Monster Beverage Corp. (NASDAQ: MNST) Q4 2019 Earnings Call Transcript

Monster Beverage Corp. (MNST) Q4 2019 earnings call dated Feb. 27, 2020

Corporate Participants:

Rodney C. Sacks — Chairman and Chief Executive Officer

Hilton H. Schlosber — Vice Chairman, President and Chief Financial Officer

Analysts:

Dara Mohsenian — Morgan Stanley — Analyst

Andrea Teixeira — JPMorgan — Analyst 

Steve Powers — Deutsche Bank — Analyst

Kevin Grundy — Jefferies — Analyst

Mark Astrachan — Stifel — Analyst

Presentation:

Operator

Good afternoon and welcome to the Monster Beverage Corporation Fourth Quarter and Full Year 2019 Conference Call. [Operator Instructions]

I would now like to turn the conference over to Mr. Rodney Sacks Chairman and CEO; and Mr. Hilton Schlosberg Vice President Vice Chairman President and CFO. Please go ahead.

Rodney C. Sacks — Chairman and Chief Executive Officer

Hi. Thank you. Good afternoon ladies and gentlemen. Thanks for attending this call. I’m Rodney Sacks. Hilton Schlosberg Vice Chairman and President is with me as is Tom Kelly our Executive Vice President of Finance. 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. 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 2019 and our most recent quarterly report on Form 10-Q filed on November 7 2019 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 our 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 February 27 2020. A copy of this information is also available on our website at monsterbevcorp.com in the Financial Information section. We are planning to leave some more time for questions on today’s call and on subsequent calls.

With that in mind we will not repeat many of the numbers covered in our earnings release. Consumer beverage preferences and tastes continue to evolve at an increasing pace and we are endeavoring to address them through our ongoing innovation of new products. In the fourth quarter of 2019 net sales were $1.02 billion up 10.1% from $924.2 million in the fourth quarter of 2018. Adjusting the 2018 fourth quarter for advanced purchases made following our November 1 2018 price increase in the U.S. as well as foreign currency movements net sales for the 2019 fourth quarter would have been up 7.5%. Diluted earnings per share for the 2019 fourth quarter increased 9.7% to $0.47 from $0.43 in the fourth quarter of 2018. According to the Nielsen reports for the 13 weeks through January 25 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% versus the same period a year ago.

Sales of the company’s energy brands including Reign grew 3.7% in the 13-week period. Sales of Monster were down 3.9%. Sales of NOS decreased 4.3% and sales of Full Throttle decreased 13%. Sales of Red Bull increased 5.5%. Sales of Rockstar decreased by 7.4%. Sales of five-Hour decreased 5.5% and sales of Amp decreased 37.2%. As with no comparable sales of our Reign product last year we’ve not referenced Reign. According to Nielsen for the four weeks ended January 25 2020 sales in the convenience and gas channel including energy shots in dollars increased 5.7% over the same period the previous year. Sales of the company’s energy brands which include Reign grew 4.1% in the four-week period in the convenience and gas channel. Sales of Monster decreased by 4.2% over the same period the previous year. NOS was down 4.9% and Full Throttle was down 13.3%. Sales of Red Bull were up 5.9%. Rockstar was down 8.6% five-Hour was down 5.8% and Amp was down 31%.

According to Nielsen for the four weeks ended January 25 2020 the company’s market share of the energy drink category in the convenience and gas channel including energy shots in dollars decreased by 0.6 of a point over the same period the previous year to 40.8%. Monster share decreased 3.4 share points to 33.2%. Range share was 3.4%. NOS’ share declined 0.4 of a share point to 3.5%. And Full Throttle share declined 0.2 points to 0.8%. Red Bull increased 0.1 point to 33.4%. Rockstar share was down 0.9 points to 5.5%. five-Hour share was lower by 0.7 points at 5.6% and Amp share decreased by two points to 0.4%. VPX Bang share increased two points to 7.6%. According to Nielsen for the four weeks ended January 25 2020 sales of coffee plus energy drinks which includes Cafe Monster and Espresso Monster in dollars in the convenience and gas channel increased 6.3% over the same period the previous year. Sales of our Java Monster alone were 5.5% higher than in the same period the previous year. Sales of our coffee plus energy drinks were 2.7% lower while sales of Starbucks energy were 15.2% higher.

Our company’s share of the coffee plus energy category which includes Java Monster Cafe Monster Espresso Monster Starbucks Doubleshot and Tripleshot Rockstar Roasted and Bang Keto Coffee for the four weeks ended January 25 2020 was 52.6% down 4.9 points. Java Monster share on its own for the four weeks ended January 25 2020 was 49.2% down 0.4 of a point while Starbucks Energy share was 45% up 3.5 points. According to Nielsen in the convenience and gas channel in Canada for the 12 weeks ended January 4 2020 the energy drink category increased 5% in dollars. Sales of the company’s energy drink brands were flat versus a year ago. The market share of the company’s energy drink brands was 37.1% down 2.2 points. Monster’s market share decreased 1.7 points to 33.2%. NOS’ sales decreased 2% and its market share decreased 0.2 share points to 2.7%. Full Throttle sales decreased 10% and its market share decreased by three points to 1.2%. Red Bull sales increased 7% and its market share increased 0.4 points to 36.2%.

Rockstar sales increased 6% and its market share increased 0.2 points to 16%. According to Nielsen for all outlets combined in Mexico the energy drink category grew 20.9% for the month of December 2019. Monster sales increased 11.9%. Our market share in value decreased 2.3 points to 29.3% against the comparable period the previous year. Sales of Burn were down 77.5%. Burn’s market share decreased 1.2 points to 0.3%. Red Bull sales decreased 8.1% and its market share decreased by 2.5 points to 7.8%. Vive 100 sales decreased 5.3% and its market share decreased by 6.7 points to 24%. Vault’s sales increased 47.2% and its market share increased three share points to 16.8% while Boost sales decreased 5.5% and its market share decreased 2.2 points to 8%. Amper an affordable energy brand launched in March 2019 increased its market share to 9.4% in the month of December 2019. Coca-Cola Energy market share was 3.5% in the month of December 2019.

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 in turn 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 such activities could have a significant impact on the monthly Nielsen statistics for Mexico. According to Nielsen for the month of December 2019 compared to December 2018 Monster’s retail market share in value increased in Argentina from 16.9% to 33.5% in Brazil from 19.6% to 27.4% and in Chile from 34.9% to 39.8%. 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 dates within the month referred to from country to country.

According to Nielsen in the 13-week period ended January 25 2020 Monster’s retail market share in value as compared to the same period the previous year grew from 12.7% to 12.8% in Belgium from 24.8% to 28.2% in France from 16.4% to 17% in Germany from 20.3% to 21.9% in Great Britain from 17.8% to 24.9% in Norway from 31.7% to 34.5% in Spain but declined from 7.3% to 6.1% in the Netherlands and from 13.8% to 12.8% in Sweden. According to Nielsen in the 13-week period ended in December 2019 Monster’s retail market share in value as compared to the same period the previous year grew from 13.3% to 13.6% in the Czech Republic from 33.6% to 34.7% in Greece from 18.8% to 23% in the Republic of Ireland from 18.1% to 20.6% in Italy and from 10.9% to 14.5% in Poland and from 15.8% to 17.4% in South Africa. According to IRI in Australia Monster’s market share in value for the four weeks ended December 29 2019 increased from 7.9 7.5% to 9.3% as compared to the same period the previous year. Mother’s market share in value decreased from 13.5% to 12.5% during the same period.

According to IRI in New Zealand Monster’s market share in value for the four weeks ended December 29 2019 increased from 5.6% to 6.3% as compared to the same period the previous year. Live+ market share in value decreased from 8.5% to 8.2% and Mother’s market share in value increased from 7.8% to 9.6%. According to Nielsen in South Korea Monster’s market share in value in all outlets combined for the quarter ended December 2019 grew from 37.6% to 50.6% as compared to the same period in the previous year. Monster is now the leading energy brand by market share in value in all outlets in South Korea. According to INTAGE in Japan Monster’s market share in value in the convenience store channel for the 13-week period ended December 30 2019 grew from 46.7% to 54.2% 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 or other trading factors during those periods.

Net sales to customers outside the U.S. were $319.6 million 31.4% of total net sales in the 2019 fourth quarter compared with $274.3 million or 29.7% of total net sales in the corresponding quarter in 2018. Foreign currency exchange rates had the effect of decreasing net sales in U.S. dollars by approximately $9.1 million. Included in reported geographic sales are our sales to the company’s military customers which are delivered in the U.S. and transshipped to the military and their customers overseas. In EMEA supply chain and production issues have largely been resolved. In EMEA net sales in the fourth quarter increased 8.6% in dollars and increased 12.8% in local currencies over the same period in 2018. Gross profit in this region as a percentage of net sales for the quarter was 38.7% compared to 42.1% in the same quarter in 2018. Gross profit percentage for the region was impacted by country and product mix. We’re also pleased that Monster continues to perform well and gained market share in Belgium Czech Republic France Germany Great Britain Greece Italy Norway Poland the Republic of Ireland South Africa and Spain.

In Asia Pacific net sales in the fourth quarter increased 49.9% in dollars and 47.9% in local currencies over the same period in 2018. Gross profit in this region as a percentage of net sales was 40.2% versus 46.1% over the same period in 2018 as a result of country and product mix. In Japan net sales in the quarter increased 84.2% in dollars and 76.8% in local currency. In South Korea net sales increased 51.5% in dollars and 58.5% in local currency as compared to the same quarter in 2018. In Oceania which includes Australia New Zealand Tahiti French Polynesia New Caledonia Papua New Guinea and Guam net sales decreased 4.1% in dollars and increased 0.8% in local currencies although I’d like to point out that sales of the Monster brand increased 18.4% in dollars and 24.5% in local currency as compared to the same quarter in 2018. In Latin America including Mexico and the Caribbean net sales in the fourth quarter increased 6.9% in dollars and 16.2% in local currencies over the same period in 2018. Gross profit in this region as a percentage of net sales was 42.6% compared to 44.7% over the same period in 2018. In Brazil net sales in the quarter increased by 35.8% in dollars and increased 44% in local currency. Net sales in Chile decreased 14.8% in dollars and 17.6 sorry 7.6% in local currency in the quarter.

In January 2020 Monster Energy was launched by the Coca-Cola Bottler in Israel. We continued the rollout of Monster across India and began the launch of Mango Loco in December. We also continued Ultra White’s expansion from September’s launch to further provide a broad portfolio with strong taste experiences for Indian consumers. The Monster range continued to build significant active distribution increases across China in the 2019 fourth quarter versus a year ago but the situation in China is currently challenging. I wanted to provide an update regarding the recent coronavirus or COVID-19 outbreak. First of all our number one priority is the safety of our employees in China. We are thinking of everyone who has been affected by coronavirus and we continue to monitor the situation closely. In addition to having employees in China we and our suppliers currently globally source certain ingredients from third-party manufacturers in Wuhan and other parts of China. We also manufacture finished goods through third-party bottlers and co-packers in China.

The coronavirus outbreak could adversely affect our business and cause disruptions internationally due to the closure or suspension of activities at such third-party manufacturers as well as within China at our co-packing facilities and our China office. Ingredient sourcing delays could also interfere with and/or delay production of certain of our products internationally. In addition the outbreak together within the accompanying special government measures could adversely affect the growth of our business in China and affect demand for our products. However it’s too early to determine what impact it will have on our global supply chain and our operations. As I’ve said before our first priority is employee safety and we are continuing to monitor the situation closely. I will now briefly discuss our litigation with Vital Pharmaceuticals Inc. VPX the maker of Bang energy drinks. Monster filed a lawsuit against VPX in September 2018 for false advertising. VPX filed a trademark lawsuit in March 2019 against Monster in relation to our Reign Total Body Fuel high-performance energy drinks and another lawsuit suit in August 2019 against Monster alleging a host of legal challenges including many similar to the claims Monster alleged against VPX.

These proceedings are ongoing. In October 2019 the U.S. District Court denied VPX’s motion for a preliminary injunction against our Reign Total Body Fuel high-performance energy drinks in its trademark lawsuit. In its decision the court ruled that VPX failed to meet any of the elements of a preliminary injunction and failed to establish it is likely to succeed on the merits of its claims. In October 2019 VPX announced its intention to launch its own line of Reign-branded energy drinks in 16-ounce cans to be sold in convenience stores. Later that month we filed an expedited motion for a preliminary injunction asking the court to stop this product launch and prevent VPX from infringing Monster’s trademark rights in this way. In November 2019 VPX stipulated that I would refrain from launching such products until the district judge entered a final order on the preliminary injunction motion. In January 2020 the magistrate judge issued a reported recommendation that an injunction be granted in Monster’s favor. Motions for summary judgment have been filed by Monster in this proceeding and which are currently pending.

In the event that summary judgment is not granted the matter is scheduled for trial in May 2020. As this litigation and other pending proceedings with VPX are subjudicate we will not be answering any questions on this matter on today’s call. In October we launched Java Monster Farmer’s Oats which contains oatmeal and is our first plant-based coffee product being nondairy and vegan as well as two new flavors in the Reign brand family Strawberry Sublime and Mang-O-Matic to supplement our Orange Dreamsicle line extension which was launched at the end of the third quarter. During the fourth quarter of 2019 we also extended Ultra paradise Reign Melon Mania and Reign Razzle Berry in multipacks. In 2020 in the United States we will be discontinuing our Cafe Monster line of products and repositioning our Espresso Monster line. We launched Reign Inferno thermogenic fuel in Jalapeno Strawberry Red Dragon and True Blue at the end of January 2020. We launched Mango Loco in Argentina during the fourth quarter of 2019. In Puerto Rico in January 2020 we launched Reign Strawberry Sublime and Mang-O-Matic as well as Muscle Monster vanilla and chocolate.

We launched Monster Energy Monster Energy Absolutely Zero and Monster Energy Valentino Rossi in Israel in January 2020. Monster Pacific Punch was launched in Belgium Great Britain Northern Ireland the Republic of Ireland in January 2020 and is planned to be launched in to a further seven markets in 2020. Monster Pipeline Punch will be launched in the Baltics and Norway this year and will then be available in 17 markets across EMEA. Monster Ultra Paradise was launched in Great Britain Northern Ireland and the Republic of Ireland in January 2020 and in Sweden in February 2020 and is planned to be launched into a further 18 markets throughout 2020. Espresso Monster was launched in Belgium the Republic of Ireland and Poland in the fourth quarter of 2019 in both mocha and vanilla variants. We also launched both variants in the Baltics the Netherlands and Portugal in January 2020 and in Austria in February 2020. Espresso Monster mocha and vanilla variants are now available in 14 markets in EMEA. We are planning to roll out two flavors of Espresso Monster or into a further nine markets throughout 2020.

Additionally we have launched Espresso Monster Salted Caramel in Germany and Great Britain in December 2019. We’re planning to roll out our Salted Caramel Espresso variant in a further five EMEA markets throughout 2020. Reign was launched in Great Britain Northern Ireland and the Republic of Ireland in the fourth quarter of 2019 and we are planning to launch Reign in Germany by the end of the first quarter of 2020. Additionally we are planning to launch into a further seven markets throughout 2020. Monster Hydro Sport was launched in Germany Great Britain Northern Ireland and the Republic of Ireland in the fourth quarter of 2019 and in France in January 2020. We are planning to launch Hydro Sport in Norway and Sweden by the end of the first quarter of 2020. We launched Predator our affordable energy brand in Kenya and Uganda in the fourth quarter of 2019. Additionally we launched Predator in Poland in January 2020 and are planning to launch Predator in Afghanistan Czech Republic Ghana and Hungary in the first quarter of 2020.

We’re also planning to launch Predator into a further 11 EMEA markets throughout 2020 Azerbaijan Belarus Bosnia Croatia Ethiopia Iraq Russia Slovenia Nigeria the Netherlands and the UAE. We launched Monster Mother Epic Swell in Australia during the fourth quarter of 2019 with a convenience customer before a national launch in January 2020. Monster Mill also launched in Australia in January 2020. In South Korea we further expanded Pipeline Punch to 90% of convenience stores with initial positive results. We launched Mango Loco in India during December and completed Ultra White’s rollout in India Vietnam and Malaysia during the 2019 fourth quarter. We are planning to launch a number of products in Asia Pacific over the upcoming months including a full country relaunch of Pipeline Punch in Japan in March 2020 and Ultra Paradise in South Korea and Japan later this year. We estimate January 2020 gross sales to be approximately 15.3% higher than in January 2019. On a foreign currency adjusted basis January 2020 gross sales would have been approximately 15.7% higher than comparable January 2019 gross sales.

January 2020 had the same number of selling days than in January 2019. 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 alter unilaterally for their own business reasons. We reiterate that sales over a short period 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’d like to summarize some recent positive points.

Retail sale statistics from many countries around the world demonstrate that the energy category is continuing to grow and that Monster is generally growing ahead of the category in line with earlier periods. New additions to the Monster family continue to add to the company’s sales. We are excited about the prospects for our brands and our new product launches this year as well as our innovation pipeline in 2020. 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 not only within the U.S. but also internationally. We are pleased with our growth and performance in our international markets. Net sales in the fourth quarter in EMEA increased 12.8% in local currency in Asia Pacific increased 47.9% in local currency and in Latin America and the Caribbean increased 16.2% in local currency. We reiterate the growth potential for us in China and India. We are proceeding with our plans for future launches of our affordable energy brands internationally. We are also proceeding with our plans for the launch of Reign Total Body Fuel high-performance energy drinks in certain countries outside of the U.S.A.

I would like to open the floor to questions about the quarter and the year.

Questions and Answers:

Operator

[Operator Instructions] And our first question comes from Dara Mohsenian of Morgan Stanley. Please go ahead.

Dara Mohsenian — Morgan Stanley — Analyst

Hey guys.

Rodney C. Sacks — Chairman and Chief Executive Officer

Hi Dara.

Dara Mohsenian — Morgan Stanley — Analyst

So gross margins returned to year-over-year expansion in the quarter after fairly significant compression generally in the last couple of years. So can you just discuss some of the key factors that drove that sequential year-over-year improvement in Q4? And if you think those factors are more sustainable as we look out to 2020? And then just on the U.S. front can you discuss your shelf space outlook particularly with Coke Energy launch? And if you think you’ve seen any market share impact from the Coke Energy launch so far?

Rodney C. Sacks — Chairman and Chief Executive Officer

So maybe I can address the gross profit issue that you referred to. So if you look at worldwide what the positive factors worldwide well obviously the price increase in the U.S. and Canada and then product mix particularly with Reign which is a better gross margin than some of our juice and coffee products we will take benefits in because we were manufacturing Java Monster’s domestically and we weren’t importing from the U.S. and aluminum and other raw materials were a positive factor. So that was the positives. Against that we continue to have and you’ll see the gross margins that we referred to on this call. Against that you’ll continually see a change in the strategic brands versus the Monster products and the strategic brands because they are concentrates they have higher margins than the finished goods product. So that’s you’ll continue to see that as an offset.

You’ll continue to be see geographic mix as an issue because obviously in the U.S. our margins are strong. They are less strong in other parts of the world for all the reasons we’ve spoken to in the past and you’ll see the same trend with regard to product mix as we sell internationally as we sell more juice products and more coffee products they have a lower margin than the traditional Monster products and Reign products. So that’s in a nutshell where we are with margin.

Operator

Our next question comes from Andrea Teixeira of JPMorgan. Please go ahead.

Andrea Teixeira — JPMorgan — Analyst

Hi, thank you for taking my question. If you can comment on how the launches in particular Reign Inferno and how incrementally has been to your quarter-to-date update? And as a follow-up to your coronavirus commentary obviously safety is the most important at this point. But what is your view on the monitoring in California and overall changes in mobility? Have you seen any greater impact in convenience stores so far against the other channels?

Hilton H. Schlosber — Vice Chairman, President and Chief Financial Officer

Perhaps I’ll just take the Inferno has been really well received. The initial it’s really very new to tell but the sales have been good. The line extensions that we introduced into the Reign line including particular Orange Dreamsicle have also been well received. So the numbers are looking really positive for Orange Dreamsicle and the other new products as well as Reign. So anecdotally we’ve had some good response both to the concept of the thermogenic inferno products as well as to the actual flavors.

Rodney C. Sacks — Chairman and Chief Executive Officer

So Alex if you look at for example what’s happening in China we’re seeing obviously significant foot traffic decreasing in the bigger stores and the convenience stores have they have and are suffering but not to the same degree. So if you translate that back to California we haven’t seen any implications yet. But the whole idea of the situation in China is that they limit the number of shoppers in particular stores. So that’s why you’ll see reduced foot traffic in the bigger stores and more concentrated foot traffic in the convenience stores. But we haven’t seen any implications of that at this time. And then if I could just talk about the coronavirus for one second I’ve been asked and I haven’t really answered it because I was waiting to answer it on the call. And we don’t normally give numbers sales in various countries. But what I can tell you is that our sales in China in 2019 were less than 1% of our consolidated net sales for the company. So that puts a little bit in perspective because it was a little bit of nervousness but it’s less than 1%.

Operator

Our next question comes from Steve Powers of Deutsche Bank. Please go ahead.

Steve Powers — Deutsche Bank — Analyst

Yes. Hey, thanks. So Hilton last month in New York you acknowledged potential I think you think you framed to those issues of focus as Coke Bottlers were taking on Coke Energy and bring it to the market in the U.S. Just I guess some update there and how you’re feeling about those bottlers’ execution on your brands now that we’re a couple of months into the year. The January numbers imply that you’ve had some good uptake of that innovation but just any color around that and around the in-market execution that you’re seeing would be great. And then just to give voice to a question Dara had asked that I think we might have lost sight of. Just any additional color on the cooler and shelf set redesigns as they’re shaping up in the U.S. Are you getting the positioning that you thought you would? Is Coke Energy getting the position that you thought it would relative to yourselves and Red Bull and others? That too would be great. Thank you.

Rodney C. Sacks — Chairman and Chief Executive Officer

Okay. So the situation with our bottlers is always going to be a challenge now and we know that and we’re working with all of our bottlers and our field teams and our guys on the street are working very closely to ensure that we get the right type of representation on shelves. The anecdotal information that I’ve seen is that Coca-Cola Energy took off and unfortunately or fortunately there doesn’t seem to be a very strong amount of repeat purchases. However they will continue we believe to spend significant amounts of dollars on their products. And what we have to do is what I’ve probably said in New York and I’ll say it again we have to stay true to our lives and ensure that our products get the right representation in the stores and we don’t suffer the issues of shelf space that for example we experienced in Australia and we alluded to that in our presentation as well. But the news of today is that Coca-Cola Energy has been in its current form has been discontinued from the two major retailers in Australia.

Hilton H. Schlosber — Vice Chairman, President and Chief Financial Officer

If I could just perhaps just add a little bit on that on color. We’ve looked at some of the schematics that have come out for this year in the U.S. which is the obviously the place where Coke Energy has recently been launched. And if we look at the schematics for that plus obviously the performance energy products by and large we are getting increased shelf space both for our general products as well as our Reign products and Inferno including our innovation. And perhaps if we look back on 2019 some of the innovation that we introduced didn’t quite get the real estate and distribution levels that we had hoped for and we thought and that probably was affected us a little bit in the 2019 year. But if you look at the new products we have a really robust pipeline of new products. We have new Reign products Inferno. We’ve got Ultra Fiesta and Ultra Rosa in the Ultra line that are two really good products. We have NOS Turbo which is sort of a performance energy product to help boost the NOS line.

We’ve got our new Hydro Sport SKUs we have a new Java 300 line which has a higher caffeine content to compete with the Starbucks Tripleshot. So and we are looking at the SKUs and we’re getting a lot of good listings for the innovation. So hopefully execution of our bottlers and distribution partners this year on particularly on innovation will be better and we are getting extra innovation. In many cases we are getting the performance products onto an additional or separate shelf. In some cases it’s simply an expansion of and within the energy set.

Operator

Our next question comes from Kevin Grundy of Jefferies. Please go ahead.

Kevin Grundy — Jefferies — Analyst

Thanks. Good evening, guys.

Rodney C. Sacks — Chairman and Chief Executive Officer

Good evening.

Kevin Grundy — Jefferies — Analyst

Two very quick ones. First one for Hilton. The G&A in the quarter this one is a bit granular but I think that needs to be asked to sort of explain some of the profit margin pressure in the quarter. So gross margin better but G&A was quite a bit higher even excluding the intellectual property claim. Can you talk a little bit about some of the drivers there? And I know you don’t like to guide but should we expect sort of normalization on that line item looking out for the balance of the year? And then Hilton just on the performance segment understanding your comments already on the shelf space reset but can we get updated thoughts there? So Bang obviously made a lot of noise but the market share on that product is down about a point sequentially from where it was around the time of the launch of Reign. And when we look at the combined market share of those two brands being and & Reign it’s kind of hanging around this 11% sort of area. So your updated thoughts on the outlook for performance for the balance of ’20 and sort of beyond that. Are we sort of at a place where this 11% market share is kind of the right number? Or you think it goes beyond that? And if so why? So thanks for all that guys.

Hilton H. Schlosber — Vice Chairman, President and Chief Financial Officer

Okay. Wow that’s quite enough. That’s about 24 questions in one. If we talk a little bit about G&A I think we were satisfied with the G&A that was spent in the quarter. We were rolling off the NASCAR program and we have a big push into social media. And that was one of the big factors that we kind of were duplicating some of the social media costs in the quarter as we roll off the NASCAR program. So you won’t see that NASCAR program to the same degree in 2020. And then when I look at the rest of the G&A payroll is obviously increasing higher than ordinarily we would like but we’re running an international business today that’s growing and developing and you could see from the sales and the number of countries we’re in that we have to support the organization.

So quite apart from other small issues which or not small issues but other issues which you’ll pick up in the K I don’t want to go into them now. All I can tell you is that I think that apart from that litigation which obviously we were really unhappy about but it’s a fact of doing business in the U.S. and I always tell everyone I’m not a lawyer but I listen to these juries and it’s like it is what it is. But I’m satisfied that our G&A is under control. So sorry what the next question you asked was about the percentage of the performance energy products in the U.S.? And with that yeah…

Kevin Grundy — Jefferies — Analyst

And so that…

Hilton H. Schlosber — Vice Chairman, President and Chief Financial Officer

Yes sorry.

Kevin Grundy — Jefferies — Analyst

Yes I’m sorry not to. It was just basically broadly outlook for performance segment which of course has made a lot of noise over the past year or two. But Bang’s market share is now down about a point Reign is three, 3.5 it’s is in that range. And when you look at the combined market share of those two brands it’s been sort of bouncing around this 11% sort of area. So where does that leave us? What’s your outlook for performance energy? And what’s its role in the category going forward? Thank you guys.

Hilton H. Schlosber — Vice Chairman, President and Chief Financial Officer

Well I think Rodney put up his hand. So I’m happy for him to take over. All right. Just looking at that section I think the section that again we call it the performance section but really it’s part of the energy category and it’s really energy. It’s a question of whether we can carve out additional space with retailers to look at attracting increased buyers into the categories. And so I think that you are we are seeing some increased buyers coming into the category. And the set is sort of starting to settle down now. You’re getting space allocated to Bang space allocated to Reign including Inferno. We’re seeing a little bit of space being allocated to some of the competitors. You’ve got Rockstar with their sort of line and they’ve come out with a thermogenic line as well. And then you’ve got Adrenaline Shoc and then some of the smaller guys who are trying to get space but don’t have the distribution dips CELSIUS and C4. So but we think it is panning out. So it’s sort of starting to settle down. It may grow a little bit but we certainly don’t know.

We think that there is an appetite there is an increased consumer base through the different type of products that we’ve introduced now for example through Inferno. But we do we don’t give as I said guidance I think you know that. And we certainly don’t have a crystal ball but we think that there is some positive growth that will be achieved in energy generally. And I think that this subset of types of products within the energy category will grow a little bit. And we are launching for example our Hydro Super Sport and that again is sort of an advanced hydration but it does have BCAAs and higher caffeine. So a lot of products like that Turbo are starting to play into this area. Just really really just dividing up the attributes that consumers are looking for. Some consumers are looking for higher caffeine or BCAAs and we think that that will help the whole category grow as well as these specific products within the category.

Rodney C. Sacks — Chairman and Chief Executive Officer

Yes. I can just add to that Kevin. I’m a consumer of these products and I honestly believe the category is here to stay but where it will go I don’t think anybody knows. I think the main thing is that we have a number of SKUs that are addressing the category. We have some new product innovation that’s coming in terms of flavors and we’re pretty excited about that whole performance energy part of the energy category but it’s one part. There’s lots of other parts to it as well.

Kevin Grundy — Jefferies — Analyst

Yeah. Thanks.

Operator

Our next question comes from Mark Astrachan of Stifel. Please go ahead.

Mark Astrachan — Stifel — Analyst

Wow. That was a pronunciation. Hey, guys. How are you?

Rodney C. Sacks — Chairman and Chief Executive Officer

All right. And you?

Mark Astrachan — Stifel — Analyst

I am good, other than the stock market. So Hilton I wanted to go back to gross margin. I know I seem to ask this question a lot on calls but international in particular I guess how should we think about that going forward? I’m not asking guidance but I guess it seems like the pressure on the strategic brands is having an outsized impact on that number. So as you go to the back half of ’20 you start lapping these low double-digit declines that you had in 3Q and 4Q. You’re obviously launching Predator now. I guess that’s not you’re launching Predator now that’s a concentrate model so that should help. How should we be thinking about kind of those moving parts? Meaning as you lap easier comparisons as you get the benefit from Predator should that help stabilize international gross margins? Can they move a little bit higher if Predator works in these markets? Maybe just a bit more color there in terms of the puts and takes on thinking about international margins would be helpful.

Rodney C. Sacks — Chairman and Chief Executive Officer

Yes I think that as we look at the international business we’ve spoken about the way the pricing structure works in those markets that we try and price ourselves close to where Red Bull is and that we have different models with the bottlers internationally that kind of force us into a different gross margin computation than we have in the U.S. Having said that if I look for example at the EMEA margin which we discussed earlier on the call and the margins there fell from 42% to 38.7% but there were a number of factors that went into that result. Firstly and we’ve spoken about this before we have country mix we have brand mix we have product mix. So we have a very extensive product project now to reduce the juice content in a number of our juice products to enhance margin. We have other projects and I just came back from the U.K. about two weeks ago where the whole meeting was just focused on margin focused on freight in focused on co-packers focused on where best to allocate our resources to try and improve the gross margins. And we have this concentrate and Monster progression.

That of course will be resolved in part when we’re able to get Predator up and running. So there were a number of factors. And then you always have one-offs in the quarter. So in the fourth quarter we had about a one percentage hit to gross margin in EMEA through one-off costs. So I think we’re very well aware from this office of the need to improve margins and we are working on improving the margins within the constraints of the strategic brands having higher margins than the Monster brands and Reign brands. Obviously our objective is to sell more Monster and sell more Reign. And if that takes away from the strategic brands then so be it because this is the Monster Beverage Corporation. This is what our mission is to sell Monster and Reign products. So if the strategic brands will in fact over time they make a hit we’re doing the best we can to keep them at their current levels and improve on that. But it’s a mix and it will continue to be a mix. And I’m not sure there’s anything more I could say. I probably said too much.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Sacks and Mr. Schlosberg for any closing remarks.

Hilton H. Schlosber — Vice Chairman, President and Chief Financial Officer

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 to expand distribution of our products through the Coca-Cola Bottler system internationally. We are particularly excited about the new opportunities we have going forward with a portfolio of energy drinks throughout the world comprised of our Monster energy brand together with the strategic brands as well as Hydro Predator and Reign and the pretty extensive new innovation that we have recently introduced and are planning to continue to introduce throughout the rest of 2020. Thank you very much for your attendance.

Operator

[Operator Closing Remarks]