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How Monster Beverage’s Margins Fared in Q1

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Margins in the first quarter

Monster Beverage (MNST) was able to fight higher costs in the first quarter by increasing its product pricing. The company’s gross margin was almost flat YoY (year-over-year) at 60.6% in the first quarter, supported by higher product prices in the United States and Canada and the company’s product sales mix, and offset by its geographical sales mix and higher input costs. Its geographical mix shifted unfavorably with its proportion of international sales rising YoY to 30% from 28.5%. Monster Beverage’s international operations generally carry a narrower margin than its domestic operations.

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Operating margin remains unchanged

Monster Beverage’s operating margin was also flat YoY, at 32.9%, benefiting from lower distribution costs and selling expenses as a percentage of sales, and partially offset by its G&A (general and administrative) expense rate deleveraging. G&A expenses rose due to payroll expenses growing along with the company’s domestic and international headcount, and higher payroll tax.

PepsiCo’s (PEP) operating margin expanded 120 basis points to 15.6% in the first quarter, driven by productivity efforts and a favorable mark-to-market net impact on commodity derivatives, and partially offset by higher commodity, advertising, and marketing costs. Monster Beverage’s operating margin is generally wider than peers’ due to its energy drinks’ higher pricing.

In general, nonalcoholic beverage companies have been raising their beverages’ prices to offset higher input costs, including freight costs. Monster Beverage raised its Monster Energy US prices by ~4% in November, and raised its NOS and Full Throttle concentrate prices in the United States by ~1.5% in January. In February, Monster Beverage increased its Canadian Monster Energy NOS and Full Throttle prices by ~3%.

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