached to the earnings release dated May 2, 2019. A copy of this information is also available on our website at monsterbevcorp.com in the Financial Information section. Consumer beverage preferences and tastes continue to evolve, and we are endeavoring to address them through our ongoing innovation of new products. In the first quarter of 2019, net sales were $946 million, up 11.2% from $850.9 million in the first quarter of 2018. Net sales in the first quarter were negatively impacted by approximately $22 million of foreign currency movements. Gross profit, as a percentage of net sales, was 60.6% for both the three months ended March 31, 2019 and March 31, 2018. For the quarter ended March 31, 2019, gross profit as a percentage of net sales was positively affected by increased sales prices of our product sold in North America, and to a lesser extent, product sales mix. Gross profit as a percentage of net sales was primarily negatively affected by geographical sales mix and increases in certain input costs. Distribution costs, as a percentage of net sales, were 3.8% for the 2019 first quarter as compared to 3.9% in the 2018 first quarter. Selling expenses, as a percentage of net sales, were 11% for the 2019 first quarter as compared to 11.5% in the same quarter in 2018. General and administrative costs, as a percentage of net sales, were 12.9% for the 2019 first quarter as compared to 12.3% in the same quarter in 2018. In the quarter, payroll expenses, as a percentage of net sales, were 7.7% compared to 7.5% in the same period in 2018. Payroll costs increased $8.6 million, primarily due to headcount growth, both domestically and internationally as well as an increase in payroll taxes. Stock-based compensation, this is a non-cash item, was $15.3 million in the first quarter of 2019 compared to $13.4 million in the same quarter of 2018. Our effective tax rate decreased from 23.3% in the 2018 first quarter to 16.8% in the 2019 first quarter. The decrease in the effective tax rate was primarily due to an increase in the deductions for equity compensation as well as the increasing profits earned by certain foreign subsidiaries in lower tax jurisdictions than in United States. Net income was $261.5 million in the 2019 first quarter compared to net income of $216.1 million in the 2018 first quarter, an increase of 21%. Diluted earnings per share for the 2019 first quarter increased 26.7% to $0.48 from $0.38 in the first quarter of 2018. We continue to make good progress on the implementation of our strategic alignment with Coca-Cola Bottlers globally. In March 2019, we agreed to the assignment of the Kalil Bottling Group’s distribution territories to Coca-Cola Bottlers in the southwestern United States. We incurred no distributed termination costs and received no deferred revenue connection with this assignment. We transitioned the distribution of Monster Energy drinks from Big Geyser’s territory, which is located in the New York metro markets to Liberty Coca-Cola in early April 2019. As of April 6, 2019, the United States has been fully transitioned to all Coca-Cola network bottlers. In the second quarter 2019, Monster Energy will be launched in Azerbaijan and Saudi Arabia. We are planning further international launches later this year in EMEA. We launched Predator, our strategically preferred affordable energy brand, in Namibia and Mozambique in the first quarter of 2019. We're also planning launches of Predator in certain markets in Eastern Europe in the second quarter of 2019 as well as in selected additional markets in Eastern Europe, Central Asia, the Middle East and Africa throughout the second half of 2019. We launched Monster in Bolivia in the first quarter of 2019. We also launched Monster in Paraguay last week, and anticipate launching in the Dominican Republic in the second quarter. In China, we completed the rollout of Monster Ultra in the first quarter. During the first quarter, we also began the launch of Monster Mango, which will continue throughout the second quarter of 2019. We’ve significantly expanded our shelf space for Monster with these three SKUs in our targeted top 40 cities and key accounts. We continue the rollout of Monster across India, and Monster is now available in approximately 90% of the country. We are planning additional SKU launches in India later in 2019. I'll now provide a quick update on our arbitration with The Coca-Cola Company. As we’ve stated, our various agreements with The Coca-Cola Company restrict The Coca-Cola Company from competing in the energy drink category, with certain exceptions, including an exception relating to the Coca-Cola brand. Coca-Cola has developed three energy drink product that it believes it may market under an exception, relating to the Coca-Cola brand. We believe that the exception does not apply. By mutual agreement, the issue was submitted to arbitration at the end of October 2018 for a determination of whether Coca-Cola is permitted to manufacture, market and distribute these products. The arbitration proceedings are still ongoing on the schedule the parties agreed two months ago. Monster expects a decision from the arbitrators before the end of the second quarter. Although Coca-Cola has announced it is proceeding to launch new energy drinks in certain countries without waiting for the arbitration panel to rule on the issue, Coca-Cola’s entitlement to continue to sell such drinks will be governed by the outcome of the arbitration. We reiterate that whatever the outcome of the arbitration, we will continue to cooperate and work together as partners. I also wanted to take a moment to address a matter that has received some attention. Monster's litigation with Vital Pharmaceuticals, Inc., VPX, the maker of Bang energy drinks. Monster filed a lawsuit against VPX in September 2018 for false advertising, including false and unsupported claims that Bang contains ingredients that it does not have and provide benefit that it does not generate. VPX has continually attempted to delay our lawsuit. In April, we filed a motion for preliminary injunction, which is scheduled for hearing in June 2019. In March 2019, VPX filed a trademark lawsuit against Monster. I have two comments to make. Firstly, the lawsuit is meritless. Months after Monster publicly announced the launch of Reign Total Body Fuel beverages in mid-January 2019, a company related to VPX allegedly purchased an unrelated Reign trademark for a different class of products, namely powered dietary supplements. Monster holds trademark and use priority over VPX for its Reign Total Body Fuel beverages in the clause that covers these beverages. We recently filed a reply to VPX’s complaint, which set forth our opposition in detail, and asserts counterclaims against VPX for trademark infringement and unfair competition. Secondly, this lawsuit will not impede or slow the launch Reign Total Body Fuel. As our litigation with VPX and the arbitration with Coca-Cola are subjudicate, we will not be answering questions on these matters on the call. According to Nielsen reports for the 13 weeks to April 20, 2019, all assets combined, namely convenience, grocery, drug, merchandise, sales in dollars in the energy drink category, including energy shots, increased by 9.8% versus the same period a year ago. Sales of Monster grew 1.9% in the 13-week period, while sales of NOS decreased 2.4% and sales of Full Throttle decreased 8.6%. Sales of Red Bull increased 7.8%. Sales of Rockstar decreased by 8.6% and sales of 5-Hour decreased by 6.2%. Sales of Amp decreased 45.3%. According to Nielsen, for the four weeks ended April 20, 2019, sales in the convenience and gas channel, including energy shots in dollars increased 9% over the same period in the previous year. Sales of Monster decreased by 2.3% over the same period the previous year, while NOS was down 3.2% and Full Throttle was down 10.6%. Sales of Red Bull were up 6.7%, Rockstar was down 14.6%, 5-Hour was down 8.1% and Amp was down 44.4%. According to Nielsen, for the four weeks ended April 20, 2019, Monster's market share of the energy drink category in the convenience and gas channel, including energy shots in dollars, decreased by 4 points over the same period of previous year to 34.1%. NOS’s share declined 0.5 share points to 3.7% and Full Throttle's share declined 0.2 points to 0.8%. Red Bull's share decreased 0.7 of a point to 33.9%, Rockstar share was down 1.5 points to 5.5%, 5-Hour’s share was lower by 1.1 points at 5.7% and Amp share decreased 0.4 of a point to 0.4%. VPX Bang's share is 8.3% and Reign's share is 1.7%. In view of the recent launch of Reign, we're giving you an update on its performance. According to Nielsen, for the one-week ended April 20, 2019, in the convenience and gas channel, Reign's market share in dollars for the one-week is already 2.5%, while Bang’s market share in dollars in that week is 8.3%. According to Nielsen, in the four weeks ended April 20, 2019, sales of coffee plus energy drinks, which now includes Caffé Monster and Espresso Monster, in dollars in the convenience and gas channel increased 7.8% over the same period the previous year. Sales of our Java Monster alone were 9.1% higher than in the same period the previous year. Sales of our coffee plus energy drinks were 1.3% higher, while sales of Starbucks Double Shot Energy were 9.3% higher. Our company’s share of the coffee plus energy category, which includes Java Monster, Caffé Monster, Espresso Monster, Starbucks Double Shot and Rockstar Roasted for the four weeks ended April 20, 2019, was 53.5%, down 3.5 points. Java Monster’s share on its own for the four weeks ended April 20, 2019, was 47.3%, up 0.5 of a point, while Starbucks Double Shot Energy share was 43.4%, up 0.6 of a point. According to Nielsen, in the convenience and gas channel in Canada, for the 12 weeks ended March 30, 2019, the energy drink category increased 4% in dollars. Monster sales increased 7% versus a year ago. Monster’s market share increased 0.9 of a share points to 33.9%. NOS’s sales increased 2% and its market share increased 0.1 share points to 3%. Full Throttle’s sales decreased 7% and its market share decreased 0.2 points to 1.4%. Red Bull’s sales increased 4% and its market share increased 0.3 points to 35.8%. Rockstar’s sales decreased 1% and its market share decreased 1.2 points to 16.4%. According to Nielsen, for all outlets combined in Mexico, the energy drink category grew 11.5% during the month of March 2019. Monster sales increased 13%. Our market share in value increased 0.4 points to 29.1% against the comparable period the previous year. Sales of Burn were down 30%. Burn’s market share decreased 0.7 points to 1.2%. Red Bull’s sales decreased 7.3% and its market share decreased by 1.9 points to 9.4%. Vive 100 sales increased 2.4% and its market share decreased 3 points to 34.2%. NOS sales increased 75.6 and its market share increased 6.1 share points to 16.8%, while Boost’s market share decreased 0.6 points to 7.7%. 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 the 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. 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. According to Nielsen, in the 13-week period ending January 2019, Monster's retail market share in value as compared to the same period the previous year grew from 11.5% to 13.2% in Belgium from 25.6% to 26.4% in France, from 16% to 17.2% in Germany, from 18.7% to 20% in Great Britain, from 7% to 7.1% in the Netherlands, from 16.3% to 18.8% in Norway, from 8.3% to 12.4% in Poland, from 15.6% to 16.3% in South Africa, from 29.3% to 30.3% in Spain and from 12% to 13.2% Sweden. According to Nielsen, in the 13-week period ending February 2019, Monster’s retail market share in value, as compared to the same period the previous year, grew from 11.7% to 12.9% in the Czech Republic, from 32.7% to 34.4% in Greece, from 13.7% to 15.3% in Ireland, and from 13.8% to 17.8% in Italy. According to Nielsen, for the month of March 2019, in Chile, Monster’s retail market share in value increased from 34.4% to 35.9% compared to the same period the previous year. According to Nielsen, in Brazil, Monster’s retail market share for the month of February increased from 13.5% to 20.2% as compared to the same period the previous year. We launched Monster Energy in Argentina in mid-February 2018. According to Nielsen for the month of March 2019 Monster's retail market share in value increased from 4% to 23.6% compared to the same period the previous year. According to IRI in Australia, Monster’s market share in value for the last four weeks ending April 7, 2019, increased from 8.5% to 8.8% as compared to the same period the previous year. Mother’s market share in value increased from 12.3% to 12.9% during the same period. According to IRI in New Zealand, Monster’s market share in value for the last four weeks ending March 24, 2019, increased from 6% to 7.9% as compared to the same period the previous year. Lift Plus market share in value decreased from 9.8% to 9% and Mother’s market share in value increased from 6.4% to 7.5%. According to Nielsen, in South Korea, Monster’s market share in value, in all outlets combined, grew from 11.4% to 41.8% in the first eight weeks of 2019 versus the same period in 2018. According to INTAGE, in Japan, Monster’s market share in value in the convenience store channel grew from 47.9% in the 2018 first quarter to 49.3% in the first quarter of 2019. We again point out that certain market statistics that cover single months may often be materially influenced, positively and/or negatively, by promotions or other trading factors during those months. For the Monster Energy drinks segment in the first quarter 2019 increased 11.5% from $780.5 million to $870.4 million from the comparable period in 2018. Net sales for the month of energy drink segment in the third quarter of 2019 will negatively impacted by approximately $18.2 million of foreign currency movements. Net sales for the Strategic Brands segment was $70.3 million for the first quarter, as compared to $65.8 million in the same quarter in 2018. Net sales for the company's Strategic Brands segment in the first quarter of 2019 was negatively impacted by approximately $3.8 million of foreign currency movements. Net sales for the other segment, which includes third party sales made by AFF were $5.3 million in the first quarter as compared to $4.7 million in the same quarter in 2018. Net sales to customers outside the U.S. were 284.1 million, 30% of total net sales in the 2019 first quarter from $242.1 million was 28.5% of total net sales in the corresponding quarter in 2018. Foreign currency exchange rates had the effect of decreasing net sales in U.S. dollars by approximately $22 million. Included in reported geographic sales are our sales to the company military customers, which are in the U. S. and France shipped to the military and their customers overseas. In the EMEA, we had another challenging quarter with supply chain and production issues, although less than in the 2018 fourth quarter. It not only affected our sales, but also resulted in a number of out of stocks and cancellations of orders from the retail trade in certain countries in the EMEA. As mentioned earlier, our Nielsen growth rates and market share continues to be strong in the territory. We are managing through these supply chain and production issues. Certain of our core factors that contributed in part to these issues are back on track. Furthermore, we have secured and are securing additional production capacity. In EMEA, net sales in the first quarter increased 12.5% in dollars and increased 22.3% in local currencies over the same period in 2018. Gross profit in this region as a percentage of net sales for the quarter was 43.2%, compared to 44.5% in the same quarter in 2018. Gross profit in the region was also impacted by a high percentage of Monster sales relative to sales of concentrates of our Strategic Brand in the region. We are also pleased that Monster continues to perform well and gain market share in Belgium, Czech Republic, France, Germany, Great Britain, Greece, Ireland, Italy, Netherlands, Norway, South Africa, Spain, and Sweden. In Asia Pacific, net sales in the first quarter increased 29.6% in dollars and 34.2% in local currencies over the same in 2018. Gross profit in this region as a percentage of net sales was 42.2%. This is 42.8% over the same period in 2018. Japan net sales in the quarter increased 4.5% in both dollars and in local currency. In South Korea, net sales increased to 198.5% in dollars and 212.5% in local currency as compared to the same quarter in 2018. In Oceania, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea and Guam, net sales increased 5.7% in dollars and 14.6% in local currencies as compared to the same quarter in 2018. In Latin America, including Mexico and the Caribbean, net sales in the first quarter increased 18.4% in dollars and 34.6% in local currencies, over the same period in 2018. Gross profit in this region as a percentage of net sales was 43.6% versus 46.5% over the same period in 2018. Net sales in Brazil was significantly impacted by foreign currency movements in the quarter. Net sales in the quarter decreased by 11.7% in dollars and increased to 2.9% in local currency. Net sales in Chile increased 77.9% in dollars and 95.4% in local currency in the quarter. Turning to the balance sheet. Cash and cash equivalents amounted to $618.3 million at March 31, 2019 compared to $637.5 million at December 31, 2018. Short-term investments were $263.7 million at March 31, 2019 compared to $320.7 million at December 31, 2018. Net accounts receivable increased to $596.7 million at March 31, 2019 from $484.6 million at December 31, 2018. Days outstanding for accounts receivable were 49.9 days at March 31, 2019 compared to 41.4 days at December 31, 2018. Inventories increased to $300.8 million at March 31, 2019 from $277.7 million at December 31, 2018. Average days of inventory were 72.7 days at March 31, 2019 compared to 67.2 days at December 31, 2018. We have successful launched Monster Energy Ultra Paradise a line extension in our Monster Ultra family in February 2019 as well two -- an additional two flavors of Hydro, Hydro Manic Melon and Hydro Mean Green in 25.4-ounce PET bottles. In addition, we booked out the last family in the quarter with the launch of NOS Sonic Sour and the re-branding of NOS Rowdy Punch to NOS Power Punch. We also extended the Java Monster Swiss Chocolate lead launch from 2018 to all customers in February 2019 and added two flavors in our Dragon Tea line Green Tea and Yerba Mate which launched in March. We have repositioned our Monster Rehab White Dragon Tea to be included in the new Monster Dragon Tea line. Finally in March, we launched Reign Total Body Fuel in six flavors, initial results have been positive. During January 2019 in Canada, we launched two additional line extensions of Monster Hydro, namely Purple Fashion and Zero Sugar, as well as Monster White Dragon Tea. In March, we launched our Caffé Monster line in 13.7-ounce re-sealable glass package. In Mexico, we launched Mango Loco in April 2019. During the first quarter of 2019 we launched Pacific Punch in the Caribbean and extended our range in Puerto Rico. In Chile, during the first quarter of 2019, we launched Monster Absolutely Zero. In Argentina, we launched Monster Ultra. The initial results have been positive. In the first quarter of 2019, we launched Monster Mango Loco in Norway, the Netherlands, Poland, Italy and the Baltics. Monster Mango Loco will be launched in another 12 EMEA markets in the second quarter 2019. Monster Pipeline Punch was launched in Ireland. We also launched Espresso Monster and Espresso Monster Vanilla in Germany and Spain. We are planning to continue to rollout of our Espresso Monster line across Western Europe in the second quarter of 2019. We launched Black Monster Ultra in Russia in the first quarter of 2019 and continued the rollout of additional SKUs in the Monster Ultra range in EMEA markets, specifically in Monster ultra blue and gray Brazil in Ireland and Monster Ultra Violet in the Baltics in the first quarter of 2019. There is SKUs in the Monster Ultra line 39 EMEA markets. In Australia we successfully launched the new flavor across in February with good initial results. We launched Monster Mango in China in March and continue with our rollout of Monster Ultra. We plan to launch a number of products in Asia Pacific later this year. As I mentioned earlier, we implemented a price increase of approximately 4% on our Monster Energy portfolio to our used customers effective November 1, 2018. We are satisfied with the initial results for the implementation of this price increase. For Monster expenses as percentage of gross sales decreased in the first quarter of 2019. We increased the prices of our concentrate for NOS and Full Throttle effective January 1 2019 by approximately 1.5%. We also implemented a price increase of approximately 3% to our Canadian customers effective February 1, 2019 for the Monster Energy NOS and Full Throttle lines. We estimate April 2019 gross sales to be approximately 15.6% higher than in April 2018. On a foreign currency-adjusted basis April 2019 gross sales would have been approximately 18.9% higher than comparable April 2018 gross sales. It was one more selling day in April 2019 than in April 2018. In this regard we cautioned the guiding 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 for promotional retail stores. Distributing incentives as well as shift in the timing of production in some instances where our bottlers are responsible for production and unilaterally determine their production schedules which affects the day which we such bottlers as very 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 or even two months should not necessarily be imputed to or regarded as indicative of results for a full quarter or any future period. During the 2019 first quarter, the company purchased approximately 2.6 million shares of common stock at an average purchase price of $54.18 per share for a total of $139 million excluding broker commissions. As of May 2, 2019 approximately $520.6 million remains available for repurchase under our previously-authorized repurchase program. In conclusion I'd like to summarize a recent positive points. One, retail sales statistics from many countries around the world demonstrate that the Energy category is continuing to grow and that Monster is generally growing ahead of the category in line with earlier periods. Two, the new additions to the Monster family continue to add to the company sales. Three, we are excited about the prospects for our brands and our new product launches. Four, in particular initial results for our Reign Total Body Fuel high-performance energy drinks which launched in March are positive and we are encouraged by the prospect for this line. Five, we are pleased with our performance in our international markets and reiterate the growth potential for us in China and India. Six, we're continuing with our plans to launch Monster Energy drinks with Coca-Cola bottlers in certain new markets. Seven, we're also proceeding with our plans for future launches of our affordable energy brands internationally and also evaluating the launch of Reign Total Body Fuel high-performance energy drinks in countries outside of the USA in the second half of 2019. I would like to open the floor to questions about the quarter. Thank you. Operator

Thank you. [Operator Instructions] And our first question comes from the line of Stephen Powers with Deutsche Bank. Your line is now open.

Hey, guys. Thanks. I guess, it's worth asking about, but I guess maybe just start on your thoughts on U.S. pricing relative to the competition. And now that you've got your innovation out in the marketplace, should we expect to see incremental promotional dollars allocated to those initiatives? And I guess, how much do you think those initiatives will be allocated against Reign versus against the base Monster franchise? I guess, what I'm really asking about is, how much if at all do you think incremental promotional investment is likely to offset the list price increases you took late last year as you go forward throughout the balance of 2019?

Okay. Steve you will see that in this quarter when results that we actually improved promotional allowances in this quarter. So the promotional allowances are reducing. However in the next quarter we're planning and this is really planned, nothing to do with any sales or sales mixes, but we had already planned a BOGO which is a buy one get one ready to get Reign exuviated more intensively than it was in the -- with the launches. Part of the launching plan and you will see that happen in the second quarter. Apart from anything else, we are watching the market. We're watching Red Bull's crossing very carefully. And we'll make adjustments if we think it will have a long-term impact. However, what we see and you'll see that as well is the majority of Red Bull's growth is actually coming from innovation.

Okay. Great. So just a follow-up quickly. The big incremental innovation is tied to the launch of Reign which I think makes sense. And then now you have Ultra Paradise and some of your newer Monster SKUs in the marketplace. Any incremental promotion? It sounds like from your -- from what you just said, we should assume goes to those new innovations as opposed to -- against the base SKUs. Is that a fair way to think about it?

I'm not sure I said that. When we promote Monster, we promote the line. But what I did say was that with regard to Reign, you'll see a special promotion in the ensuing quarter which will be due to a previously planned BOGO which is buy one get one to really kickstart the launch of Reign.

Perfect. Okay.

During the quarter we will be -- we had some timing differences on our promotions last year in the first quarter where we didn't have the same depth of promotion this year. But going into the second quarter, we will be promoting Monster pretty much in accordance with the normal promotional schedule that we plan for summer.

I think Steve Kristen was -- because of the pricing the increased pricing it will be more access of coming on through this Monster.

Correct.

Yes. Okay. That's clear. Thanks guys.

Yes. Okay.

Thank you. And our next question comes from the line of Judy Hong with Goldman Sachs. Your line is now open.

Thank you. Hi, everyone.

Hi, Judy.

I guess, I wanted to ask about Reign more specifically whether or how much it contributed to 1Q sales as well as the April sales, because obviously there is a pretty big divergence in terms of the Nielsen numbers and your reported numbers? And then I guess more broadly on Reign, can maybe just talk a little bit more about the performance of the brand so far? How much do you think it take your share away from Bang versus maybe expanding the category? Or how much is sort of cannibalizing your brands? And how quickly do you think that we can to full distribution?

On the contribution of Reign, Reign contributed about $25.5 million of sales to the first quarter.

Net sales.

Net sales. Yes. We don't have the -- we're not going to go into the number in April that's just a -- we give the gross numbers as opposed to breaking that up. And I think Judy to answer the balance of your question I think it's just too early for us to tell exactly what is taking from what. You can see the numbers from Nielsen has been some affected since. Obviously, there is a new entrant and participant in the category. It's taking share from all the products. But ultimately we do believe that Reign will continue to increase itself and establish itself that is the reason why we're actually looking at the first promotion we got with Reign. It hasn't been promoted until now. And so you got to get the first promotion coming through in the second quarter on Reign. And we will continue to pull out. We did get some pretty good distribution initially from the Coke bottlers, but it will continue to hold out as we go into the second quarter.

Thank you.

Just to add to that Judy, it’s really the launch exceeded our expectation.

Thank you. And our next question comes from the line of Mark Astrachan with Stifel. Your line is now open.

Hey, afternoon guys.

Hi, Mark.

I wanted to ask a question on white space and opportunity for products. So you commented on Ultra being available in I think 38 EMEA markets. It got me thinking so, how do you think about U.S. innovation in terms of what the white space would be for existing franchises as well as just new franchises where you're putting the stuff on shelves. Meaning, it seems like Reign is getting on the new shelf. Is that fair? How do you think about the existing energy shelves? And then outside of the U.S., how do you think about taking successful innovation like Hydro, Java and taking it global. Where are you in the rollout of SKUs versus where it would be? Obviously, there is a lot of that and still maybe just kind of broader strokes of how you think about what the opportunity can be. I think that would be helpful.

I think you mentioned this Mark on previous calls, where the determination is made together with the local management about -- in each country thought which SKUs we should launch, which SKUs are appropriate to the consumer needs in that country. And there is a rollout which is dependent on opportunities and you've seen we've done that. I mean, on this call we mentioned a number of countries where we have launched additional SKUs. And we will continue to do so. But one thing we will not do is roll out all our SKUs in all our countries, because that's not a good approach to addressing the market. In China, for example, we already have three SKUs. We have the original Monster. We have Ultra. And we have Mango. So we have three SKUs now in China. And if you look at other countries we success for the -- and success we’ve done that. In EMEA, we've done that and we continuing to do that.

In most of these countries, we really are -- there isn't a cookie cutter sort of formula. We look at the countries. We obviously try and launch with Monster Green to establish the Monster brand, because that's what it's stands for. But from then on we look at the individual countries. They flavor preferences, and you'll find that our second or third SKU many countries differ from country-to-country. And then depending on the response we get. In some countries, we get really good response to Ultra. We then change the track and basically start to launch more of the Ultra product. And perhaps some years ago, we were launching more of the juice product. And so the order is changed a little bit. Mango has got very well received. Popcorn is being very well received. And so we really elevated those SKUs basically looking in some countries. There are some countries where we are finding directly there is a good reception to our Rehab line. Now Rehab, it may not go into that format. It may go in the form of a tea likers. Rehab has less meaning in foreign countries than it has in the U.S. because of the origin of Rehab. But there is some opportunities for tea lines in some countries and we are looking at that into non-core. And as you've been seen we have taken the step also some testing to look at coffee. In Europe we think that market is -- we're going to expand that market with Espresso. And we're also looking at some other potential coffee products into the UK market. Again looking at shelves and keeping abreast of growth and innovation. In those markets, we do see good opportunities for that. And once we look at that, and again reach the right progression in other countries we will look at other growth opportunities in -- but we're going to follow our policy of looking at it country-by-country as we have launched in the country as the bottle is able to handle it and we feel it's right to continue to grow. That we'll continue to build out over years our portfolio is going to continue to grow, continue to build out internationally. In the U.S., while we've launched, we believe there is -- the energy shelf is pretty impacted at the moment. So we're looking to get new space for this high-performance category incremental. In some cases in order to -- because of timing and because of reset in order to get products on shelf, it has been put onto the energy shelf. But in many cases, we are achieving additional space and we also have -- we believe most of the retailers are agreed that there should be additional space allocated to this high-performance category. It is a profitable category for the retailers. It's a high ring. And so we believe we will see additional space being allocated to energy basically to accommodate the new high-performance products that we believe we will end up with -- overall end up with increased shelf space.

And Mark, to reinforce that earlier comment that certain flavor profiles that do really well overseas and don't do well in the U.S. For example, one of my favorite Monster products is the Ultra Citron. And a decision was taken that we would probably should discontinue it in favor of other Ultra products. And that Ultra Citron has been launched in the bunch of international countries Japan, Korea and a bunch of countries across Europe because of its less sweet profile. So each country will determine -- with obviously with direction from the Senate, the product that best suit the consumer needs in those countries.

Just to add, I think it hasn't been launched yet in Japan or Korea.

Thank you.

It has.

Between us they are not certain with…

I believe it has. Yes.

Okay.

And again…

Yes.

The concept that a major product that will see in other countries that we may not even launch in the U.S. or they may launch in, they just -- we discontinued in the U.S.

Yes, agreed.

Thank you. And our next question comes from the line of Amit Sharma with BMO Capital Markets. Your line is now open.

Hi. Good afternoon, everyone.

Hi.

Rodney if we take Reign out from Q1 sales and look at the rest of the US portfolio around 4.2 - growth, all right. And most of that coming from pricing? And you talked about that you will watch Red Bull price like at what point do you get worried about the volume performance of the core Monster brand in U.S. and not just price accordingly?

I think we've got a whole beverage portfolio. And you're going to take the portfolio as a whole in time. I think that we did mention I think earlier that for timing reasons they were certain promotions that we've done last year that fairly to earlier periods where we had some Nielsen updates that didn't get repeated this year. They are falling into -- probably into the second quarter now. So we – overall, we are comfortable with the brands. There is a sort of change going on in the industry at the moment. There's a change in – obviously, finding shelf space, people are trying some of these new high-performance drinks. We think a lot of that will stop. The noise will stop settling down. We think there will be growth. Overall, we're still -- we're comfortable with our innovation. Ultra Paradise is now got on to shelves and is really doing well. Innovation in coffee. The Swiss coffee is doing well. We have additional innovation planned in the months to line later in the year. And so we are comfortable that overall we will continue to grow.

Yes. Amit just remember that our launches took place February the 21st for Hydro. So there's two new flavors in seven 50. For Java the Swiss Chocolate; for Ultra Paradise, last Snapple that is all February the 21st. And in March the 21st, we had Reign and we had Dragon Tea. So the launches took place really towards the end of the quarter. And -- but as I said earlier, we will be monitoring Red Bull and we'll take whatever steps necessary to ensure that the business continues to grow.

Thank you. And our next question comes from the line of Laurent Grandet with Guggenheim Partners. Your line is now open.

Yes. Good evening Rodney and Hilton. Congrats on a strong quarter. I would try to have a second shot at Crane, because we don't have so much, I mean, Nielsen reliable numbers for now. So I think you said Reign was representing about 2.5% in the last week of April when Bang was about 8.3% I guess…

Correct.

Yes. That's correct, yes. So it seems like

The Market share yes.

Market share in convenience.

Market share, yes, in market share. So it seems like since you had those two, it feels like a 23% of the new – rain represent about 22% of the new category. That's a great result just after six-week especially as you are roughly in just half of those stores, Bang is available and why you can't? So do you have any qualitative feedback at least from retailer in terms of sales especially in stores that sell Boost, Bang and Reign that you could share with us that would be helpful? Thank you.

Well, we've got some information from some of our major convenience retail partners on SKUs – competitive SKUs. And they are trending by and large at a higher percentage than is shown in the Nielsen numbers. But because of the fact that we bought and it's not something that we generally go into and verify as carefully, we don't want to quote them on this call. But we do -- the numbers we are seeing out of the top change is showing a higher comparable number, which is positive for us and I think we just got to be a bit patient and wait for the numbers to start coming through generally. And then we'll start seeing the south point as well as the distribution overall.

Thank you. And ladies and gentlemen, this concludes today's Q&A session. I would now like to turn the call back over to Rodney for any closing remarks.

On behalf of Monster, I'd like to thank everyone for their continued interest in the company. 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. Any particular spend distribution of our product through the Coca-Cola Bottlers system international. We are also particularly excited about new opportunities that we have going forward with a portfolio of energy drink products throughout the world, comprised of our Monster Energy brand together with our strategic brands as well as Hydro, Mutant, Predator and Reign. Thank you very much for your attention and attendance.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude today's program and you may all disconnect. Everyone have a wonderful day.