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How Monster Beverage Performed in 3Q17

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Part 2
How Monster Beverage Performed in 3Q17 PART 2 OF 5

What Drove Monster Beverage’s Higher Sales in 3Q17?

Sales beat expectations

Monster Beverage (MNST) generated net sales of $909.5 million in 3Q17, beating the consensus analyst estimate of $904.6 million. The company’s net sales grew by an impressive 15.4% on a year-over-year basis in 3Q17. The company’s 3Q17 sales growth rate was an improvement compared to the 9.6% sales growth rate in 2Q17 and the 4.1% growth in 3Q16 sales.

What Drove Monster Beverage’s Higher Sales in 3Q17?

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Key growth drivers

Monster Beverage’s sales growth in 3Q17 was driven primarily by the strong performance of its Monster Energy Drinks segment. The segment’s sales grew 16.6% to $827.7 million in 3Q17 owing to higher domestic and international consumer demand.

Net sales of the company’s Strategic Brands segment rose 6.2% to $76.6 million in 3Q17. This segment consists of the energy drink brands acquired from Coca-Cola (KO). Net sales of the company’s Other segment fell to $5.2 million in 3Q17 from $5.7 million in 3Q16. The Other segment includes certain products sold by American Fruits & Flavors to independent third-party customers. Monster Beverage acquired its long-time flavor supplier American Fruits & Flavors in April 2016.

Monster Beverage’s international net sales continued to be strong and grew 36.3% to $260.1 million in 3Q17. Currency headwinds had a favorable impact of about $0.7 million on the company’s 3Q17 net sales.

Sales of rivals

Monster Beverage delivered stronger sales growth than its peers in 3Q17. PepsiCo’s (PEP) revenue grew 1.3% to $16.2 billion in 3Q17, mainly driven by increased pricing. Coca-Cola’s (KO) revenue fell for the tenth straight quarter by 14.6% to $9.1 billion in 3Q17. This decline mainly reflected the impact of the company’s refranchising efforts. Dr Pepper Snapple (DPS) reported 3.6% sales growth in 3Q17 driven by a favorable product and package mix, Bai Brands sales, and higher shipments.

Despite strong sales, Monster Beverage’s margins contracted in 3Q17. We’ll discuss this in the next part of this series.

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