Monster Beverage Corp (MNST) — Q2 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 announcement.

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 and our most recent quarterly report on Form 10-Q filed on May 11, 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 August 4, 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. From the beginning of the COVID-19 pandemic, our top priority has been the health, safety, and well-being of our employees. As mentioned on our previous call in early 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. Our offices have partially reopened in the United States and in certain countries, and our field sales teams are operating in the field with our bottlers, distributors, and retailers, subject to safety protocols. We are incredibly proud of the teamwork exhibited by our employees, co-packers, and bottlers and distributors around the world who are ensuring the integrity of our supply chain. Our flavor manufacturing facilities, co-packers, warehouses, and shipment facilities are all operating. Certain of our bottlers and distributors have implemented modifications to their coal points and service levels. But generally, our products remain available to consumers. In limited countries, the operations of our bottlers and distributors have been more affected. The COVID-19 pandemic had an adverse impact on our net and gross sales for the 2020 second quarter, in part due to certain of our bottlers and distributors reducing their inventory levels. However, we did see a sequential improvement in sales in the latter half of the quarter, as certain countries and states began to gradually reopen. 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. Our sales in the second quarter were initially adversely affected as a result of a decrease in foot traffic in the convenience and gas channel, which is our largest channel, but improved sequentially throughout the quarter. Our e-commerce, club store, mass merchandiser, and grocery-related business continue to increase in the quarter while our food service on-premise business, which is a small channel for us, remains challenged. 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 the COVID-19 pandemic. In addition, we are not experiencing raw material or finished product shortages in our supply chain. Monster Energy Cares, our philanthropic arm, continues to be 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 second quarter of 2020, net sales were $1.09 billion compared with $1.1 billion in the second quarter of 2019. Adjusting for foreign currency movements, net sales for the 2020 second quarter would have been up approximately 1%. The COVID-19 pandemic's impact was more pronounced in EMEA during the quarter. In particular, the reduction in revenue from our strategic brands segment was significant as our larger revenue-generating countries in EMEA experienced extended lockdowns. Operating income was $407.3 million, up from $379 million in the second quarter of 2019, due in part to lower sponsorship and endorsement costs of $19.8 million, as well as lower travel and entertainment expenses of $10.1 million. The cost for certain postponed or rescheduled events have been or may be deferred to future periods. Due to the uncertainty surrounding the COVID-19 pandemic, we are unable to estimate in which future periods, if any, such deferred sponsorship and endorsement costs will be recognized. Net income increased 6.5% to $311.4 million as compared to $292.5 million in the 2019 comparable quarter. Diluted earnings per share for the 2020 second quarter increased 9.9% to $0.59 from $0.53 in the second quarter of 2019. According to Nielsen reports for the 13 weeks through July 18, 2020, for all outlets combined, namely convenience, grocery, drug, mass merchandisers, sales in dollars in the energy drink category, including energy shots, increased by 7.6% versus the same period a year ago. Sales of the company's energy brands, including Reign, were up 5.8% in the 13-week period. Sales of Monster were up 4.8%; sales of Reign were up 26.8%; sales of NOS increased 1.6%; and sales of Full Throttle decreased 0.9%. Sales of Red Bull increased 17.3%; sales of Rockstar decreased by 7.5%; sales of 5-Hour decreased 9.1%; and sales of Amp decreased 10.8%; VPX Bang sales decreased 11.6%. According to Nielsen, for the four weeks ended July 18, 2020, sales in the convenience and gas channel, including energy shots in dollars, increased 9.2% over the same period the previous year. Sales of the company's energy brands, which include Reign, increased 5% in the four-week period in the convenience and gas channel. Sales of Monster increased by 5.6% over the same period versus the previous year; Reign sales increased 2.5%; NOS was up 2.7%; Full Throttle was down 1.4%; sales of Red Bull were up 21.1%; Rockstar was down 6.9%; 5-Hour was down 4.1%; and Amp was down 5.8%. VPX Bang sales decreased 7.2%. According to Nielsen in the four weeks ended July 18, 2020, the company's market share of the energy drink category in the convenience and gas channel, including energy shots in dollars, decreased by 1.5 points over the same period the previous year to 37.8%. Monster's share decreased 1.1 share points to 31.1%, Reign share was 2.8%, NOS's share decreased 0.2 points to 3.3%, and Full Throttle share decreased 0.1 of a point to 2.7%. Red Bull's share increased 3.7 points to 37.3%, Rockstar's share was down 0.8 points to 4.9%, 5-Hour's share was lower by 0.6 points at 4.6%, and Amp's share decreased 0.1 of a point to 2.4%. Bang's share decreased 1.3 points to 7.2%. According to Nielsen, for the four weeks ended July 18, 2020, sales in dollars in the coffee plus energy drink category, which includes our Java Monster line in the convenience and gas channel, increased 10.2% over the same period the previous year. Sales of Java Monster were 24.6% higher in the same period versus the previous year. Sales of Starbucks energy were 12.3% higher. Java Monster's share of the coffee plus energy category, which primarily includes Java Monster, Java Monster 300, Starbucks Double Shot and Triple Shot, Rockstar Roasted and Bang Keto Coffee for the four weeks ended July 18, 2020, was 51.1%, up 5.9 points, while Starbucks energy share was 47%, up 0.8 points. Cafe Monster and Espresso Monster have been discontinued in the United States. According to Stackline, which tracks energy drink sales by Amazon in the United States for the four-week period ending July 18, 2020, sales in dollars in the energy category by Amazon, including energy shots, increased 190% over the same period the previous year. Sales of Monster increased 269.4%, and its share was 39.5%, up 8.5 share points versus the same period a year ago. Red Bull sales increased 172.4%, and its share was 14.5%, down 0.9 of a point. Celsius sales increased 213%, and its share increased 0.8 of a point to 11.3%. 5-Hour sales increased 50.5%, and its share declined 3.8 points to 4.2%. VPX Bang sales increased 66.1%, and its share declined 2.7 share points to 3.7%. Reign share was 5.5%, and Rockstar share was 1.7%. According to Nielsen in all major channels in Canada for the 12 weeks ended June 30, 2020, the energy drink category increased 6.8% in dollars. Sales of the company's energy drink brands increased 6.9% versus a year ago. The market share of the company's energy drink brands was 37.8%, the same as in the previous year. Monster's market share increased 0.2 of a point to 34.9%. NOS's sales increased 7.6%, and its market share remained the same at 2.1%. Full Throttle sales decreased 21.2%, and its market share decreased 0.3 of a point to 2.7%. Red Bull sales increased 11.1%, and its market share increased 1.5 points to 38.1%. Rockstar sales decreased 5.2%, and its market share decreased 2.1 points to 16%. Sales in Mexico for all outlets combined in June 2020 declined 11.8%. Monster sales decreased 18.9%. Our market share in value decreased 2.4 points to 27.8% against the comparable period the previous year. Burn has been discontinued in Mexico; Red Bull sales decreased 30.3%, and its market share decreased by 1.8 points to 6.8%. The Vive 100 sales decreased 32.6%, and its market share decreased by 7 points to 22.5%. Volts sales increased 0.2 of a percent, and its market share increased 2.2 share points to 18.8%. Coca-Cola energy's market share was 0.9 of a percentage point. Predator, which was launched in March 2020, achieved a market share of 1.4%. 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 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, subjectivities could have a significant impact on the monthly Nielsen statistics for Mexico. According to Nielsen for the month of June 2020, compared to June 2019, Monster's retail market share in value increased in Argentina from 25.4% to 39.4%; in Brazil from 21.1% to 30.4%; and in Chile from 37.4% to 44.9%. Since the launch of Monster Energy in Argentina in the first quarter of 2018, Monster is now the leading energy brand in volume in Argentina. 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 and are reported on varying dates within the month referred to from country to country. According to Nielsen in the 13-week period ended mid-June 2020, Monster's retail market share in value as compared to the same period the previous year grew from 22.1% to 25.6% in Denmark; grew from 20.8% to 24.8% in Great Britain; grew from 24.2% to 28.4% in Norway; grew from 21.9% to 24.9% in the Republic of Ireland; grew from 32.2% to 34.8% in Spain; and grew from 12.8% to 13.8% in Sweden, but declined from 13.1% to 12.5% in Belgium; from 27% to 25.9% in France; and from 7.4% to 6.3% in the Netherlands. According to Nielsen in the 13-week period to the end of May 2020, Monster's retail market share in value as compared to the same period the previous year grew from 34.7% to 35.2% in Poland, from 13.7% to 17.7% in South Africa, while it remained flat at 13.3% in the Czech Republic, and declined from 16% to 15.1% in Germany and from 18.5% to 16.8% in Italy. 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 IRI in Australia, Monster's market share in value for the four weeks ended July 5, 2020, increased from 9.4% to 11.9%. As compared to the same period the previous year, Mother's market share in value decreased from 13.9% to 13.3% during the same period. Market share of the company's brands in Australia for the four weeks ended July 5, 2020, increased from 23.3% to 25.2%. According to IRI in New Zealand, Monster's market share in value for the four weeks ended June 21, 2020, increased from 7.8% to 10.4%. As compared to the same period the previous year, Live+ market share in value decreased from 8.3% to 7.1%. And Mother's market share in value decreased from 6.5% to 6.4%. Market share of the company's brands in New Zealand for the four weeks ended June 21, 2020, increased from 22.6% to 23.8%. According to Nielsen in South Korea, Monster's market share in value in all outlets combined for the month ending June 2020 grew from 39.4% to 53.3% 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 month of June 2020 declined from 52.5% to 51.1% as compared to the same period in the previous year. Net sales to customers outside the U.S. were $328.3 million, 30% of total net sales in the 2020 second quarter, compared to $343.3 million or 31.1% of total net sales in the corresponding quarter in 2019. The decrease was largely due to the reduction of sales in EMEA during the quarter. Foreign currency exchange rates had the effect of decreasing net sales in U.S. dollars by approximately $18.2 million in the 2020 second 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 second quarter decreased 20.4% in dollars and decreased 15.9% in local currencies over the same period in 2019. Gross profit in this region as a percentage of net sales for the quarter was 38.1% compared to 39.5% in the same quarter in 2019. Gross profit percentage for the region was adversely impacted by foreign exchange rates, country, and product mix. In local currencies, gross profit as a percentage of net sales for the quarter was 39.4%. The COVID-19 pandemic's adverse impact on net sales was more pronounced in EMEA for the three months ended June 30, 2020, particularly in the strategic brands segment. Net sales in EMEA will also be adversely impacted by the reduction in inventories by certain of our bottlers and distributors beyond the COVID-19 pandemic, which resulted in the temporary delisting of some Coca-Cola and Monster products, which had an adverse impact on net sales in EMEA for the three months ended June 30, 2020. We are pleased that in the second quarter, Monster gained market share in Denmark, Great Britain, Greece, Norway, Poland, Republic of Ireland, South Africa, Spain and Sweden. In Asia Pacific, net sales in the second quarter increased 30.4% in dollars and 30.9% in local currencies over the same period in 2019. Gross profit in this region as a percentage of net sales was 43.3% versus 43.6% over the same period in 2019. In Japan, net sales in the quarter increased 41.8% in dollars and 37.5% in local currency. In South Korea, net sales increased 46.9% in dollars and 55.7% in local currency as compared to the same quarter in 2019. In China, net sales increased 66.9% in dollars in the quarter and 74.4% in local currency as compared to the same quarter in 2019. In Oceana, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea, and Guam, net sales decreased 32.3% in dollars and 24.9% in local currencies; sales of the Monster brand decreased 25.6% in dollars and 17.9% in local currency as compared to the same quarter in 2019, while the strategic brands in this region decreased at a faster rate. Net sales in this region were adversely affected as a result of our bottlers and distributors reducing their inventory levels in Latin America, which includes Mexico and the Caribbean. Net sales in the second quarter decreased 9.7% in dollars and increased 10.8% in local currencies. Gross profit of the same period in 2019, gross profit in this region as a percentage of net sales was 41.2% compared to 43.3% of the same period in 2019. In Brazil, net sales in the quarter decreased by 1% in dollars but increased 31.2% in local currency. Net sales in Chile increased 30.8% in dollars and 62.3% in local currency in the quarter. I will now briefly discuss our litigation with Vital Pharmaceuticals, Inc., the maker of Bang energy drinks. Several proceedings are currently ongoing with VPX, including claims for false advertising and trademark and trade dress infringement, brought by the company against VPX and by VPX against the company. The company's lawsuit for unfair competition, false advertising, and misappropriation of trade secrets is scheduled for trial in April 2021. VPX's lawsuit against the company, which VPX claims trademark infringement of the newly acquired Reign trademark and the company counter-claimed for cancellation of their trademark. The district court judge ruled in the company's favor in respect of the trademark infringement claims, finding that the company had superior rights to the Reign trademark in connection with energy drinks and cancelling the Reign trademark that VPX had purchased. VPX remains barred from selling Reign branded energy drinks; VPX's trade dress infringement claims in these proceedings are scheduled for trial at the end of August 2020. As this litigation and other pending proceedings with VPX are ongoing, we will not be answering any questions on this matter on today's call. In the United States, our bottlers focused on relaunching our first-quarter product innovation, which launch plans were disrupted due to the COVID-19 pandemic. In Canada, we did not launch any new items within the second quarter of 2020 and continue to grow our distribution of all first-quarter 2020 innovations. In Honduras, we launched Fury and Gold Strike in the affordable energy category during April 2020 and in El Salvador in early July 2020. Initial results have been positive. In June 2020, we launched Ultra Paradise in Argentina and Puerto Rico. Additionally, in June 2020, we launched Monster Mango Loco in Guatemala, El Salvador, and Honduras. In New Zealand, we launched Monster Energy Mule and Mother Tropical Blast during April 2020. Despite a lockdown in the majority of EMEA markets for most of the second quarter, we have still been able to introduce new products across EMEA. Juice Monster Pacific Punch was launched in Spain in June 2020 and is now available in 10 markets across EMEA, and we plan to launch Juice Monster Pacific Punch in an additional two markets in 2020. Juice Monster Pipeline Punch was launched in Romania in May 2020 and is now available in 21 markets across EMEA, and we plan to launch Juice Monster Pipeline Punch in an additional eight markets in 2020. Juice Monster Mango Loco was launched in Switzerland in June 2020 and is now available in 35 markets across EMEA. We plan to launch Juice Monster Mango Loco in an additional 10 markets in 2020. Monster Ultra Paradise was launched in Austria, the Baltics, and Hungary in May 2020, in Denmark and Spain in June 2020, in Poland in July 2020, and is now available in 14 EMEA markets, and we plan to launch Monster Ultra Paradise in an additional seven markets in 2020. Espresso Monster Milk and Vanilla variants are now available in 20 markets in EMEA, and we plan to launch Espresso Monster Milk and Vanilla variants in an additional two markets in 2020. Monster Hydra Sport was launched in Spain in May 2020, and we plan to launch Monster Hydra Sport in an additional market in 2020. We are also pleased with the performance of Reign and we plan to launch Reign in an additional six markets in 2020. We launched Monster Mule in Poland in July 2020 and plan to launch Monster Mule in an additional nine markets in 2020. We launched Predator, a primary affordable energy brand, in Nigeria in June 2020. Additionally, we are planning to launch Predator in Ethiopia in the third quarter of 2020. We are also planning to launch Predator in an additional six EMEA markets later in 2020, including Bosnia, Croatia, Ghana, Romania, Russia, and Slovenia. Currently, innovation launches for all EMEA markets for the third and fourth quarters remain on track, despite the ongoing COVID-19 pandemic. However, these launches will continue to be subject to developments in relation to the COVID-19 pandemic in individual countries. In Japan, we continued with the strong rollout of Pipeline Punch to 90% of the country, and in June launched Ultra Paradise with solid consumer acceptance. With strong innovation and continued growth of our core, we have further bolstered our number one country share position in value. In South Korea, Monster Energy retained its number one share position in value and in June began shipments for the summer 2020 launch of Ultra Paradise. In April 2020, we began distribution of our new Monster Energy Dragon tea in China, which is non-carbonated. Early feedback from consumers has been positive. During this quarter, we began shipments for our summer on-pack promotion and we expect to further build momentum with consumers in the retail trade. India remains mostly in national lockdown due to the COVID-19 pandemic, which took effect on March 25, 2020. We have prepared a strong summer on-pack promotion, which will help reestablish momentum as the market aims to reopen in the third quarter of 2020. During the 2020 second quarter, we purchased approximately 0.3 million shares of our common stock at an average purchase price of $52.88 per share, for a total amount of $15.6 million excluding broker commissions. As of August 4, 2020, approximately $441.5 million remained available for repurchase under the previously authorized repurchase program. We estimate July 2020 gross sales to be approximately 15.8% higher than in July 2019. On a foreign currency adjusted basis, July 2020 gross sales would have been approximately 17.1% higher than comparable July 2019 gross sales. July 2020 had the same number of selling days as July 2019. In this regard, we caution 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, this affects the dates on which we invoice such bottlers, as well as inventory levels maintained by our distribution partners, which they also unilaterally manage for their own business reasons. We reiterate that sales over a short period such as a single month should not necessarily be regarded as indicative of results for a full quarter or any future period. In addition, the COVID-19 pandemic remains a serious concern. If the COVID-19 pandemic and related unfavorable economic conditions continue to intensify, the negative impact on our sales, including our new product innovation launches, could be prolonged and may become more severe. 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. Two, currently, the company's flavor manufacturing facility, 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’re encouraged by the prospects for our Reign Total Body Fuel high performance energy drinks and Reign Inferno thermogenic fuel high performance energy drinks. We are planning for future launches of our Reign Total Body Fuel high performance energy drinks in certain countries outside of the U.S. Five, we are pleased with the rollout of Predator and Fury and our affordable energy drink portfolio internationally. We are proceeding with plans for future launches of our affordable energy brands outside of the United States. Six, despite the obstacles of the COVID-19 pandemic, we are pleased with our performance for the quarter and for the first half of the year. I'd like to open the floor to questions about the quarter. Thank you.

Congrats on the results. So I remember you spoke to potentially entering the alcoholic segment, the last time we were there at your headquarters in June last year. And since then, we have heard you're planning to launch a Hard Seltzer. So I understand that you have postponed some of these launches. So the question is, if you are indeed looking to launch a Hard Seltzer and then if so, when are you hoping to be able to share more news with us? Thank you.

Andrea, I think the issue is there's been a lot of speculation about what we are going to do both in the non-alcoholic and alcoholic spaces. We are looking at a number of alternatives and opportunities. And we may well do something in both of those spaces and/or one or the other. But we've not made any final decisions. We are actually analyzing it, we are looking at developing some products in both non-alcoholic and alcoholic spaces, and we are testing products. But we haven't yet decided on which of those we're going to go into. We have, for example, I know that some of the analysts have picked up that we register different names of products, some of those names may be appropriate for one or more of these lines or may not be. We are looking, obviously, as part of our planning; we are looking at the availability of names that we think may be appropriate for lines or line extensions outside of the energy category. In some cases, some of those names may well be used by us for an alternative brand within the energy space. I mean, it's a very broad spectrum that we are currently investigating. We've got the right to do quite a lot. We are looking at how do we do it? What's best, what do we think will have the most impact for the company in the short term, both in the U.S. and also internationally? So, there's been a lot of speculation, and we are definitely looking at it and evaluating it, but we've not made any decision. So at this point, it is premature for us to give any indication to the market of what our plans are because we have not firmed up our plans internally ourselves yet. There's been no definitive decision on when to launch, what to launch, and under what brand names. Obviously, we're getting there. We're quite close, but we haven't gotten to that position yet. So I really can't give you an update other than to tell you that we are seriously looking at all those options. As I said, there's a lot of speculation about what we're going to do because of the names and the trademarks we've applied to register under different clauses, but that is something that we are currently evaluating.

So Andrea, the only thing I would add to that is that we have a very strong innovation pipeline with our existing business. So whatever we do, in addition to that, please rest assured that the company has a very interesting and very strong innovation pipeline.

I have a couple of questions. First, regarding innovation, I'm interested in how you're planning to communicate new product ideas, especially given the recent disruptions and cancellations. How do you foresee that process working as we move into the fall and spring of next year? The main question I have is about CBD. What is the company's current position on that? Are you still uncertain and therefore hesitant to enter that market, or do you feel more confident now? Any insights you could provide would be appreciated.

Okay. So on the first question, we have a sales organization who in the U.S. call on every single major customer and that's how we go about presenting new product ideas on a one-to-one basis. So rest assured that innovation can be handled within the framework of our existing organization. Outside, in particular, in Europe and in other parts of the world, the Coca-Cola bottlers present to customers with our attendance, and they're very capable, and they do display new products and new product innovations. On your second point, the environment is actually not clear as to where we are and where we should be with CBD. So at this time, we have products in development, but it's something that we're looking at from the sidelines, and if things clear up and the opportunities present themselves, that's something that we definitely will look at going forward, but not right now.

Just wanted to ask you on the July sales increase, Rodney. You mentioned that bottlers had taken down inventory pretty low in the second quarter. Just how should we look at that July increase, I guess from an organic demand improvement standpoint versus bottlers maybe refilling some of the pipeline after getting inventory down to low? Thanks.

I don't think we have a clear understanding yet of when the bottlers will restore their inventory levels to what they were before COVID. If they do, it's clear that they are trying to manage their inventory as tightly as possible, and by reducing their stock, they might adopt a more aggressive approach. We hope they will increase their inventory levels to give themselves more flexibility in responding to market changes due to lead time considerations. I don't believe we've seen significant restocking in July. It seems that people are still being cautious and focused on managing their inventories, sometimes even reducing attention on some of the smaller SKUs, which may have been affected during this time. However, we anticipate that things will begin to normalize. Overall, I don't think there's been a notable increase in inventory levels in July; I think it's been relatively normal trading for us.

Yes, I would like to add that depletions have been tracking positively through July. Sales from bottlers to retailers are looking good, and while bottlers may return to previous inventory levels at some point, it's important to note that some bottlers are facing cash challenges. Larger bottlers rely on sales forecasts made from their own estimates and computer forecasting models, which guide their inventory orders. We previously discussed that April was a challenging month, and we emphasized the need for patience. Looking at this quarter, July has shown strong performance, in line with the sequential improvements we saw through May. After the dip in April, we saw improvements in May and June, and this positive trend has continued into July as well.

I guess I'm curious on the U.S. I don't know how to diplomatically ask the question but maybe, if you could touch on the engagement of the Coke system both in terms of selling your legacy product and the new product innovation including the shelf space for those. Obviously, it was a little bit of a slower start. And we've seen Red Bull do very well. So maybe just touch on kind of where we are with re-engagement both in legacy as well as innovation and how you think that should play out if things get back from a blocking and tackling standpoint, if the share trends potentially improve and you kind of how you think about that?

So Mark, we are emerging from a century-long pandemic, and all the bottlers have been operating. However, in some cases, they have primarily focused on distributing the faster selling items, as Rodney mentioned earlier. Consequently, there hasn't been much emphasis on innovation or slower-moving SKUs. We've noticed that some bottlers have also been impacted by COVID-related employee shortages. Our team, which was out in the field until last month, is now back with the necessary safety protocols in place. They are collaborating with the bottlers and retailers to reinstate the innovation that had previously stalled. Regarding Red Bull, we've been observing its growth closely. You may have seen the latest numbers we've discussed today. In fact, our performance on platforms like Amazon shows we are growing significantly faster than Red Bull. They have their own sales team and an effective distribution network. They've executed well in the market and introduced a popular innovation called watermelon. In terms of distribution, they likely have us outpaced concerning displays and points of purchase on store shelves. Our goal is to aggressively reclaim that ground with our field team back in stores. This summarizes our position and the competitive landscape with Red Bull.

Perhaps I could just, again also just provide a little bit of color too, because I think it's obviously, you're focused on it and some people have been seeing the numbers. I think it comes down to during this period of time; Red Bull really managed their own distribution system. And they have dedicated and very focused personnel. I think when most of the big companies took a step back, particularly with their personnel in the field and their core points and being active in the market in the smaller markets, convenience and gas, et cetera and independent. I think all the bigger companies took their foot off the pedal and looked at protecting their employees and trying to handle the situation. I believe that Red Bull literally was probably the only company that didn't do that and actually had their teams in the field merchandising and promoting. And when you combine that focus together with the fact that they did have a flavor that resonated and it was really well executed the introduction of it, it has really given them that boost. That's really what we think has been the real difference. But those are things that, with a bigger company, like the Coke system, where I think they just stepped back, as most other consumer product companies did. I think that will start reversing and that they are getting back into the field. Now we're getting out into the field. We also pulled some of our team out, as Hilton said. We've got to really understand that, and that's what I think has been one of the big reasons. We've got some innovation lined up for the second half of this year, including something in response to the watermelon product, and we will be launching that within the next few weeks.

So last time we spoke, I mean, you mentioned that because of COVID-19, I mean retailers and specifically, I mean the convenience store retailers then reset for most part. There was a clear focus for you; I mean to make sure that you were able to implement your new innovation. So just curious, I mean, in all your retailers and the convenience store retailers, I mean, are they all reset them in their shelves? And did you gain shelf space for the energy category or the performance energy, and/or either I mean any additional retailers that need to convert to a larger shelf? I know it's late in the summer but because of COVID-19, I mean, there was some delays. So want to have you taken these?

A lot of the retailers are merchandised by the bottlers. So even though the space was allocated, they may not have gotten to merchandise the product at the start of the resets. So where we're at now, as I mentioned, our guys are back in the field. And they're working with the bottlers to ensure that all of our innovation gets the space that has been contractually allocated, and just getting away from where we were in the early part of the pandemic where it was hands-off. If you look at how the convenience channel has grown and is continuing to grow, I think it's a far cry from where we were in March and April when all of this started.

But that being said, I think that it really is a work in progress. I don't think we've got to a point where we could say that everything that was planned is back in line and everything was achieved. I think it's because it's out of cycle and because of the difficulties just still being faced generally. It is a slower effort; it's being done slowly, but it is improving all the time. But I think it's still not where we would like to see it. But hopefully, we will continue to improve as we go through the next few months.

Yes. The sets are mostly complete, but our field teams are currently focused on the actual distribution of the products to the shelves.

Thank you. 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. And in particular, expand distribution of our products through the Coca-Cola bottler 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.