Monster Beverage Corporation (NASDAQ:MNST) Q2 2023 Earnings Call Transcript

Monster Beverage Corporation (NASDAQ:MNST) Q2 2023 Earnings Call Transcript August 3, 2023

Monster Beverage Corporation reports earnings inline with expectations. Reported EPS is $0.39 EPS, expectations were $0.39.

Operator: Good day, and welcome to the Monster Beverage Corporation Second Quarter 2023 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please note, today’s event is being recorded. I’d like to turn the conference over to Mr. Rodney Sacks and Hilton Schlosberg, Co-CEOs of Monster Beverage. Please go ahead.

Rodney Sacks: Thank you. Good afternoon, ladies and gentlemen. Thank you for attending this call. I’m Rodney Sacks. Hilton Schlosberg, our Vice Chairman and Co-Chief Executive Officer, is on the call; as is Tom Kelly, our Chief Financial Officer. Tom Kelly will now read our cautionary statement.

Tom Kelly: Before we begin, I would like to remind listeners that certain statements made during this call may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended, and are based on currently available information regarding the expectations of management with respect to revenues, profitability, future business, future events, financial performance and trends. Management cautions 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 March 1, 2023, and quarterly report on Form-Q including the sections contained therein entitled Risk Factors and Forward-Looking Statements, for a discussion on specific risk and uncertainties that may affect our performance. The company assumes no obligations to update any forward-looking statements, whether as a result of new information, future events or otherwise. I would now like to hand the call over to Rodney Sacks.

Rodney Sacks : Thanks Tom. The company achieved record second quarter net sales of $1.85 billion in the 2023 second quarter, 12.1% higher than net sales of $1.66 billion in the 2022 comparable period, and 14.4% higher on a foreign currency adjusted basis. Gross profit as a percentage of net sales for the 2023 second quarter was 52.5% compared with 47.1% in the comparative 2022 second quarter. The increase in gross profit as a percentage of net sales for the 2023 second quarter as compared to the 2022 second quarter was primarily the result of pricing actions, decreased operating costs and increased aluminum can costs. The increase was partially offset by lower gross margins in the alcohol segment and in which our sales had quite a nice bump as you seen from the release.

As expected, promotional allowances for the 2023 second quarter were marginally higher than the comparable 2022 second quarter, as well as 2023 first quarter. Operating expenses for the 2023 second quarter were $450.4 million, compared with $406.9 million in the 2022 second quarter, as a percentage of net sales operating expenses for the 2023 second quarter were 24.3% compared to 24.6% in the 2022 second quarter. Distribution expenses for the 2023 second quarter decreased to $82 million, or 4.4% of net sales compared to $87.9 million or 5.3% of net sales in the 2022 second quarter. The $5.8 million decrease in distribution expenses was primarily due to decreased freight out expenses of $11.8 million partially offset by higher warehouse expenses of $4.8 million as a result of higher raw materials and finished product inventories in the United States and EMEA.

The increase in other operating expenses was primarily due to increased payroll expenses. We are purchasing aluminum cans from local sources globally. We have returned to our orbit strategy of producing in closer proximity to our customers. The costs of repositioning finished products to distribution centers are included in freight-in costs. The company continues to address certain challenges in its supply chain as it navigates the current global supply chain environment. Operating income for the 2023 second quarter increased 14.4% to $523.8 from $373 million in the 2022 comparative quarter. The effective tax rate for the 2023 second quarter was 23.2% compared with 25.3% in the 2022 second quarter, the decrease in the effective tax rate was primarily attributable to an increase in deductible interest expense, a decrease in the effective state income tax rate, as well as an increase in net income in certain foreign jurisdictions, which have lower tax rates compared to the United States.

Net income increased 51.4% to $413.9 million, as compared to $273.4 million in the 2022 comparable quarter. Diluted earnings per share for the 2023 second quarter increased 52.8% to $0.39 from $0.26 in the second quarter of 2022. Due to continued cost pressures, the company implemented pricing actions in the United States in 2022, as well as in many other international markets in 2022, and in the first half of 2023. The company plans to implement additional price increases in a number of other international markets during the remainder of the 2023 year. In the United States, the company implemented an additional price increase on its 18.6 ounce and 24 ounce lines effective April 1, 2023. We will continue to review further opportunities for pricing actions in order to mitigate inflationary pressures.

According to the Nielsen reports, for the 13 weeks through July 22, 2023 for all outlets combined, namely convenience, grocery, drug, mass merchandisers, sales in dollars in the energy drink category, including Energy Shots increased by 13.6% versus the same period a year ago. Sales of the company’s energy brands, including Reign were up 12.2% in the 13 week period, sales of Monster were up 10.5%, Sales of Reign were up 43.7%, sales of NOS increased 11.2% and sales a Full Throttle increased 14.7%. Sale of Red Bull increased 10.2%. The company continues to have market leaders share leadership in the energy drink category for all outlets combined in the United States in both the 13 week and four week periods ended July 22, 2023. According to Nielsen for the four weeks ended July 22, 2023, sales in dollars in the energy drink category in the convenience and gas channel, including Energy Shots in dollars increased 13.7% over the same period, the previous year.

Sales of the company energy brands which include Reign increased 13.8% in the four week period in the convenience and gas channel, sales of Monster increased by 11.1%over the same period versus the previous year. Reign sales increased 54.9%, NOS was up 13.2%, Full Throttle was up 23.2% sales of Red Bull were up 8.8%. According to Nielsen for the four weeks ended July 22, 2023, the company’s market share of the energy drink category in the convenience and gas channel, including energy shots in dollars increase from 36% to 36.1%. Monster share decreased from 30.4% a year ago to 29.8%, Reign sharing increased to 0.8 of share point to 3.1%, NOS’s share remain at 2.5% and Full Throttle share remained at 0.7%. Red Bull’s share decreased 1.6 points from 36.3% a year ago to 34.7%, VPX Bang’s share decreased 4.2 points to 1.8%.

Five Hour share was lower by 0.7 point at 3.5%. Rockstar share was down 0.2 over point to 3.4%, Celsius’ share is 6.6%, C Four’s share is 3% and Ghosts share is 2.8%. Please note that VPX Bank was in bankruptcy during this period, and we will address our acquisition of Bang later in this call. According to Nielsen for the four weeks ended July 22 2023, sales in dollars in the coffee plus energy drink category, which includes our Java Monster line in the convenience and gas channel decreased 3% over the same period the previous year. Sales of Java Monster including Java Monster 300 and Java Monster Nitro Cold Brew was 3.3% higher in the same period versus the previous year. Sales of Starbucks Energy was 7% lower, Java Monster share of the coffee plus energy drink category for the four weeks ended July 22, 2023 was 54.1%, up 3.3 points, while Starbucks Energy’s share was 45.6% down two points.

According to Nielsen in all major channels in Canada for the 12 weeks ended June 17, 2023, the energy drink category increased 14.8% in dollars. Sales of the company’s energy drink brands increased 21.6% versus a year ago. The market share of the company’s energy drink brands was 42.4%, up 2.4 points, Monster sales increased 25.6% and its market sharing increased 3.3 points to 38.1% NOS’s sales decreased to 5.8% and its market share decreased 0.3 over point to 1.3%. Full Throttle sales decreased 43.2% and its market share decrease 0.3 over point to 0.3%. According to Nielsen for all outlets combined in Mexico, the energy drink category increased 23.7% for the month of June 2023. Monster sales increased 25.3%. Monster’s market sharing value increased 0.4 points to 28.8% against the comparable period the previous year.

Sales of Predator increased 75.3% and its market sharing increased 1.7 points to 5.6%. The Nielsen’s statistics from Mexico cover single months, which is a short period that may often be materially influenced positively and or negatively by sales in the OXA convenience chain, which dominates the market sales in the OXA 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 June 2023 compared to June 2022, Monster’s retail market sharing value increased in Argentina from 50.5% to 55.5%, in Chile from 38.1% to 40.8%.

And in Brazil from 41.6% to 44.4%. Monster Energy is the leading energy brand in value in Argentina, Brazil and Chile. 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 a 13 week period until June 18, 2023. Monster’s retail market sharing value as compared to the same period the previous year grew from 16.2% to 16.6% in Belgium, from 32.7% 33.1% in France, from 29.8% to 31.1%, in Great Britain, from 31.8% to 35.2% in Norway, from 28.1% to 30.3% in the Republic of Ireland, from 39.4% to 41.6% in Spain, and from 15.6% to 15.9% in Sweden.

Monster’s retail market sharing value as compared to the same period the previous year declined from 6.6% to 5.5% in the Netherlands, according to Nielsen in the 13 week period ended until the end of June 2023, Monster’s retail market sharing values as compared to the same period the previous year declined from 19.3% to 17.7% in South Africa. According to Nielsen as 13 week period until the end of May 2023, Monster’s retail market value as compared to the same period the previous year grew from 18% to 22.1% in the Czech Republic, from 27.4% to 28%, in Denmark, from 15% to 16.4% in Germany, and from 28% to 29.9% in Italy. Monster’s retail market sharing value as compared to the same period the previous year, declined from 38.7% to 37.5% in Greece, and from 20.6% to 18.7% in Poland.

According to Nielsen in the 13 week period until the end of May 2023, Predator’s retail market sharing value as compared to the same period the previous year grew from 26.3% to 31.5% in Kenya, and from 15.4% to 19.8% in Nigeria. According to IRI in Australia, Monster’s market sharing value for the four weeks ending July 9, 2023, increased from 14.1% to 16.9% as compared to the same period the previous year. Mother’s market sharing value decreased from 10.4% to 10.3%. According to IRI in New Zealand, Monster’s market sharing value for the four weeks ended July 9, 2023 increased from 12.6% to 14.9% compared to the same period of the previous year. Live Plus’s market sharing value decreased from 6.5% to 5.6%, and Mother’s market sharing value remained at 5.3%.

According to INTAGE in Japan in the month ending June 2023 Monster’s market sharing value in the convenience store channel, as compared to the same period the previous year declined from 56.7% to 55.1%. According to Nielsen in South Korea, in the month ending June 2023, Monster’s market sharing value in all outlets combined, as compared to the same period the previous year decreased from 59.9% to 57.6%. 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 these periods. Net sales to customers outside the US was $715.4 million, 38.6% of total net sales in the 2023 second quarter compared to $649 million, or 39.2% of total net sales in the corresponding quarter in 2022.

Foreign currency exchange rates had a negative impact on net sales in the US and US dollars by approximately $38.4 million in the 2023 second quarter. Included in reported geographic sales, our sales to the company’s military customers, which are delivered in the US and transshipped to the military and their customers overseas. In EMEA, net sales in the 2023 second quarter, increased 13% in dollars, and increased 16.4% in local currencies over the same period in 2022. Gross profit in this region as a percentage of net sales for the second quarter was 34% compared to 26.7% in the same quarter in 2022. We are pleased that in the 2023 second quarter Monster gained market share in Belgium, the Czech Republic, Denmark, France, Germany, Great Britain, Italy, Norway, the Republic of Ireland, Spain and Sweden.

In Asia Pacific, net sales in the 2023 second quarter increased 17.8% in dollars and increased 26.7% in local currencies over the same period in 2022. Gross profit in this region as a percentage of net sales was 42.4% versus 40.4% over the same period in 2022. Net sales in Japan in the 2023 second quarter increased 11.9% in dollars and increased 21.2% in local currency. In South Korea, net sales increased 50.3% in dollars and increased 59.5% in local currency as compared to the same quarter in 2022. Monster remains the market leader in Japan and South Korea. In China, net sales in the second quarter increased 3.7% in dollars and increased 10.6% in local currency as compared to the same quarter in 2022. We remain optimistic about the prospects for the Monster brand in China.

In the 2022 second quarter, our distribution partners restocked inventories following the easing of the COVID-19 restrictions in China. In Oceania, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea and Guam, net sales increased 26% in dollars and 36.4% in local currencies. In Latin America, including Mexico and the Caribbean, net sales in the 2023 second quarter increased 0.1 of a percent in dollars, and increased 9.4% in local currencies over the same period in 2022. In Brazil, net sales in the 2023 second quarter increased by 2.5% in dollars, and 3.6% in local currency. Net sales in Mexico increased 23.3% in dollars, and 10.1% in local currency in the 2023 second quarter. Net sales in Chile decreased 23.8% in dollars, and decreased 26.6% in local currency in the 2023 second quarter.

The decrease in sales in Chile were due in part to a normalization of bottler inventory levels. Net sales in Argentina decreased 19.5% in dollars, but increased 54% in local currency in the 2023 second quarter. We will now provide an update on our litigation with Vital Pharmaceuticals Inc. which will be referred to as VPX, the former maker of Bang Energy drinks. We previously discussed the trademark infringement arbitration in which an arbitrator found against VPX and awarded Monster Energy Company or MEC and Orange Bank, $175 million in damages, attorneys fees and costs and an ongoing 5% royalty on future sales of certain Bang Energy. VPX has appealed the judgment. We also previously discussed the false advertising case in the United States District Court for the Central District of California, in which the jury returned a verdict awarding MEC approximately $293 million in damages.

And the District Court granted MEC’s motion for a permanent injunction in joining VPX and former CEO Jack Owoc from falsely or deceptively claiming that Bang any other beverages contained creatine or form of creatine, VPX and Jack Owoc appealed the injunction. The bodies have completed briefing on remaining post round issues On October 10, 2022 VPX, along with certain of its domestic subsidiaries, and affiliates filed for protection under Chapter 11 of the bankruptcy code in the United States District Court for the Southern District of Florida. On June 28, 2023, VPX and certain affiliates entered into an asset purchase agreement with the company, which among other things provided for the company’s acquisition of substantially all of the VPX’s assets.

The transactions contemplated by the asset purchase agreement closed on July 31, 2023, at which time the company was deemed to have allowed general unsecured claims in VPX’s bankruptcy case relating to the arbitration award, and the jury’s award, subject to the potential modification of the Jury Award in the light of pending post-verdict motions filed by MEC and VPX. The asset purchase agreement also includes a mutual release between VPX and MEC which among other things, requires VPX to dismiss its appeals of the trademark infringement arbitration and the false advertising case, as well as cases that VPX filed against MEC in the United States District Court for the Southern District of Florida. This mutual release does not include any claims the company might have against Mr. Owoc in relation to their jury award.

The company will not recognize the allowed general unsecured claims or the jury award as it relates to Mr. Owoc [inaudible] realized or realizable. We will not be answering questions on these legal proceedings on today’s call. In June 2023, the company also entered into an agreement with Orange Bank Inc. regarding the company’s use and registration of certain bank trademarks and trade names subject to the successful closure of the asset purchase agreement. Under this agreement, the company will pay Orange Bank Inc. a onetime payment of approximately $12.5 million and a 2.5% royalty on all future sales of products bearing the trade name Bang. On June 31, 2023, we completed our acquisition of substantially all of the assets of Vital Pharmaceuticals Inc.

Sorry, apologize on July 31 2023, we completed its acquisition of substantially all of the assets of Vital Pharmaceuticals, Inc. and certain of its affiliates, collectively Bang Energy for a purchase price of approximately $362 million, subject to adjustments. The acquired assets include Bang Energy beverages, and a beverage production facility in Phoenix, Arizona. We successfully recruited a limited number of former VPX employees to fill certain open positions within Monster, as well as the majority of the team at the manufacturing site in Phoenix. Pursuant to Monster’s obligations with the Coca Cola Company, Bang Energy will be distributed through the Coca Cola bottlers network, starting with the United States in the 2023 third quarter. As a result, there will be a temporary disruption of the product supply of Bang Energy brand energy drinks.

Additionally, our intention is to rationalize Bang’s product offerings and product lines and to fully integrate Bang into the Monster infrastructure. We do not intend to manufacture or sell Bang’s other product lines such as Red Line or Shots beyond liquidating existing inventories at this time, we may consider reintroducing certain of those product lines sometime in the future. We are excited about our acquisition of the state of the art Bang Energy production facility in Phoenix, Arizona, which we intend to utilize for Bang as well as other products in the Monster portfolio. As we only completed the acquisition this week, it is still early days and we will provide you with further updates on Bang Energy on our next Investor Call in November.

In the first half of 2023, we launched The Beast Unleashed which is now available in 28 states through a network of beer distributors. We are pleased with the early results and are continuing to expand distribution, with the goal of being national by the end of the year. According to Nielsen scan data, The Beast Unleashed is currently one of the top new brands in the beer category in 2023. We plan to launch a hot iced tea extension of The Beast Unleashed named Nasty Beast Hardcore Tea later this year or early next year, with a goal of national distribution in the first half of 2024. The brand will have full flavors Original, Half & Half, Razzleberry and Green. Nasty Beast Hardcore Tea will be available in 24 oz. single-serve cans as well as in a variety 12-pack in 12 ounce sleek cans.

We refreshed the dials and doubled dials beer brands in the first half of 2023 and introduced Dale’s American Light Lager as part of the refresh. The brand family has performed well since the refresh. The high Lybrand family the largest in our beer portfolio, from scarcity is also performing well despite overall headwinds in the craft segment and is showing growth in retail scans. Our Alcohol Beverage innovation pipeline is robust, and we look forward to sharing use of additional new products in the future. In the 2023 second quarter in the United States, we focused on gaining distribution on our first quarter product innovation. Following the success of our recent Monster Energy Zero- Sugar launch, we are planning to launch NOS Zero-Sugar in 16 ounce cans in the 2023 fourth quarter.

In the 2023 second quarter, we expanded our Java Monster portfolio in Canada with the launch of Java Monster 300 Triple Shot, Mocha and Vanilla. We launched several new products in Latin America in the 2023 second quarter. In Argentina, we introduced our Monster Reserve brand, with the launch of Reserve White Pineapple in June. In the Caribbean, we continue to expand our portfolio and introduced a number of new products in different countries. After we successfully launched Java Monster Super Coffee, Mean Bean and Loca Mocha in Australia earlier this year, we expanded the launch of such products to the New Zealand market in the 2023 second quarter. We are pleased with early results in both markets. In EMEA, in the second quarter of 202,3 we launched Monster Reserve Watermelon and White Pineapple, Ultra Gold, Ultra Fiesta Mango, Ultra Paradise, Ultra Rosa, Ultra Watermelon, Used Ozzy Lemonade and Used Chaotic in a number of countries.

During the 2023 second quarter, we also launched additional SK use or BPM, Burn, Nalu, Predator and Reign in certain countries. We launched the Monster Energy brand in Egypt in June 2023. To add to Predator which we launched earlier this year in Egypt. In EMEA, as part of an ongoing pan EMEA launch, we expanded the distribution of our Monster Energy Lewis Hamilton 44 Zero-Sugar Energy drink to an additional eight EMEA markets in the second quarter of 2023 for a total of 35 markets to date. During the second quarter of 2023, we launched Monster Reserve Watermelon in Japan and Monster Ultra Sunrise in Korea and Monster Reserve Pineapple in Turkey. We launched Predator in additional regions in India. We are planning to introduce the Predator brand in additional countries in APAC in the course of 2023.

In July 2023, we launched Monster Ultra Peachy Keen in Japan and Predator in Iraq. Monster Energy will be launched in the Philippines later this year. We estimate that on a foreign currency adjusted basis, including the alcohol brands segment, July 2023 sales were approximately 13.7% higher than the comparable July 2022 sales and 12% higher than July ‘22 excluding the alcohol brand segment. We estimate July 2023 sales, including the alcohol brand segment to be approximately 12.1% higher than in July 2022 and 11.2% higher than in July 2022, excluding the alcohol brand segment. July 2023 had the same number of selling days as July 2022. 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, our bottlers are responsible for production and determine their own production schedules. This affects the dates on which we invoice such bottlers. Furthermore, our bottling and distribution partners maintain inventory levels according to their own internal requirements, which they may alter from time to time for their own business reasons. We reiterate that sales over a short period such as a single month should not necessarily be imputed to or regarded as indicative of results for a full quarter or any future period. In conclusion, I would like to summarize some recent positive points. First, the energy category continues to grow globally. Second, we are pleased to report that our pricing actions which have been implemented to partially mitigate inflationary pressures have not significantly impacted consumer demand.

Third, our IFF labor facility in Ireland is now providing a large number of flavors to our EMEA region, enabling better service levels and lower land of costs to our EMEA region. Fourth, we are enthusiastic for 2023 new product innovations, notably Monster Energy Zero-Sugar, Ultra Strawberry Dreams, Rainstorm and Tour Water in United States and Monster Energy Lewis Hamilton 44 Zero-Sugar in EMEA. Fifth, we are pleased with the early results from the launch of The Beast Unleashed, we are continuing to expand distribution with the goal of being national by the end of the year. Sixth, we are excited about the launch of Nasty Beast Hardcore Tea later this year or early next year, with the goal of national distribution in the first half of 2024 as well as the additional alcohol opportunities that the CANarchy acquisition presents.

Seven, we are pleased with the initial results of our launch Rainstorm, our new line of Total Wellness Energy drinks. Eight, we are pleased with the rollout of Prince and Fury, our affordable energy drink portfolio internationally, we are proceeding with plans to launch our affordable energy brands in a number — additional number of international markets. Nine, we are excited about the opportunities that the acquisition of the Bang Energy brand presents to us and believe that the brand will fit well within our broader portfolio of energy drink brands. I would like to now open the floor to questions about the quarter. Thank you.

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Q&A Session

Operator: [Operator Instructions] Our first question comes from Peter Grom at UBS.

Peter Grom: Thanks, operator and good afternoon, guys. Hope you’re doing well. So I wanted to pick up on the gross margin commentary and just get a sense for how the quarter kind of came in versus your expectations. This is the first time we haven’t really seen the sequential improvement on gross margin in about a year. And I know you mentioned promotion, I think you’ve talked about other costs, back at the shareholder meeting. But can you maybe just talk about how you see the drivers of gross margin evolving through the balance of the year, should we still expect to see sequential progression from here? And then maybe bigger picture, can you help frame where we are on the long term margin recovery journey. Thanks.

Hilton Schlosberg: Peter, the difficult answers your question is that we really don’t give guidance. So if we look at this quarter that we just reporting, we spoke about some of the drivers behind the improvement in gross margin. But against that, we did have continued increases, and I’ve said this in previous quarters in certain ingredients and other input costs, as well as co-packing. So that’s the fact that will stay with us. And then we have another obviously, issue that we spoke about, and that is geographical sales mix. So as we sell more product overseas, so the margin reduces overall, the percentage gross margin reduces overall. And then, as you look at the alcohol business building, the gross margins from that side of the business are less than the gross margins that we enjoy in the energy drink sector.

So you’ve got pluses and minuses, the alcohol brands, you’ll see in the Q that will be released in a day or so that the alcohol brands were $60 million of sales, and that margin is lower, and we’ve reported it as being lower than in the rest of the business. So, overall, there’s really is a mix, and then with a Bang product coming in, we expect that the Bang product will have the same margins as the kind of Ultra products in our own portfolio, the Reign products and Ultra products, and that will improve margins. So overall, there’s a — we’ve got a mix of positive items that are benefiting gross margins and those items that are detracting from gross margins.

Operator: Our next question comes from Andrea Teixeira with JPMorgan.

Andrea Teixeira: Thank you, and good afternoon. Can you comment on where you’re seeing the energy category demand perspective, from a consumer standpoint? And then related to that, obviously, congrats on the acquisition of Bang. How are you planning to lean even more into this wellness energy category, with the organic growth through the House Renovation, Rainstorm, in particular continues to grow fast, but now Bang adds more presence into that sub segment. So what are you – what you can share at this point, I know you’re going to share more in the next earnings call. But can you talk about how you can participate even more in that category? And if I can squeeze just a clarification about Brazil and Latin America, I think x, Mexico continues to do well. But I was surprised to see a deceleration. I know, it’s tough comparison, when you gain a lot of shares in Brazil, but just to make sure that we get those points in. Thank you.

Hilton Schlosberg: So if I talk about the energy category as such, and we started looking at the one week data because the community looks at the one week data, and the energy category is still growing in good double digits 13% in the last week, so we’re seeing a good increase in the energy category. And as we look at, traditional energy and wellness energy and performance energy, obviously, you’ve seen kind of differences within those segments. Interesting, the Bang started off life as a very much performance energy. And today, if you look at the brand, and you analyze what it stands for, really stands for a different segment, which is really lost on energy. So you’ve got all these different brands that are filling different needs within the energy space.

But traditionally, energy is still growing, I did a quick analysis and the traditional energy is still growing and the number I’m looking at is around 10%. You’ve got this other wellness energy and obviously we are participating in that segment with Rainstorm, yes, which we are really excited about. And then performance energy where we have Reign which is doing very well. The difficulty in, really going deep in — deep dive into performance energy is that the Bang brand has suffered, because it’s lost so much distribution. And that’s a factor that obviously is driving that segment of the market. And then quickly, just turning to Brazil, and Chile, the energy category in those countries really grew very rapidly. And we grew extensively within those two countries, but there has been, we’ve seen a little bit of a slowdown in growth in both Brazil and in Chile.