Monster Beverage (NASDAQ:MNST) Q3 2026 Earnings Call

0:00 Good day and welcome to the Monster Beverage Corporation third quarter 2026 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Hilton Schlosberg, CEO. Please go ahead. Good afternoon, ladies and gentlemen. Thank you for attending this call. I'm Hilton Schlosberg, Vice Chairman and Chief Executive Officer. Also on the call are Tom Kelly, our Chief Financial Officer, Rob Gehring, our CEO of the Americas, Guy Carling, our CEO of EMEA and OSP, Mark Rodriguez, our COO, and Emelie Tirre, our Chief Strategy Officer.

0:56 As many of you know, this will be Rob's last earnings call. I want to thank him and wish him the best in his new role at the Coca-Cola Company. Mark Astrachan, our Senior Vice President of Investor Relations and Corporate Development, will now read our coaching statement. 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 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 of 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.

1:49 Please refer to our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K filed on February 27, 2026, and quarterly reports on Form 10-Q, including the section contained therein entitled Risk Factors and Forward-Looking Statements for 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 any new information, future events, or otherwise. I would also like to note that an explanation of the non-GAAP measures, which we refer to as adjusted or applicable, mentioned during the course of this call is provided in the notes in the condensed consolidated statements of income and other information attached to the earnings release dated November 5th, 2026. A copy of this information is also available on our website, www.monsterbevcorp.com, in the financial information section. Please note, regional scanner data is included in an exhibit file with our 8K. We point out that certain market statistics that cover single months or four-week periods may often be materially influenced positively or negatively by promotions or other trading factors during those periods.

2:55 I'd now like to hand the call over to Hilton Schlosberg. Good afternoon, and thank you for joining us. We are pleased to report another quarter of strong financial results in cash generation but net sales once again crossing the $2.5 billion threshold in a single quarter. Net sales increased 16.7% compared to the prior year with solid growth across all geographies driven by the strength of our co-offerings as well as our new product innovations. This is especially evident outside the United States when net sales increased 28.1% compared to the prior year, reflecting share gains in many of our global markets. Turning to an update on the energy drink category, the global energy drink category remains healthy with continued robust growth.

3:48 We believe household penetration continues to increase in the energy drink category driven by functionality and lifestyle positioning, diverse offerings that appeal to an increasingly broad and loyal consumer base and affordable value offerings in addition to premium offerings. All said, we think this serves to recruit new consumers to the category while driving greater purchase frequency among existing consumers. We believe our portfolio of existing, recently launched, and planned energy drink offerings is well positioned to participate in the growing global energy drink category, appealing to a broad range of consumers across geographies, price points, meat states, and day parts. Our business continues to be supported by strong marketing programs, impactful retail engagement, and our solid partnership with the Coca-Cola Company and its global bottling partners.

4:45 In the United States, according to Nielsen, for the recently reported 13-week period through October the 24th, 2026, sales in dollars in the energy drink category, including energy shots for all outlets combined, namely convenience, grocery, drug and mass merchandisers, including Amazon and Costco, increased by 12.4% versus the same period a year ago. In EMEA, the energy drink category, according to Nielsen, for our track markets for the recently reported 13-week period, which differ from country to country, grew 14.7% versus the same period last year, FX neutral. In APAC, the energy drink category, according to Nielsen, Sakana, and Intage, for our track channels for the recently reported 13-week period, which differ from country to country, grew 11.3%, versus the same period last year, FX Neutral.

5:46 In ATAM, the energy drink category, according to Nielsen, for our tracked markets for the three months ended September 30, 2026, grew 28.3% versus the same period last year, FX Neutral. Turning now to marketing initiatives, Monster maintained strong momentum in the third quarter with efforts focused on growing our core business, attracting new consumers, and increasing household penetration. Similar to last quarter, selling expenses were elevated as we increased spending across a variety of new and existing platforms and partnerships. This included increased investments in social and digital media to support both our existing products and our innovation with the goal of recruiting new energy consumers, increasing household penetration and reaching a broader consumer base. In the third quarter, Monster Energy's roster of athletes, events, and ambassadors showcased the brand on a global stage and scale.

6:50 In a dominant end to the Motocross World Championship season, Jeffrey Herlings won eight consecutive MXGPs to take his sixth overall title, further cementing his legendary status in the sport. In MotoGP, the Monster Energy branded Ducati and the recently signed Aprilia Factory racing teams dominated the championship with Marc Marquez winning in Germany, Aragon and San Marino. Additionally, Monster Energy riders achieved notable victories in AMA and SMX motocross. In Formula One, Lennon Norris, equipped in Monster Energy branded suit, helmet and cap, won back-to-back victories for the McLaren MasterCard Formula One team in the Hungarian and Dutch races. Monster Energy's arrival in the UCI Mountain Bike World Series was sealed with victory for Max Oran in his home race in Leger, France, equipped with his Monster Energy helmet.

7:52 Over 60,000 fans lined his descent in the result that transcended sport and resonated across social and mass media with the President of France, In Australia, Monster Energy's renewed partnership with the Australian Football League, the AFL, culminated in the season-ending grand final in Melbourne. With 100,000 fans in attendance and millions watching on TV, Monster Energy pitch side branding was present for the game-winning kick in the last seconds of the game as part of a full stadium LED takeover within Monster time. In the United States, our successful sponsorships of Morgan Wallens, Unstall the Problem Tour, and UFC continued in the third quarter.

8:38 Monster Energy athletes also achieved notable victories in X Games New Orleans, the X Games XGL Championship, and NASCAR. Last year, our partnership with the Big 12 Conference commenced in the quarter, which includes naming rights for Monster Energy for the conference's football and basketball regular seasons and a co-branded Monster Energy and Big 12 Conference logo that appears on fields and courts and jerseys. There are currently five Big 12 football teams in the AP Top 25 poll. Turning to tariffs. During the third quarter of 2026, the impact of tariffs and the increase in the price of aluminum on our operating results was modest.

9:23 Despite the modest impact on our business in the third quarter, the tariff landscape continues to be complicated and dynamic. For instance, tariffs significantly impacted the Midwest premium for aluminum, which increased the cost of our aluminum cans. We also import some raw materials into the United States, export some raw materials for local markets, and export limited quantities of finished goods. We do not believe, based on our business model, that the current tariffs will have a material impact on the company's operating results. However, based on current aluminum pricing and the Midwest premium, we expect a continued modest sequential increase in our aluminum costs through at least the first quarter of 2027.

10:08 We will continue to recognize Tarasong Aluminum through the higher mid-risk premium and continue to implement hedging strategies across the business where possible. Turning to our third quarter 2026 financial results, net sales were $2.56 billion for the 2026 third quarter, or 16.7% higher than net sales of $2.20 billion in the 2025 third quarter. Net sales, excluding the alcohol brand segment, increased 17.1% in the 2026 third quarter. New changes in foreign currency exchange rates had a favorable impact on net sales for the 2026 third quarter of $8.1 million. Net sales on a foreign currency adjusted basis increased 16.3% in the 2026 third quarter. Net sales, excluding the alcohol brand segment, on a foreign currency adjusted basis increased 16.7% in the 2026 third quarter. Excluding the alcohol brand segment from our reported results is purely illustrative as it remains part of our ongoing operations. Net sales for the company's Monster Energy Drink segment increased 17.1% to $2.37 billion for the 2026 third quarter from $2.03 billion for the 2025 third quarter.

11:38 Net sales on a foreign currency adjusted basis for the Monster Energy Drink segment increased 16.7% in the 2026 third quarter. Net sales for the company's strategic brand segment increased 19.8% to $156.4 million for the 2026 third quarter from $130.5 million in the 2025 third quarter. Made sales on a foreign currency adjusted basis for the strategic brand segment increased 90.3% in the 2026 third quarter. Net sales for the alcohol brand segment decreased 13.6% to $28.5 million for the 2026 third quarter from $33.0 million in the 2025 third quarter.

12:29 Gross profit as a percentage of net sales for the 2026 third quarter was 54.7% compared with 55.7% in the 2025 third quarter. Adjusted gross profit as a percentage of net sales excluding the alcohol brand segment for the 2026 third quarter was 54.9% compared with 56.2% in the 2025 third quarter. The decrease in gross profit as a percentage of net sales for the 2026 third quarter was primarily the result of increased aluminum can costs, geographical sales makes, and increased trading costs partially offset by pricing actions. From a gross profit percentage perspective, our pricing actions largely offset higher aluminum can and other input costs with geographic sales mix significantly driving the lower year-on-year gross margin percentage in the third quarter. Again, highlighting our geographical sales mix, net sales to customers outside the United States increased to 47% of total net sales in the 2026 third quarter.

13:39 Distribution expenses for the 2026 third quarter were $116.3 million or 4.5% of net sales compared with $82.6 million or 3.8% of net sales in the 2025 third quarter, largely reflecting higher freight and fuel costs. Selling expenses for the 2026 third quarter were $260.1 million or 10.1% in net sales compared with $214.6 million or 9.8% in net sales in the 2025 third quarter. The increase in setting expenses for the 2026 third quarter was primarily due to increased social, digital media and other marketing expenses, including sponsorships and endorsements, in order to reach a broader consumer audience and increase household penetration.

14:34 General and administrative expenses for the 2026 third quarter were $305.7 million or 11.9% of net sales compared with $251.9 million or 11.5% of net sales for the 2025 third quarter. Stock-based compensation was $30.4 million for the 2026 third quarter compared to $32.8 million in the 2025 third quarter. General and administrative expenses in the 2026 third quarter included a property and equipment impairment charge of $19.9 million and expenses of $14.7 million related to our digital transformation initiatives. Adjusted general and administrative expenses for the 2026 third quarter were $274.4 million compared with $230.9 million in the 2025 third quarter. Adjusted general and administrative expenses as a percentage of net sales less the alcohol brand segment were 10.8% and 10.7% for the 2026 and 2025 third quarters respectively.

15:46 Operating expenses for the 2026 third quarter were $682 million compared with $549.1 million in the 2025 third quarter. Adjusted operating expenses for the 2026 third quarter were $644.4 million compared with $517.8 million in the 2025 third quarter. Operating income for the 2026 third quarter increased 6.4% Thank you very much. The effective tax rate for the 2026 third quarter was 24.6% compared with 23.9% in the 2025 third quarter.

16:48 The increase in the effective tax rate was primarily due to a lower stock-based compensation deduction and an increase in income from higher income tax jurisdictions partially offset by a lower valuation allowance on foreign tax credit carry forwards. Net income per diluted share for the 2026 third quarter increased 7.8% to 29 cents from 27 cents in the third quarter of 2025. Adjusted net income per diluted share for the 2026 third quarter increased 8.5% to 30 cents from $0.28 in the third quarter of 2025. Turning now to the U.S. and North America, moving to geographic results, we're pleased with our performance in the U.S. and Canada, with net sales increasing 9.5% in the 2026 third quarter compared to the 2025 third quarter.

17:44 Sales growth was broad-based across channels. Our sales performance reflected healthy category growth with solid contribution from our core brand families complemented by innovation and disciplined execution across our organization and bottling partners. Our portfolio of zero sugar or sugar-free energy drinks remained a significant contributor to U.S. growth. According to Nielsen, the Ultra Brand family grew 19% in dollars in the 2026 third quarter compared to the 2025 third quarter. Monster's full sugar portfolio also continued to contribute to sales growth and was led by the Juice Monster family, which increased 21% in dollars compared to the prior year. Innovation remained a meaningful contributor to growth in the third quarter, complemented by limited time offerings celebrating America's 250th anniversary across our Ultra, Juice Monster, Rain, and Bang brand families. We were also encouraged by the consumer response to our Flirt Apple Bottoms Up LTO and are planning additional LTOs in 2027 for the brand. LTOs, by the way, mean limited time offers.

19:00 Additionally, during the quarter, we began shipping our fall innovation to bottlers ahead of the October launches of Java Monster Dubai Chocolate and Monster Energy Banana Shots in full sugar and zero sugar versions. Encouraging you to continue to gain traction in FSOP, which is food service on-premise, and I'm excited to highlight recent collaborations with Carl's Jr. and Tim Hortons. in addition to the previously announced agreement between Merit and the Coca-Cola Company, which includes Monster. Looking ahead, we will keep investing in an innovation pipeline that serves our core consumers and brings new consumers into our brand families. Our robust 2027 new product offerings, including planned phase launches starting in January with Monster Ultra Aloha Pug, Rain Dirty Soda, Flirt Brew Snow Code, and the Valentine's Day Focused LTO from Flirt.

20:00 In February, we will introduce Juice Monster Rez Rocket, Monster Energy Candy Apple Red, Monster Rehab Classic Tea, Bang Pineapple Whip, and two new Monster Killer Brew espresso offerings. In March, we will launch Monster Protein in chocolate and vanilla flavors into the fast-growing ready-to-drink protein category. We will reintroduce Nas Cherry Darts in April due to consumer demand and again feature Monster Ultra Red, White and Blue Razz and Juice Monster Strawberry Lemonade as summer LTOs. We will also launch Monster Energy McLaren Zero Sugar as part of a coordinated launch in many markets in the summer of 2027.

20:46 Lastly, as previously disclosed, we implemented pricing adjustments through frontline price increases and or reductions in promotional allowances by package and channel in the United States effective November 1, 2026. We anticipate minimal impact on volumes supported by the category's favorable value proposition and the relatively modest pace of energy drink price increases compared to other NARTD beverages over the past decade. Revenue growth management will remain a key component of our North American strategy. Turning to sales international, outside the United States, net sales to customers increased 28.1% to $1.20 billion, approximately 47% of total net sales in the 2026 third quarter.

21:37 compared to $937.1 million or approximately 43% of total net sales in the 2025 third quarter. Net sales to customers outside the United States on a foreign currency adjusted basis increased 27.2% to $1.19 billion in the 2026 third quarter. Now looking at EMEA. Turning to EMEA, our net sales in the region in the 2026 third quarter increased by 24.9% in dollars and increased 25.1% on the currency neutral basis over the same period in 2025. Gross profit in this region as a percentage of net sales for the 2026 third quarter was 37.2% versus 37.0% in the same period in 2025.

22:28 We implemented a price increase in certain markets in EMEA in the 2026 third quarter and are proposing price increases in certain other EMEA markets in the 2026 fourth quarter. According to Nielsen, the MEC portfolio of brands gained 190 basis points of value market share across the region in the 2026 third quarter compared to the prior year quarter. The energy green category continues to grow double digits in EMEA, with our monster brands growing more than 60% faster than the category. Notably, the MEC portfolio has gained value share leadership in Great Britain, Egypt, and Serbia. According to Nielsen, for the last reported 13-week periods, which vary by country, our MEC portfolio delivered 39% of the value sales growth of the energy green category in the EMEA.

23:23 This reflects contributions from both our core offerings and innovation across our brand families. Our portfolio of zero sugar or sugar-free SKUs continues to be a significant contributor to growth. According to Nielsen, for the last 13-week period, the Alfa brand family grew 42% in the third quarter compared to the 2025 third quarter. Thank you very much. Established full sugar products, including Monster Green and Juiced Monster Mango Loco, continue to grow year on year. This growth reflects strong execution across markets enabled by close collaboration with our Coca-Cola bottling partners to expand distribution, enhance in-store execution, and increase portfolio visibility.

24:29 Innovation was a meaningful driver of performance with the rollout of Juiced Monster Viking Berry and Monster Ultra Bias Guava to markets across CMEA. This was complemented by special limited edition offerings of Oscar Piastri in both Monster Energy and Zero Sugar variants. Our affordable portfolio continues to gain momentum, and according to Nielsen, we increased share in Egypt, Morocco, and Nigeria. This portfolio remains an important growth driver Broadening consumer access to the category and strengthening our positioning across developing energy drink markets. We also continue to gain traction in FSOP in the region with recent collaborations of Subway restaurants in the UK and Ireland and Wingstop in France. Turning to Asia Pacific.

25:19 Net sales in Asia Pacific in the 2026 third quarter increased 12.3% in dollars and 14.9% on a currency neutral basis over the same period in 2025. Gross profit in this region as a percentage of net sales for the 2026 third quarter was 42.1% versus 40.7% in the same period in 2025. Net sales in Japan in the 2026 third quarter decreased 2.0% in dollars and increased 7.8% on a local currency basis. Our Japan results benefited from the previously announced agreement to sell Monster Energy Green and vending machines owned by Coca-Cola, Bottas, Japan, Inc. Depletions were positive, excluding these sales.

26:06 Net sales in South Korea in the 2026 third quarter decreased 5.1% in dollars and increased 2.0% on a local currency basis as compared to the same quarter in 2025. Net sales in China in the 2026 third quarter increased 43.8% in dollars and increased 35.5% Thank you for watching. F.S.S.A.I.

26:52 that's the Food Safety and Standards Authority of India orders issued in June and July of 2026 directing industry members including Monster to stop using the description energy drinks on caffeinated beverages. Monster channels the orders in the High Court of Delhi which in October granted interim relief permitting the sale of existing energy drink labeled stock and the use of existing can and bottle inventory. While the matter remains pending The recent court decision has enabled Monster to resume production and distribution in accordance with the court's order. We began sending Monster in Mongolia and Cambodia and Bang in Vietnam in the third quarter. We remain optimistic about the long-term prospects for our brand in Asia Pacific and the expansion of our affordable brands in China and India.

27:44 In Oceania, net sales in the 2026 third quarter increased increased 7.6% in dollars and increased 1.3% on a currency neutral basis as compared to the same quarter in 2025. Mid-sales in the quarter were impacted by bottling inventory fluctuations as according to Nielsen, NEC sales increased 22% and the portfolio gained 150 basis points of value market share across the region compared to the prior year quarter extending its leadership position. Turning out to Latin America and the Caribbean, mid-sales in Latin America, including Mexico and the Caribbean in the 2026 third quarter increased 48.8% in dollars and increased 40.0% on a currency neutral basis over the same period in 2025.

28:34 Gross profit in this region as a percentage of net sales was 47.7% for the 2026 third quarter versus 46.8% in the 2025 third quarter. Net sales in Brazil in the third quarter increased 70.0% in dollars and increased 60.4% on a local currency basis. Net sales in Mexico increased 20.6% in dollars and increased 10.8% Thank you very much. Tony Tavon-Sabrine. On alcohol brands, net sales for the segment were $28.5 million in the 2026 third quarter, 13.6% lower than the 2025 comparable quarter. With regard to our share repurchase programs during the 2026 third quarter, we repurchased 2.3 million shares of our common stock and an average purchase price of $43.87 per share for total amounts of approximately $100 million.

29:56 As of November 4, 2026, approximately $800 million remained available for repurchase under the previously authorized repurchase programs. Turning to October sales, we estimate that October 2026 sales on a non-foreign currency-adjusted basis, excluding the alcohol brand segment, were approximately 11.6% higher and the comparable October 2025 sales at 11.1% higher on a non-foreign currency-adjusted basis including the alcohol brand segment. We estimate that on a foreign currency-adjusted basis excluding the alcohol brand segment, October 2026 sales were approximately 11.2% higher than the comparable October 2025 sales and 10.7% higher on a foreign currency adjusted basis, including the alcohol brand segment.

30:56 October 2026 had one fewer sending day than October 2025. In this regard, Number one, 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 each holiday's fall, timing of new product launches, 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 distribution partners maintain inventory levels according to their own internal requirements, which they may alter from time to time for their own business reasons. And number two, 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.

31:56 In our conclusions, in conclusion, I'd like to summarize some recent positive points. We are pleased with our strong financial results and cash generation in the third quarter. We had solid sales growth across all of our geographic regions, especially outside the United States in the quarter. We gained share in many markets globally in the quarter. We remain focused on the growth of our existing core offerings, as well as the continued introduction of product innovations, which remain central to our long-term growth strategy. We continue to expand our sales in non-Nielsen track channels, and we are especially pleased with the recently announced collaborations in our FSOP business. The energy green category continues to grow globally, and consumer demand, as measured by scanner data, remains strong. We believe that household penetration continues to increase in the energy green category due to product functionality and affordable value proposition and lifestyle positioning.

32:57 We are also seeing increases in purchase frequencies as well as usage occasions expanding across day parts. We continue to review opportunities for price increases both domestically and internationally We are continuing our digital transformation in order to modernize our enterprise platforms and strengthen end-to-end business capabilities across commercial, operations, and supply chain, including our upgrade to SAP S4 HANA with a planned go-live date of January 1, 2028. Lastly, as a reminder, we are hosting an Investor Day in New York City on December 1st, and we hope you can join us in person or online. I would now like to open the floor to questions about the quarter.

33:42 We will now begin the question and answer session. To ask a quick question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your hands up before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, Please press star then two. Due to the time constraint, please limit yourself to one question only. The first question comes from Dara Mohsenen with Morgan Stanley. Please go ahead. Hey, guys. So remarkable international revenue growth, obviously in the quarter, but this business has also really sustained high growth levels over a longer period of time, the international business, and It's sort of defying gravity that normally CPG businesses slow at much higher revenue levels as you approach $5 billion annually in revenue internationally. So A, I just love a review of what's driving the sustained success. Maybe as you look at the last couple of years, what have been some of the more positive factors that have developed?

34:49 And B, also what I'm really curious about is now that you've had this historical success, what does it unlock going forward? Restaurants, I'm sure, are taking notice or food service in general. Traditional retailers are probably thinking about a broader product offering. Maybe you get bolder with pricing, whatever it may be. But just now that you have these proof points with retail partners, seemingly greater permissibility at the consumer level, what are sort of incremental opportunities going forward as you think about the international business broadly? So, Dara, good morning, good afternoon. I don't know where you are. I hear you in the Far East, so I'm not going to comment on good evening, but welcome to the call.

35:35 You know, it's actually really interesting if one analyzes this category because we're part of a very large non-alcoholic ready-to-drink category. And so it's not as such that we have a category on its own that's growing, but we have a category that's part of a very substantial category that's growing within that category and growing in itself outside of that category. And, you know, we get back to the basic premises that we've spoken on previous calls about, and that is, you know, consumer acceptance continues to grow. The mainstreaming of energy drink Energy Drinks continues to increase.

36:24 We are seeing increasing household penetration gains. We're moving into multi-packs and you're seeing increasing buy rates because of the fact that we're now in multi-packs. And other drivers of the category include the value proposition. Energy drinks always have been regarded as an affordable luxury. The functionality, which is really important. The image, the lifestyle, the innovation, the absolute need for energy from consumers, and the usage across more day part occasions, which is not only true in the US, but it's true in MEA and across the world. And generally, the acceptance among consumers is also increasing and aiding growth and category penetration.

37:16 So just to summarize, you know, our durable attributes are image, value proposition, and functionality. So when we look at data that's available to us, and you'll recall that at our last meeting and last investor meeting, we put up a chart which was formed by global data where they showed the growth in a category through 2030. Now, that's not our data. That's a third-party independent data. evaluation of the category and they are seeing growth in the category going forward to 2030 in high single digit numbers really across the world. So I don't know if Guy wants to add anything from an international perspective particularly EMEA because Guy runs EMEA and OSP so Guy I don't know if you've got anything to add. Thank you, Hilton.

38:15 Thank you, Dara. I think the trends reinforce exactly what Hilton has been saying. The energy category continues. It's relatively young compared to other beverage categories. But the category continues to recruit new consumers. In EMEA in Europe, we see 30% of new consumers coming into the category on an annual basis. We also see rising frequency. More and more are drinking You know, the number of products per week. It's all underpinned, as Hilton said, by strong functionality, brand image, and an ever-expanding, you kind of raised the question, range of consumption occasions. The with food opportunity remains huge. We've made progress in America and around the world in FS and OP. 31% of consumers in Europe drink energy with food on an ongoing basis.

39:08 and ultimately consumption of any drinks is becoming habitual with more consumers and more people. We're well positioned within it. We've got a balance in growth between existing products and innovation. We've got ultra white, which is over a decade old, growing over 40%. Zero sugar itself, zero sugar energy grows at twice the rate of full sugar. and Monster delivered 57% of the zero sugar growth as Hilton talked about in the call. We gained three share points within zero sugar energy in Europe. And I think lastly, our system partnership gets ever increasingly stronger with the Coca-Cola bottling partners. It increases our availability, our average SKU assortment.

39:53 It allows scaled innovation launches, expanding monster-led energy zones with key retailers, and crucially accelerating our branded cooler footprint. And all of this drives our growth as well as the categories. Thanks, Guy. And as you said earlier, it's Rob's last call and we have to get Some good information from Rob. So Rob, if you could maybe address Dara's point on FSOP and the food service on-premise opportunity. You bet. Dara, we believe there's an immense opportunity ahead of us with FSOP and you heard Hilton allude to some of our recent collaborations with retailers. When you look at the frequency at which the U.S. consumer or For any case, any of our geographies where the consumer is consuming food outside of home on that occasion, we know they constantly are seeking a beverage and we want energy to be at the forefront of those choices and move from discovery to conversion. And so we're very pleased with the recent announcements.

40:54 We continue to work with the Coca-Cola Company and the partnerships around the world such as Marriott and things like that because the consumer is using our beverages more and more outside of the traditional occasions. and we believe it's an incredible opportunity for us to capture growth. The next question comes from Peter Galbo with Bank of America. Please go ahead. Hey, good afternoon. Thanks for taking the questions. Hilton, I know your favorite topic is to talk about gross margins often in gross profit dollars, but I was wondering if we can maybe ask the question this quarter in a little bit of a different light. Obviously, the international growth has been impressive, and I know that that comes in at a lower margin percentage.

41:42 So I'm just curious if there's any way we can kind of discern what the impact from the international growth is in terms of the year-over-year margin pressure, just because I think there's so much focus on that number, obviously. And again, if you're growing faster in those regions and the dollars are faster – It may help to just kind of understand what the percentage impact is from international. Thanks very much. Yeah, thanks for that question. I mean, if you look at where we are today, 47% of our growth is international. 47%, not of our growth, I'm sorry, 47% of our sales is international. Last quarter, same period a year ago, it was 43%.

42:28 So international is growing as a percentage of our business, which is very encouraging for us because we do see ourselves as an international business today. We're in 160 countries and we're really proud of the progress that we've made in growing the business on an international footprint. So we disclose every quarter, we disclose our margins, our gross margins in every part of the world. So, you know, you've got to, I think, I don't have those tools in front of me to answer your question specifically, but you've got the information. You know, you know that we moved from 43 to 47 in this quarter. You also know what the margins were a year ago because we, you know, we've spoken about them on the call and they are available and we have the numbers that we gave you, you know, today.

43:24 So, by region. So, If there's still a question after this, then maybe you could give us a call and we could talk about it offline. But all the tools are there for you to be able to compute the answer that you're looking for. The next question comes from Kamal Gajewala with Jefferies. Please go ahead. Hey, guys. I guess, yeah, correct. Good afternoon. The last quarter was sort of the beginning of seeing the outcomes of some of the shift in focus to capturing more Gen Z and capturing more of the sort of new energy drink consumers. And so can you just talk about that a little bit more?

44:12 How's that process going now that we're a little further along? And I don't know if you have some statistics on how many people have entered the category and how much of them you've been able to get for yourselves. So, you know, we know that there's an opportunity with female forward consumers and FLIRT is growing, you know, nicely. You know, we spoke about some of the innovation and so, you know, we're quite excited about the opportunity, you know, through that brand. We're spending a lot of money as you realize and as we spoke about on social media and we feel we are reaching the right 18 to 24 year old consumer.

45:03 Not only are we working on repeat but we're building a solid base. I've just been looking at some stats. Household penetration has grown as we spoke earlier, purchase intent has grown, and Gen Z household incidence is now at 58%. So we think that what we're doing is hitting the target. We know that there's more to come, but that consumer is very important to us, and we believe we have a broad range of products to be able to address that consumer needs and we'll continue to evaluate as we go forward. You know, we've got our protein products that are being launched next year. We have an array of interesting innovation next year.

45:59 So, you know, we believe that we're doing the right things and we believe that the social media activity that we're doing is generating, you know, good results as indeed are our sponsorships, our endorsements and promotions We're just going to follow on with the strategy that we started because we do think it's working. We believe that FLIRT will grow through LTOs, and we spoke a little bit on the call about the first LTO, which is one for Valentine's Day. The next question comes from Bonnie Herzog with Goldman Sachs. Please go ahead. All right, thank you. Hi, everyone. I actually wanted to go back to gross margins and just maybe hoping for a little more color and maybe phasing expectations moving forward. Should we expect another sequential deceleration for margins in Q4? And then how should we think about phasing next year?

47:02 Does it make sense to think about 1H being more pressured than the second half, for instance? And I think I understand the headwinds, you know, Hilton, that you've certainly called out. But what about the levers you can pull to help mitigate some of the pressures, like, you know, whether it's further pricing actions, you know, are they greater versus last year, you know, any more pricing opportunities internationally, et cetera? Thank you. So we do have a price adjustment that's going through November the 1st. We've spoken about that. and I think this whole aluminum context is something that is a headwind to gross margins generally across all of our territories. And if we just think about it, aluminum has increased, raw aluminum has increased 36% since a year ago. So those are the numbers that you're dealing with.

48:14 Now, yes, we do hedge and we evaluate hedges in the best way we can. But at the end of the day, aluminum does have an impact. We call it a modest impact, but it does have an impact on margins. and there are other factors and the biggest factor is this whole geographical mix because as we grow internationally our margins, our growth margins reduce as percentages and as the previous caller said, it's certainly as a percentage, yes, but we bank dollars, we don't bank percentages. So we don't give guidance.

49:02 It's hard for me to talk about the fourth quarter because we don't give guidance. Outside the US, if you examine the numbers, you'll see that gross margins increased year on year in all three geographic regions. So we're doing the very best we can to increase margins internationally, and increased pricing internationally. In the US, I mentioned that we have a price increase that will take effect from November the 1st. So given everything that we mentioned on the call, I think it is difficult territory. And I know you want a percentage for your model.

49:50 But unfortunately, I just can't give it. You know, you've got the rudiments of where we are, and as we continue to grow internationally, there will be a drag. And then, you know, when we look at EMEA, there's a further drag in EMEA as they expand their portfolio in the various countries in which they operate. You know, against that, we have efficiencies, which we're always working on efficiencies. That's number one. And number two, you know, with the growth of... of zero sugar products. Those products have higher margins than the full sugar products. So it's really a balance.

50:35 It's really a mix. And there are pluses and minuses. But at the end of the day, it's not something that we neglect. I mean, we actively are engaged in improving margins. Guy had a price increase in the MEA in the last six months. So we are addressing where we can, but I repeat at the end of the day, as we grow internationally, margins, percentages are going to be a drag on the overall company gross profit as a percentage, and that's something that we all have to live with. The next question comes from Matthew Smith with Stiefel. Please go ahead.

51:22 Good afternoon. Thanks for taking the question. Thank you so much for having me. and evaluation of the phasing of innovation. Do you feel like with that amount of activity, the base products and the innovation products were able to reach their full potential? Or do you think the pacing of innovation dimed some of the lift you could have gotten as these products fall into the base and the anniversary of the innovation? Thank you. Yeah, I think that if you look at our 2027 innovation pipeline, you know, we believe it's robust and that it really compares favorably to the lineup we had in 2026. I think you were at NACS, right? So we presented the innovation slate and the feedback was really positive, not only from the bottlers, but also from, you know, from our retail customers and our retail partners.

52:34 You know, we have expanded our own innovation program. We're going to Monster Protein. And I think that as we look at 2027, we're going to do a better phase out of our innovation. So we really hope that and we believe that the bottle's focus will be better than it was in 2026. You know, maybe we had a little bit too much in 2026, but... We regard 27 innovation as quality over quantity. We're bringing back some of the innovation, the Americas 250 innovation, which was very well received as LTOs over the Independence Day. So some of that innovation that we did in 26 will continue to live in 27.

53:32 The next question comes from Peter Grom with UBS. Please go ahead. Great. Thanks. Good afternoon, everyone. So, you know, Hilton, you kind of started the call discussing your optimism for the category. And clearly the performance this year has been impressive. But, you know, and I know we talked about international markets to Dara's question earlier. But I'm curious how you see kind of U.S. category growth evolving as you look out to next year. I know you don't give guidance, but we have seen some slowing in the data in the U.S. I'm curious what you think is driving that and just, you know, as you think about cycling, some tougher comparisons. What do you think is a realistic growth rate for the industry as you look ahead?

54:17 Well, you know, category data is actually starting accelerating, which is – which is interesting. You know, the category is healthy. It's becoming a big category and it's hard to grow at the same rate as we have achieved historically with a much larger category. But I think what I'd like to do is get some insight on the U.S. from Rob, if that's okay. You bet. Thanks for the question. We did see, I would say, a little slowing at the end of the summer versus our traditional trends, but it's bounced back. I mean, even in the most recent weeks on scanner data, we're looking at is over 15% growth. So it's rebounded nicely, even though there's been headwinds throughout the year that everyone's speaking about, whether it be NAX or fuel price, I'm sorry, SNAP or fuel prices, things of that nature.

55:11 We constantly monitor consumer behavior. We've noticed as a lot of different manufacturers have taken Retail Inflation, that the category has been resilient and we're proud of the ability to grow both price and volume concurrent with the many competitors we have because we do believe in the health of the category. So as the consumer makes choiceful decisions with where they spend their money, we're bullish about the future. We believe in the value that innovation brings. to the category. And the goal for us is to constantly evaluate our innovation and ensure it's elevating our base. We want it to elevate our core brands. So we look at all of those variables and constantly work with our retailers to ensure we're providing the right value proposition that our consumers are seeking.

56:02 This concludes our question and answer session. I would like to turn the conference back over to Hilton Schlosberg for any closing remarks. Thank you. On behalf of Monster, I'd like to thank everyone for the interest in the company. We're confident in the strength of our brands and the talent of our entire Monster family throughout the world, and I'm excited to be working with them and thank them all for their contributions. We believe in the company and our growth strategy and are committed to innovating, developing, and differentiating our brands and expanding the company both at home and abroad. We're proud of our relationship with the Coca-Cola system and the opportunity this presents to us. We believe that we are well positioned in the beverage industry and are optimistic about the future of our company.

56:49 And I'd like to make a special tribute to Rob, who's leading us to join the Coca-Cola company in a very senior capacity. And Rob, we wish you all the best. Thank you for everything and applaud you working with you in your future role. because we believe that Rob's future role is going to be synergistic to both ourselves and the Coca-Cola Company as we move forward in some critical areas like FSOP and the opportunities that all of that presents to all of us. FSOP is also important from a marketing perspective because it gives access and image to our products. So very excited about that. So Rob, thank you for that.

57:34 and thank you everyone out there for your attendance. Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.