Monster Beverage Corp (MNST) — Q1 2020 Earnings Call Transcript

Good afternoon, ladies and gentlemen. Thank you for attending this call. I am Rodney Sacks. Hilton Schlosberg, our Vice Chairman and President is on the call, as is Tom Kelly, our Executive Vice President of Finance. Tom Kelly will now read our cautionary statement.

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, as well as the future impact of the COVID-19 pandemic on the company’s business and operations. Management cautions that these statements are based on our current knowledge and expectations and are subject to certain risks and uncertainties, many of which are outside the control of the company, that may cause actual results to differ materially from the forward-looking statements made during this call. Please refer to our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K filed on February 28, 2020, 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 7, 2020. A copy of this information is also available on our website.

Let me begin by stating that our thoughts and prayers are with all who have been impacted by the COVID-19 pandemic. COVID-19 has affected the health of so many individuals around the globe, including some of our team members. This includes myself. In mid-March, I began to experience flu-like symptoms, tested positive for COVID-19, and thankfully made a good recovery. I'm feeling good but for an occasional cough. For this, I'm very grateful. And we are fortunate that everyone at our company who has been diagnosed with COVID-19 is doing well and has been making good progress. The company has always operated with co-leaders. And I would like to thank Hilton and the leadership team for their leadership and support during this difficult period. To everyone at Monster, my sincere thanks and appreciation for all your efforts. From the beginning of the COVID-19 pandemic, our top priority has been the health, safety, and well-being of our employees. Early in March 2020, we implemented global travel restrictions and work-from-home policies for employees who are able to work remotely. For those employees who are unable to work remotely, safety precautions have been instituted, which were developed and adopted in line with guidance from public health authorities and professional consultants. We are incredibly proud of the teamwork exhibited by our employees, co-packers, and bottlers distributors around the world, who are ensuring the integrity of our supply chain. Our flavor manufacturing facilities, our co-packers, warehouses, and shipment facilities are all operating. Certain of our bottlers distributors have implemented modifications to their core points and service levels, but generally, our products remain available to consumers. In limited countries, which are smaller markets for us, the operations of our bottlers and distributors have been more affected. Since March 2020, while various markets have faced governmental measures, restrictions, and guidance in response to the COVID-19 pandemic, the sales and merchandising activities of certain of our bottlers and distributors have been modified. The impact of the COVID-19 pandemic on our net and gross sales for the 2020 first quarter was not material. The company's April sales were materially adversely impacted by the COVID-19 pandemic. However, bottler and distributor sales of the company's product to retail in the United States were markedly less adversely impacted. Since mid-March 2020, the company has seen a shift in consumer channel preferences and package configurations, including an increase in at-home consumption and a decrease in immediate consumption. To date, our sales in the second quarter have been adversely affected as a result of a decrease in foot traffic in the convenience and gas channel, which is our largest channel and food service on-premise, while our e-commerce, club store, mass merchandise and grocery and related business remain stable. Currently, we do not foresee a material impact on the ability of our co-packers to manufacture and our bottlers and distributors to distribute our products as a result of COVID-19 pandemic. In addition, we are not experiencing raw material or finished product shortages in our supply chain. Monster Energy case, our philanthropic arm, is actively engaged in a number of philanthropic efforts, including donating products to individuals working on the front lines, such as first responders, healthcare workers, hospitals, and the National Guard. Based on currently available information, we do not expect the COVID-19 pandemic to have a material impact on our liquidity. In the first quarter of 2020, net sales were $1.06 billion, up 12.3% from $946 million in the first quarter of 2019. Adjusting for foreign currency movements, net sales for the 2020 first quarter would have been up 13.4%. Operating income was $365 million, up from $311.5 million in the first quarter of 2019. The increase in net income was 6.6%. The lower percentage increase in net income was primarily due to our higher effective tax rate in the quarter compared to the same quarter in 2019, primarily attributable to a decrease in the equity compensation deduction. Diluted earnings per share for the 2020 first quarter increased 8.2% to $0.52 a share from $0.48 in the first quarter of 2019. According to Nielsen reports for the 13 weeks through April 25, 2020, all outlets combined, namely convenience, grocery, drug, mass merchandise, sales in dollars in the energy drink category, including energy shots, decreased by 1.2% versus the same period a year ago. Sales of the company’s energy brands, including Reign were down 0.2% in the 13-week period. Sales of Monster were down 6.8%. Sales of NOS decreased 8.4%. And sales of Full Throttle decreased 12%. Sales of Red Bull decreased 1.8%. Sales of Rockstar decreased 11.5%. Sales of 5-Hour decreased 14.2%. And sales of Amp decreased 26.8%. VPX sales decreased 5.8%. Since Reign had just entered the market at the end of March last year, we have not provided comparable sales for our Reign products. According to Nielsen for the full week ended April 25, 2020, sales in the convenience and gas channel, including energy shots in dollars decreased 15.9% over the same period the previous year. Sales of the company's energy brands, which include Reign, declined 14.4% in the four-week period in the convenience and gas channel. Sales of Monster decreased by 16.9% over the same period versus the previous year. NOS was down 16.2%. And Full Throttle was down 15.9%. Reign sales increased 27.4%. Sales of Red Bull were down 12.1%, Rockstar was down 21.8%, 5-Hour was down 31.9% and Amp was down 26.2%. VPX Bang sales decreased 30.3%. According to Nielsen, for the four weeks ended April 25, 2020, the company's market share of the energy drink category in the convenience and gas channel, including energy shots in dollars increased by 0.7 of a point over the same period the previous year to 41%. Monster share decreased 0.4 of a share point to 33.3%. Reign’s share was 3.3%, NOS’s share remained the same at 3.6% and Full Throttle share remained the same at 0.8 of a percent. Red Bull share increased 1.5 points to 34.9%, Rockstar share was down 0.4 of a point to 5.2%, 5-Hour share was lower by 1.1 points at 4.6 and Amp share decreased 0.1 of a point to 0.4%. VPX Bang share decreased 1.4 points to 6.9%. According to Nielsen, for the four weeks ended April 25, 2020, sales of coffee plus energy drinks, which primarily includes Java Monster in dollars in the convenience and gas channel, decreased 13.3% over the same period the previous year. Sales of our Java Monster alone were 8.7% lower than in the same period the previous year. Sales of our coffee plus energy drinks were 12.7% lower, while sales of Starbucks Energy were 11.6% lower. Our company’s share of the coffee plus energy category, which primarily includes Java Monster, Starbucks Doubleshot and Tripleshot, Rockstar Roasted and Bang Keto Coffee for the four weeks ended April 25, 2020 was 53.5%, up 0.4 of a point. Java Monster share on its own for the four weeks ended April 25, 2020 was 49.5%, up 2.5 points, while Starbucks Energy share was 44.6%, up 0.9 of a point. According to Stackline, which tracks energy drink sales by Amazon in the United States, for the 13 weeks ended April 11, 2020, sales in dollars in the energy category by Amazon, including energy shots grew 80.8% versus the same period a year ago. Sales of Monster increased 88.8% to 34.8 share, up 1.5 share points versus the same period a year ago. Red Bull sales increased 86.7% and the share increased 0.5 of a point to 14.9%. Celsius sales increased 118.2% and its share increased 2 points to 11.4%. 5-Hour sales increased 34.1% and its share decreased 2.4 points to 6.9%. VPX Bang sales declined 27.4% and its share declines five share points to 3.4%. Reign share was 4.6% and Rockstar share was 3.5%. For the four-week period ending April 11, 2020, according to Stackline in the United States, sales in dollars in the energy category by Amazon, including energy shots increased 129.6% over the same period the previous year. Sales of Monster increased 137.5% and its share was 36.7%, up 1.2 share points versus the same period a year ago. Red Bull sales increased 130.2% and its share remained at 16%. Celsius sales increased 149.9% and its share increased 0.8 of a point to 10.1%. 5-Hour sales increased 95.2% but its share declined 1.2 points to 6.9%. VPX Bang’s sales declined 9.8% and its share declined 4.6 share points to 3%. Reign share was 4.9% and Rockstar share was 3%. According to Nielsen in the convenience and gas channel in Canada for the 12 weeks ended March 28, 2020, the energy drink category increased 3% in dollars. Sales of the company’s energy drink brands increased 1% versus a year ago. The market share of the company’s energy drink brands was 37.9%, down 0.8 of a point. Monster's market share decreased 0.5 of a point to 33.9. NOS’s sales increased 4% and its market share remain the same at 2.9%. Full Throttle sales decreased 19% and its market share decreased 0.3 of a point to 1.1%. Red Bull sales increased 3% and its market share decreased by 0.3 of a point to 35.1%. Rockstar sales increased 3% and its market share decreased 0.2 of a point to 16.3%. Celsius sales increased 75% and its share increased 1.5 share points to 3.7%. We verified the Nielsen data for Mexico for the month of March 2020 did not fully capture all of Monster's sales. As a result, the Nielsen data is inaccurate and will not be covered on this call. We will resume reporting Nielsen data for Mexico once its data has been corrected. According to Nielsen for the month of March 2020 compared to March 2019, Monster's retail market share in value increased in Argentina from 23.7% to 37.1%, in Brazil from 19.2% to 25.7% and in Chile, from 35.9% to 41.4%. I'd like to point out that the Nielsen numbers in EMEA should only be used as a guide, because the channels read by Nielsen in EMEA vary from country to country, and are reported on varying base within the month referred to from country to country. According to Nielsen in the 13-week period ended April 17, 2020, Monster’s retail market share in value as compared to the same period the previous year grew from 31.7% to 34.4% in Spain. According to Nielsen in the 13-week period ended March 31, 2020, Monster’s retail market share in value as compared to the same period the previous year grew from 12% to 12.6% in the Czech Republic, from 12.3% to 15.2% in Poland, from 19.4% to 23.8% in the Republic of Ireland and from 16.3% to 17.7% in South Africa. Monster’s retail market share in value as compared to the same period the previous year declined from 35% to 34% in Greece. According to Nielsen in the 13-week period ended March 29, 2020, Monster’s retail market share in value as compared to the same period the previous year, grew from 18% to 20% in Italy. According to Nielsen in the 13-week period ended March 28, 2020, Monster’s retail market share in value as compared to the same period the previous year, declined from 16.5% to 15.8% in Germany. According to Nielsen in the 13-week period ended March 21, 2020, Monster’s retail market share in value as compared to the same period the previous year grew from 26.4% to 27.6% in France, from 20% to 22.5% in Great Britain, from 18.8% to 25.7% in Norway, from 13.2% to 13.5% in Sweden, but declined from 13.2% to 13% in Belgium and from 7.1% to 6.1% in the Netherlands. According to IRI Greece, Ireland and Australia, Monster’s market share in value for the month ending March 2020 increased from 8.9% to 10.3% as compared to the same period the previous year. Mother's market share in value decreased from 13.4% to 13.2% during the same period. Sales of the company's brands in Australia for the month ending March 2020, increased from 22.3% to 23.4%. According to IRI in New Zealand, Monster’s market chain value for the four weeks ended March 15, 2020 increased from 7.7% to 9.7% as compared to the same period the previous year. LIVE PLUS there's market share in value decreased from 8.5% to 7.7% and Mother's market chain value decreased from 6.9% to 6.2%. Sales of the company's brands in New Zealand for the four weeks ended March 15, 2020 increased from 23.2% to 23.7%. According to Nielsen in South Korea, Monster’s market share in value in all outlets combined for the month ending February 2020, grew from 42.5% to 51.3% as compared to the same period in the previous year. According to INTAGE in Japan, Monster’s market share in value in the convenience store channel for the 13-week period ending March 2020, grew from 49.3% to 58.4% as compared to the same period in the previous year. During the latest four-week period ending March 2020, Monster’s share in Japan grew from 49.5% to 61.6% as compared to the same period in the previous year. We again point out that certain market statistics that cover single months or four-week periods may often be materially influenced positively and/or negatively by promotions and/or other trading factors during those periods. Net sales to customers outside the U.S. was $356.8 million, 33.6% of total net sales in the 2020 first quarter compared to $284.1 million, which is 30% of total net sales in the corresponding quarter in 2019. Foreign currency exchange rates had the effect of decreasing net sales in U.S. dollars by approximately $10.4 million in the 2020 first quarter. Included in reported geographic sales are our sales to the company's military customers, which are delivered in the U.S. and trans-shipped to the military and their customers overseas. In EMEA, net sales in the first quarter increased 26.3% in dollars and increased 28.5% in local currencies over the same period in 2019. Gross profit in this region as a percentage of net sales for the quarter was 41.3% compared to 43.2% in the same quarter in 2019. Gross profit percentage for the region was impacted by country and product mix. We’re also pleased that in the first quarter, Monster gained market share in the Czech Republic, France, Great Britain, Italy Norway, Poland, Republic of Ireland, South Africa, Spain, and Sweden. In Asia-Pacific, net sales in the first quarter increased 32.8% in dollars and 33.7% in local currencies over the same period in 2019. Gross profit in this region as a percentage of net sale was 42% versus 42.2% over the same period in 2019, as a result of country and product mix. In Japan, net sales in the quarter increased 61.7% in dollars and 60.1% in local currency. In South Korea, net sales increased 40.6% in dollars and 48% in local currency as compared to the same quarter in 2019. In Oceania, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea, and Guam, net sales increased 2.6% in dollars and 7.5% in local currencies. Sales of the Monster brand increased 18.5% in dollars and 24.3% in local currency as compared to the same quarter in 2019. In Latin America, including Mexico and the Caribbean, net sales in the first quarter increased 29.1% in dollars and 45.7% in local currencies over the same period in 2019. Gross profit in this region, as a percentage of net sales, was 42.5% compared to 43.6% over the same period in 2019. In Brazil, net sales in the quarter increased by 114.7% in dollars and increased 138.1% in local currency. Net sales in Chile, decreased 16.8% in dollars and 3.2% in local currency in the quarter. This was due to timing of shipments and our retail market share depletions remained strong. In the 2020 first quarter, we transitioned to Trinidad and Tobago to the Coca-Cola bottler. In addition, we began production with our bottler in Trinidad, which will allow us to supply other islands and countries in this region on a tax-efficient basis. In January 2020, Monster Energy was launched by the Coca-Cola bottler in Israel. I will now briefly discuss our litigation with Vital Pharmaceuticals Inc., VPX the maker of Bang Energy drinks. A number of proceedings are currently ongoing to adjudicate claims, including claims for false advertising and trademark infringement, brought by the company against VPX and by VPX against the company. These proceedings are ongoing. Our only update since our last earnings call is in relation to the lawsuit against VPX over its intention to launch its own line of Reign branded energy drinks in 16-ounce cans to be sold in convenience stores. On May 1, 2020, a district court judge granted a preliminary injunction joining the VPX from using the Reign mark in connection with any ready-to-drink beverage. A motion for summary judgment has been filed by Monster in this proceeding against all of VPX's claims in the suit, with a hearing on that motion set for later in May this year. In the event that summary judgment is not granted against all claims in the suit, the matter is scheduled for trial in August 2020. As with litigation and other pending proceedings with VPX are sub judice, we will not be answering any questions on this matter on today's call. We are working closely with our China team to follow the rules implemented by local authorities and we have reopened our office in China. Monster shipments and distribution in the first quarter in China were negatively affected by the lockdowns due to the COVID-19 pandemic. This resulted in a volume decrease in the first quarter in China. But beginning in late March, early April, we have seen an increase in shipments and depletions. In April, we began distribution of our new Monster Energy Dragon Tea, which is non-carbonated and which has received early positive feedback. In addition, certain globally supplied ingredients are sourced from third-party manufacturers in Wuhan and other parts of China have recommended shipping to our network of co-packers. During the 2020 first quarter in the United States, we launched a number of new exciting products, including a line of Reign Inferno, Thermogenic Fuel, two new energy drinks in the Monster Ultraline, a line of Java Monster 300 and a line of Monster Hydro Super Sport, as well as NOS Turbo. These launches were negatively impacted by the COVID-19 pandemic, and we did not achieve planned distribution levels, in part due to certain retailers postponing implementation of their new plan schematics, which included our innovation products. We are developing plans with our bottlers and distributors to re-prioritize these recent innovation launches to ensure that we are able to maximize their distribution as soon as normalcy returns, particularly to the convenience and gas channel. In Canada, our Monster Energy portfolio was extended in January 2020 with the launch of Monster Ultra Paradise, Java Monster Swiss Chocolate, Monster Hydra Blue Ice, Monster Dragon Green Tea, and Yerba Mate. We also added an additional flavor to our NOS energy lineup with NOS Sonic Sour. In Mexico, we launched Predator as our first entry in the country in the value segment. And in Brazil, we launched our non-carbonated Monster Energy Dragon Tea lemon tea during March 2020. In Australia, we launched Monster Energy Neo nationally and rolled out Mother Epics roll nationally in January off an exclusive with the select convenience and guest chain launch in the fourth quarter of 2019. Juice Monster Pacific Punch was launched in Germany and the Netherlands in March 2020, and in France and Sweden in April 2020 and is now available in nine EMEA markets. It is planned to be launched into a further three markets in 2020. Black Monster Manga Logo was launched in Russia in March 2020. Manga Logo is now available in 34 EMEA markets. Juice Monster Pipeline Punch was launched in Iceland, Malta, and Norway in February 2020 and in the Baltics, Denmark, and Hungary in March 2020, and is now available in 20 markets across EMEA. Monster Ultra Paradise was launched in Germany and the Netherlands in March and in Belgium, Italy, and Norway in April and is now available in eight EMEA markets. We are planning to launch Ultra Paradise into a further 14 markets in 2020 in EMEA. Espresso Monster was launched in Bulgaria, Cyprus, Greece, and Switzerland in March 2020, and in the Czech Republic and Slovakia in April 2020, in both milk and vanilla variants. Espresso Monster milk and vanilla variants are now available in 20 markets in EMEA. We are planning to launch two flavors of Espresso Monster into further two markets in 2020. Additionally, we launched Espresso Monster Salted Caramel in Norway in February 2020 and in Sweden in April 2020. We are planning to launch this product in the further three EMEA markets in 2020. Reign was launched in Germany in February 2020 and in Spain in April 2020. Additionally, we are planning to launch Reign into a further six markets in 2020. Once the HydroSport was launched in Norway and Sweden in February 2020, and we are planning to launch Monster HydroSport in Spain late in the second quarter. Burn Dark Energy, our new citrus burn variant was launched in Russia in March 2020. Two SKUs of the new Nalu Energy tea line, green tea and ginger and black tea and passionfruit, were launched in Belgium in April 2020. We launched Predator, our affordable energy brand in the Czech Republic and Hungary in February 2020, Afghanistan and North Macedonia in March 2020. Additionally, we are planning to launch Predator in Ethiopia, Ghana, and Nigeria in the second quarter of 2020. We're also planning to launch Predator into a further five EMEA markets later in 2020, Bosnia, Croatia, Romania, Russia, and Slovenia. Similar to the United States in a number of markets, our recent new product launches were negatively impacted by the COVID-19 pandemic, and we are implementing plans to re-prioritize certain launches. In Japan, we successfully relaunched Pipeline Punch with strong results that build our number one country share positioning value. In South Korea, we further expanded Pipeline Punch to 90% of convenience stores with positive results that also took Monster to a number one share position in value. The Monster portfolio grew strongly in both countries. We are planning to launch Ultra Paradise in both Japan and South Korea later this year. India followed up on the December 2019 Mango Loco launch and extended distribution nationally early in the first quarter before a national lockdown due to the COVID-19 pandemic, which took effect on March 25, 2020. We estimate April 2020 gross sales to be approximately 22.2% lower than in April 2019. On a foreign currency-adjusted basis, April 2020 gross sales would have been approximately 20.8% lower than comparable April 2019 gross sales. However, bottler and distributor sales of the company's products to retail in the United States were markedly less adversely impacted. April 2020 has the same number of selling days as April 2019. April sales were materially and adversely impacted by the COVID pandemic to differing degrees from country to country. We're optimistic for improvement once the COVID-19 pandemic subsides. Indeed, a number of U.S. states have recently begun to partially reopen and certain countries internationally are starting to do likewise. In this regard, we caution again that sales over a short period are often disproportionately impacted by various factors, such as, for example, selling days, days of the week in which holidays fall, timing of new product launches and the timing of price increases and promotions in retail stores, distributor incentives, as well as shifts in the timing of production, in some instances where our bottlers are responsible for production and unilaterally determine their production schedules, which affects the dates on which we invoice such bottlers, as well as inventory levels maintained by our distribution partners, which they also unilaterally for their own business reasons. We reiterate that sales averages for periods, 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. In conclusion, I would like to summarize some recent positive points; one, the company's priority has been and remains the health and safety of our employees, customers, consumers, and our communities; two, currently the company's flavor manufacturing facilities, its co-packers, warehouses, and shipping facilities and bottlers and distributors are all operating; three, we are pleased with the new additions to the Monster Energy portfolio; four, we are encouraged by the prospects for our Reign Total Body Fuel high performance energy drinks and Reign Inferno thermogenic fuel high performance energy drinks, not only within the U.S. but also internationally; five, we are pleased with our growth and performance, both domestically and internationally during the first quarter. We reiterate the growth potential for us in India, when the country reopens, as well as in China; six, we are proceeding with planning for future launches of our affordable energy brands, as well as Reign Total Body Fuel high performance energy drinks in certain countries outside of the U.S.; seven, this year in light of the public health impact of the COVID-19 pandemic, we will conduct our annual meeting on June 3, 2020 exclusively as a virtual meeting via live webcast. You will not be able to attend the annual meeting in person but during the virtual meeting, you may ask questions and we'll be able to vote your shares electronically. Additional information regarding attending the annual meeting, voting your shares, and submitting questions can be found in the company's proxy statement. I would like to open the floor to questions about the quarter. Thank you.

Thank you and good afternoon, everyone. Rodney, I'm pleased to hear you’re doing well, and I wish good health to all on this call. I would like to understand how much traditional channels and convenience and gas have contributed to the 20.8% FX neutral decline globally in April. Additionally, if we could break down the U.S. figures, we would appreciate your insight, particularly since you mentioned that the U.S. was significantly affected. This information will help investors gauge when the impact of COVID will lessen. I would also like to clarify the performance of e-commerce. How much does it currently represent as a percentage of total sales? Thank you.

Okay, Andrea, good afternoon. I’ll address that question. In April, we observed a decline in sales, which we mentioned earlier. Looking at the Nielsen data for all major channels, there was a 10.2% decline. We measure both shipments and depletions, which reflect the sales from bottlers and distributors to various retailers. Depletions were largely consistent with the Nielsen figures and, in fact, were slightly better. In the U.S., it appears that there was a reduction in inventories within the bottler network since shipments fell more quickly than depletions, as indicated by the Nielsen data. This is where we currently stand in the U.S. regarding our bottler and distributor business. Our direct business, which includes clubs and e-commerce, remained stable, so we did not experience declines in that area. Additionally, in April, there was significant stock building and pantry loading leading up to the last week of March. When we analyze our sales week by week in April, there has been an improvement. This trend is also true for EMEA, our second-largest market, where there was not as significant stock reduction by the bottlers and distributors, but performance has improved week by week as countries reopened. For our other regions, Asia Pacific saw a slight increase compared to last year, while LATAM performed similarly to last year. That's the update from the U.S. and EMEA, and I hope that clarifies your question. Regarding your second question about e-commerce, we do not disclose those specific numbers, although they are available through stat line. The debt market is growing significantly for us, and you can see from our call that our market share with Amazon is increasing notably.

Hey, afternoon, everybody. First of all, by the way, I'm making dinner for the kids while listening. So you guys are very fortunate. I guess I just wanted to talk a bit about some of the cost controls that seem to have occurred in the quarter. Maybe talk a bit about how to think about selling and G&A expenses. In terms of with some of the shift response to what you've seen in the quarter and some of this because you didn't have NASCAR recurring and selling expenses, while G&A up a little bit less than we've seen. And I know you don't want to give guidance, but any sort of direction that you can give us in terms of how to think about those numbers for 2020 that would be helpful. Thanks.

So as we look at the year, particularly with sponsorships and endorsements. Yes, NASCAR has fallen away and we have other sponsorships and endorsements that may not cost the same this year as they did last year, because a number of events have been canceled. So we don't give guidance. But I think as one reflects on the year, we can see a change in pattern in our spending. We've been spending a lot more on social media, which we believe is very important, particularly in this market that we're in. And we'll continue to spend in the markets as we deem appropriate.

I guess Rodney, as you mentioned, some of the states are starting to reopen. What have you seen kind of from the core Monster consumer in more restrictive states in New York or California where we're expecting kind of manufacturing and construction to come back online sooner. That I would think will also kind of play more in your core consumer. Just anything you're hearing on the ground as they start to reopen more. Thanks.

I think that that's drilling down to a level that I don't think is appropriate. And I don't think it's something we should be doing because there are so many variances from state to state and so many factors. I think you've got to look at it on a broader basis across the U.S. and also across the world because you look at individual countries. And we're really not in a position to analyze each and every country and giving you percentage up or the percentage back to normal. I think it's just more anecdotal of a trend that we are seeing, and it's starting to open. And we just say, we feel that when you look at the weekly numbers, Hilton referred to earlier, you can see that there seems to be a trend that those numbers are improving on a weekly basis.

Good morning, everyone. And Rodney I’m very glad to hear that you’re recovering from COVID, so keep safe. So, I'd like to question you about the renewed competition in the space. And PepsiCo in the quarter became a much stronger competitor with, first the acquisition of Rockstar, and that's with the announcement of distribution agreements with them in the U.S. Any comments on the move and how you are planning to adjust maybe to this new landscape? And also mean, should that change the way you and the Coca-Cola company and its populous partner? Thank you.

Well, I think it's difficult to comment on Coca Cola because we've always maintained a good relationship with the Coca-Cola company even during the arbitration proceedings that we had. We know that transitions generally are very disruptive. We've been through a number and we know how disruptive they can be. So that's we believe in a short term is an opportunity for us. In the long term, it's difficult to comment because Pepsi Cola has never really had success in the energy category historically, although they now have brands that are a lot more powerful than they had before. Rockstar has declined 50% since the market share, since the distribution agreement began in 2009. So it's really difficult to say. I think that the short term will be disruptive and we've got plans, both for the short term and for the long term. And I think it will be inappropriate for us to disclose what those plans are. But rest assured we do have plans and we believe we've got very strong brands and that we’ve got good marketing prowess and that that advantage will prevail in the long term.

I just wanted to follow up on the Pepsi side. I know you've mentioned Rockstar and Bang, so I'm curious if you expect anything new from Mountain Dew or if you’ve noticed any developments there now that Pepsi seems to have more freedom in the energy sector.

Well, we haven't seen anything yet. But we are anticipating that yes, that reporting in the press that they were kind of hamstrung with utilizing the word energy on some of the other brands. And we believe that that’s something that will happen in time but honestly, we shouldn't conjecture on what they may or may not do.

I would like to add that many of these points are not new. They have attempted to enter that space through Kickstart and the Mountain Dew range, so there will be some adjustments. They have already built on what Hilton mentioned, as they have been distributing Rockstar for the past decade. Ultimately, I don't expect much change. However, we cannot predict what they will invest in or for how long. We believe that the Rockstar brand faces some challenges, and we feel confident in our ability to address those. Regarding the Bang situation, you may have noticed the market shares for Bang over the last year. We believe we are well-positioned to continue competing with them, despite the changes in the distribution system. While there are advantages, there are also drawbacks to this shift.

So the one thing I would add, actually, to what we've all just said, is that this results with PepsiCo, I think will galvanize us, Coca-Cola and a whole bottling system against the common enemy. And I think that's a very positive factor as well.

Thank you. On behalf of Monster, I would 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 and in particular, expand distribution of our products through the Coca-Cola bottling system internationally. We believe that we will be able to navigate through the challenges ahead as a result of the COVID-19 pandemic. And hope that this unfortunate situation will resolve itself in the not too distant future. We believe that we are well positioned in the energy drink category and continue to be optimistic about our total portfolio of energy drink brands. We hope that you will stay safe and healthy. Thank you very much for your attendance.