Monster Beverage Corporation (NASDAQ:MNST) Q3 2023 Earnings Call Transcript

Monster Beverage Corporation (NASDAQ:MNST) Q3 2023 Earnings Call Transcript November 2, 2023

Monster Beverage Corporation beats earnings expectations. Reported EPS is $0.41, expectations were $0.4.

Operator: Good afternoon. And welcome to the Monster Beverage Company Third Quarter 2023 Conference call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Rodney Sacks and Hilton Schlosberg, Co-CEOs. Please go ahead.

Rodney Sacks: Thank you. Good afternoon, ladies and gentlemen. Thank you for attending this call. I am Rodney Sacks. Hilton Schlosberg, our Vice Chairman and my 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 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.

A colorful array of sparkling beverages in dozens of different containers on parade.

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 reports on Form 10-Q, 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 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: Thank you, Tom. On July 31, 2023, the company completed its acquisition of Bang Energy, which is the Bang Transaction. The acquired assets primarily include Bang Energy Drinks and a beverage production facility in Phoenix, Arizona. Inventory purchased as part of the Bang Transaction was recorded at fair value. Certain of the purchased inventory was subsequently sold in the 2023 third quarter and was recognized through cost of sales at fair value, which we define as the Bang Inventory Step-Up hereafter in the call. As a result of the Bang Inventory Step-Up, gross profit was adversely impacted by approximately $7.8 million during the 2023 third quarter. During the 2023 third quarter, in connection with the Bang Transaction, the company recorded a gain of $45.4 million, which will be referred to hereinafter as the Bang Transaction Gain, in interest and other income and expense net within the condensed consolidated statement of income.

During the 2023 third quarter, the company incurred approximately $8 million of acquisition expenses related to the Bang Transaction and those are referred to also later in this call as the Bang Transaction Expenses. The company achieved record third quarter net sales of $1.86 billion in the 2023 third quarter, 14.3% higher than net sales of $1.62 billion in the 2022 comparable period and 16.1% higher on a foreign currency adjusted basis. Gross profit as a percentage of net sales for the 2023 third quarter was 53%, compared with 51.3% in the comparative 2022 third quarter. Gross profit as a percentage of net sales was 53.4% for the 2023 third quarter, excluding the Bang Inventory Step-Up. The increase in gross profit as a percentage of net sales for the 2023 third quarter as compared to the 2022 third quarter was primarily the result of pricing actions, decreased freight-in costs and decreased aluminum can costs.

Promotional allowances for the 2023 third quarter were higher than in the comparable 2022 third quarter, as well as the 2023 second quarter. Operating expenses for the 2023 third quarter were $473.2 million, compared with $415.8 million in the 2022 third quarter. As a percentage of net sales, operating expenses for the 2023 third quarter were 25.5%, compared with 25.6% in the 2022 third quarter. Operating expenses for the 2023 third quarter included approximately $8 million of Bang Transaction-related expenses. Distribution expenses for the 2023 third quarter were $85.7 million or 4.6% of net sales, compared to $83 million or 5.1% of net sales in the 2022 third quarter. Operating income for the 2023 third quarter increased to 22.2% to $510.5 million from $417.9 million in the 2022 comparative quarter.

Interest and other income expense net for the 2023 third quarter increased to $71.4 million from $2.1 million in the 2022 comparative quarter. The increase was due to $39.3 million of interest income and a gain of $45.4 million related to the Bang Transaction. Such amounts were partially offset by foreign currency transaction losses of $13.2 million. The effective tax rate for the 2023 third quarter was 22.2%, compared with 23.3% in the 2022 third quarter. The decrease in the effective tax rate was primarily attributable to an increase in deductible interest expense. Net income increased 40.4% to $452.7 million, as compared to the $322.4 million in the 2022 comparable quarter. Diluted earnings per share for the 2023 third quarter increased 41.3% to $0.43 from $0.30 in the third quarter of 2022.

Diluted earnings per share adjusted for the Bang Transaction Gain, the Bang Inventory Step-Up and the Bang Transaction Expenses net of tax was $0.41 for the 2023 third quarter, an increase of 34.1%. The company plans to implement additional price increases in certain international markets during the remainder of the 2023 year. 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 October 21, 2023, for all outlets combined, namely convenience, grocery, drug, mass merchandisers, sales in dollars in the energy drink category including energy shots increased by 9.2% versus the same period a year ago. Sales of the company’s energy brands excluding Bang were up 6.7% in the 13-week period, sales of Monster were up 4.8%, sales of Reign were up 36.3%, sales of NOS increased 10% and sales of Full Throttle increased 7.6%.

Sales of Red Bull increased 3%. The company continues to have market 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 October 21, 2023. According to Nielsen, for the four weeks ended October 21, 2023, sales in dollars in the energy drink category in the convenience and gas channel, including energy shots in dollars increased 6.7% over the same period the previous year. Sales of the company’s energy brands, excluding Bang, increased 4.5% in the four-week period in the convenience and gas channel. Sales of Monster increased by 1.9% over the same period versus the previous year. Reign sales increased 35.2%, NOS was up 9.7% and Full Throttle was up 7.8%.

Sales of Red Bull were up 1.8%. According to Nielsen, for the four weeks ended October 21, 2023, the company’s market share of the energy drink category in the convenience and gas channel including energy shots in dollars decreased from 36.8% to 36.1%, excluding Bang. Monster share decreased from 31.1% a year ago to 29.7%. Reign share increased 0.6 of a share point to 3%, NOS share increased share increased 0.1% of a share point to 2.6% and Full Throttle share remained at 0.7 of a percent. Bang share was 1.4%. Red Bull share decreased 1.7 points to 34.5, Five Hour share was lower by half a point at 3.5%, Rockstar share was down 0.4 of a point to 3.4%, Celsius’ share is 7.4%, C Four’s share is 3.3% and Ghosts’ share is 2.7%. According to Nielsen, for the four weeks ended October 21, 2023, sales in dollars in the coffee plus energy drink category, which includes our Java Monster line in the convenience and gas channel increased 8.9% over the same period the previous year.

Sales of Java Monster including Java Monster 300 and Java Monster Nitro Cold Brew were 2% lower in the same period versus the previous year. Sales of Starbucks Energy was 14.9% lower. Java Monster share of the coffee plus energy drink category for the four weeks ended October 21, 2023, was 55.9%, up 3.9 points, while Starbucks Energy’s share was 43.8%, down 3.1 points. According to Nielsen, in all major channels in Canada for the 12 weeks ended October 7, 2023, the energy drink category increased 8.6% in dollars. Sales of the company’s energy drink brands increased 6.5% versus a year ago. The market share of the company’s energy drink brands was 40%, down 0.8 of a point. Monster sales increased 7.7% and its market share decreased 0.3 of a point to 36.2%.

NOS sales decreased half a point and its market share decreased by 0.1 of a point to 1.2%, sorry, the sales decreased 5 point — 0.5%. Full Throttle sales increased 12.8% and its market share remained at 0.5%. According to Nielsen, for all outlets combined in Mexico, the energy drink category increased 20% for the month of September 2023, Monster sales increased 22.7%, Monster’s market share in value increased 0.7 points to 29.3% against the comparable period the previous year. Sales of Predator increased 60.3% and its market share increased 1.5 share points to 6.1%. 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 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 September 2023 compared to September 2022, Monster’s retail market share in value increased in Argentina from 52.8% to 56.8%, in Brazil from 43% to 45.1% and decreased in Chile from 41.7% to 39.9%. Monster Energy is the leading energy brand in value in Argentina, Brazil, and Chile. I would like to point out, 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 until October 8, 2023, Monster’s retail market share in value as compared to the same period the previous year grew from 30.5% to 31.3% in France, from 29.9% to 32.4% in Great Britain, from 5.4% to 5.6% in the Netherlands, from 31.6% to 34.7% in Norway and from 40.3% to 40.5% in Spain. According to Nielsen, in the 13-week period until the end of September 2023, Monster’s retail market share in value as compared to the same period the previous year grew from 15.6% to 18.4% in Germany, Monster’s retail market share in value as compared to the same period of the previous year remained flat at 31.6% in Italy, Monster’s retail market share value as compared to the same period the previous year declined from 19% to 18.4% in Poland and from 19.8% to 17.9% in South Africa.

According to Nielsen, in the 13-week period ended September 10, 2023, Monster’s retail market share in value as compared to the same period the previous year grew from 15.4% to 16.8% in Belgium, from 19.3% to 21.3% in the Czech Republic, from 28% to 30% in the Republic of Ireland and from 15.4% to 16% in Sweden. According to Nielsen, in the 13-week period until the end of August 2023, Monster’s retail market share in value as compared to the same period the previous year declined from 38.8% to 38.2% in Greece. According to Nielsen, in the 13-week period until the middle of August 2023, Monster’s retail market share in value as compared to the same period the previous year grew from 27.5% to 28% in Denmark. According to Nielsen, in the 13-week period until the end of August 2023, Predators retail market share in value as compared to the same period the previous year, grew from 29.8% to 32.8% in Kenya and from 17% to 20.3% in Nigeria.

According to IRI in Australia, Monster’s market sharing value for the four weeks ending October 15, 2023, increased from 14.8% to 16.4% as compared to the same period the previous year. Mother’s market sharing value decreased from 11.7% to 10.1%. Going to IRI in New Zealand, Monster’s market sharing value for the four weeks ended October 22, 2023, decreased from 13.6% to 13.3% compared to the same period the previous year, Live Plus’ market sharing value decreased from 6.2% to 5.2% and Mother’s market sharing value increased from 6.1% to 6.4%. According to INTAGE in Japan, in the month ending September 2023, Monster’s market sharing value in the convenience store channel as compared to the same period the previous year increased from 55% to 58.9%.

According to Nielsen in South Korea, in the month ending September 2023, Monster’s market sharing in value in all outlets combined, as compared to the same period the previous year, decreased from 61.4% to 51.9% due to overly aggressive price promotions by a competitor. 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. was $733.7 million or 39.5% of total net sales in the 2023 third quarter, compared to $610.6 million or 37.6% of total net sales in the corresponding quarter in 2022. Foreign currency exchange rates had a negative impact on net sales in the U.S. dollars by approximately $29.2 million in the 2023 third quarter.

Included in reported geographic sales, our ourselves to the company’s military customers, which are delivered in the U.S. and transshipped to the military and their customers overseas. In EMEA, net sales in the 2023 third quarter increased 22.3% in dollars and increased 23.6% in local currencies over the same period in 2022. Gross profit in this region as a percentage of net sales for the third quarter was 31.1%, compared to 34.7% in the same quarter in 2022. We are also pleased that in the 2023 third quarter, Monster gained market share in Belgium, the Czech Republic, Denmark, France, Germany, Great Britain, the Netherlands, Norway, the Republic of Ireland, Spain and Sweden. In Asia-Pacific, net sales in the 2023 third quarter increased 16.8% in dollars and increased 21.9% in local currencies over the same period in 2022.

Gross profit in this region as a percentage of net sales increased to 43.2% from 37.4% over the same period in 2022. Net sales in Japan in the 2023 third quarter increased 22.5% in dollars and increased 29% in local currency. In South Korea, net sales increased 18.7% in both dollars and 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 third quarter increased 20.2% in dollars and increased 28.3% in 28.3% in local currency as compared to the same quarter in 2022. We remain optimistic about the prospects for the Monster brand in China. In Oceana, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea, and Guam, net sales increased 13.3% in dollars and increased 18.7% in local currencies.

In Latin America, including Mexico and the Caribbean, net sales in the 2023 third quarter increased 25.2% in dollars and increased 38.8% in local currencies over the same period in 2022. Gross profit in this region as a percentage of net sales was 37.7% for the 2023 third quarter versus 34.7% in the 2022 third quarter. In Brazil, net sales in the 2023 third quarter decreased by 4.3% in dollars and decreased by 9.6% in local currency, due in part to inconsistent purchasing patterns by our bottlers. Net sales in Mexico increased 54.4% in dollars and increased to 30.1% in local currency in the 2023 third quarter. Net sales in Chile increased 60.2% in dollars and increased 44.3% in local currency in the 2023 third quarter. Net sales in Argentina increased 61% in dollars and increased 243.4% in local currency in the 2023 third quarter.

We continued with the launch of the Beast Unleashed during the quarter, which is now available in 43 states, through a network of beer distributors. We are pleased with the initial results of the Beast Unleashed and are continuing to expand distribution with the goal of being available in substantially all of the United States by the end of 2023. We plan to launch Nasty Beast Hard Tea in the first quarter of 2024 with the goal of being national — of national distribution in the first half of next year. Nasty Beast Hard Tea will be available in four flavors and will be sold in 24-ounce single-serve cans, as well as in a variety 12-pack of 12-ounce sleek cans. In the United States, we launched Bang Energy in 12 single SKUs and two multi-pack SKUs through our Coca-Cola bottlers in the month of September.

In the 2023 third quarter, we also shipped NOS Zero-Sugar 16-ounce cans to support our planned 2023 fourth quarter launch. In Mexico, during July 2023, we launched our third Predator SKU with Predator Purple Rain and expanded our Monster Zero-Sugar offering with the launch of Monster Ultra Watermelon in August 2023. In El Salvador and Honduras, during the month of September, we launched Reserve White Pineapple. And in Puerto Rico, we launched Monster Ozzy Style Lemonade in July 2023, and in September, we introduced our Reign Storm total wellness energy drinks. In Australia, Monster Ultra Peachy Keen was launched in July 2023. In September, we launched Mother Reignbow Sherbet in Australia and Mother Lava Guava in New Zealand. In EMEA, in the third quarter of 2023, we launched Monster Nitro Cosmic Peach, Reserve Watermelon and White Pineapple, Juiced Aussie Lemonade, Juiced Chaotic, Ultra Gold and Ultra Peachy Keen in a number of countries.

We are excited about the launch of Monster Zero-Sugar in Great Britain in the 2023 third quarter. We will expand distribution to Poland and the Republic of Ireland in the 2023 fourth quarter and to an additional 28 markets by the end of the first quarter of 2024. During the third quarter of 2023, we launched Monster Ultra Peachy Keen in Japan and launched Predator in Iraq. In October 2023, we launched Monster Ozzy Lemonade in Japan. In India, we participate not only in the premium energy drink segment with Monster but also in the more affordable segment with Predator. We recently introduced Predator in a 250 ml PET format in a limited region in India to complement our existing product offering is 300 ml cans. We also transitioned the Monster brand in the Philippines from our independent distributor to our Coca-Cola Philippines bottler.

During the 2023 third quarter, the company purchased approximately 7.3 million shares of its common stock at an average purchase price of $54.83 per share for a total amount of $400 million, excluding broker commissions. As of November 2, approximately $282.8 million remained available for repurchase under the previously authorized repurchase program. We estimate that on a foreign currency-adjusted basis, including the alcohol brands segment, October 2023 sales were approximately 25.8% higher than in the comparable October 2022 sales and 25% higher than October 2022, excluding the alcohol brands segment. We estimate that October 2023 sales including the alcohol brands segment to be approximately 24.8% higher than in October 2022 and 24% higher than in October 2022, excluding the alcohol brands segment.

October 2023 had one more selling day compared to October 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 maintained 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’d like to summarize some recent positive points. The energy category continues to grow globally. We are pleased to report that our pricing actions which have been implemented to partially mitigate inflationary pressures have not significantly impacted consumer demand. Our AFF flavor 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. We are continuing with our plans to add a Juice facility to our AFF flavor facility in Ireland. We are pleased with our 2023 new product innovations, notably Monster Energy Zero-Sugar, Ultra Strawberry Dreams and Rainstorm in the United States and Monster Energy Lewis Hamilton 44 Zero-Sugar in EMEA.

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. We are excited for the launch of Nasty Beast Hard Tea early next year with a goal of national distribution in the first half of 2024, as well as the additional alcohol opportunities that the CANarchy acquisition presents. We are pleased with the rollout of Predator and Fury, our affordable energy drink portfolio internationally. We are proceeding with plans to launch our affordable energy brands in a number of additional countries internationally. 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’d like to now open the floor to questions about the quarter. Thank you.

See also 25 Largest Economies in the World by 2075 and 15 Vacations for Seniors on a Budget.

Q&A Session

Operator: [Operator Instructions] Our first question is from Peter Grom with UBS. Please go ahead.

Peter Grom: Thanks, Operator. Good afternoon, guys. Hope you are doing well. So maybe one housekeeping question…

Rodney Sacks: Good afternoon.

Peter Grom: … and then one real question here. I guess, on just the Bang Transaction, I apologize if I missed this, but did you mention how much of a contribution the transaction was to sales in the quarter? And then, I guess, just my real question here is, I would love to get some more color on the quarter-to-date trends you just mentioned. I think it was 25% or so, much better than what we can see in the track data. So can you maybe unpack the drivers of that? Is that simply just much stronger growth in international markets or is there any sort of sales pull-forward or timing impacts that we need to take into consideration? Just any color there I think would be really helpful. Thanks.

Rodney Sacks: Okay. Firstly, with regard to the Bang Transaction and the Bang sales numbers, we do not separately give those numbers. They are all included within the Monster Energy Drinks segment. We launched Bang Energy in September through the Coke bottling system and it was not an immediate launch on September 1, some bottlers took a little bit earlier in August and many that rolled out in September, rolled out through the month of September. So this is not a real fair quarter for the capability of what Bang can bring to the portfolio. And then, on your second point, it was very difficult to hear you, Peter. I think you are referring to the October sales, were you not?

Peter Grom: Yeah. I was just trying to understand, I think you mentioned 25% or so, it’s just a lot different or stronger than what we can see in track data even after backing out kind of the Bang drag. So I just was trying to get some color in terms of what were the drivers of that, is it simply stronger growth outside the U.S. or is it — is there any sort of timing contributions or pull-forward in sales, just any color you can provide I think would be really helpful.

Rodney Sacks: Well, I think, it’s important to understand that we have large unmeasured channels. And when one looks at Nielsen or IRI numbers, one doesn’t really appreciate that the company operates through — customers that do not participate in Nielsen or are not measured by Nielsen. And in addition a number of chain stores that allow pickup of products or ordering online, those numbers are not included within the all major channels that we see on the Nielsen. They included in the stores data, but they are not included in the all measured channels. Why? I really cannot answer that question. So there are a number of factors. The business was strong. We had a good October and those are the numbers. So, I really cannot comment anymore.

Operator: The next question is from Andrea Teixeira with JPMorgan. Please go ahead.

Drew Levine: Hey. Good afternoon. This is Drew Levine on for Andrea. Thank you for taking our question. So just wanted to circle back on the Bang acquisition and the transition to the Coke bottling system. Just any high level thoughts on improving distribution and sort of timeline to regaining shelf space for the brand would be helpful. And then, secondarily, within the Nielsen and IRI channels, it does appear that, sequentially, some of these more sort of emerging brands aren’t really gaining as much market share sequentially. So just any high level thoughts on the category dynamics if you think those emerging brands might be hitting on a sort of ceiling and Monster’s position within there, that would be helpful? Thank you.

Rodney Sacks: Yeah. So, remember, that number of both convenience and chain and other large stores discontinued the Bang brand during a period where there was a litigation and also with the products were questionable as regards to labeling. So there was a lot of discontinuation of Bang throughout the system. What we are doing and what our Coke bottlers are doing is regaining the distribution that is out there for Bang and also we are as a company making presentations to the large and smaller retailers, both convenience, grocery, mass, and obviously, the club channel to ensure that Bang is restocked in their sets. So that will take a little bit of time, it doesn’t happen overnight and we are hopeful that we will be able to achieve really very much extended distribution in the new sets as they come out.

And then on your second question regarding the smaller brands, already we have a mission that’s focused on our brands and our brand families, and I really don’t want to comment on the competition. Other than to say that we have a very comprehensive portfolio here and we believe that we are in a good position to focus and build upon our own sales, while recognizing the achievements of the competitors and the positioning of the competitors.

Operator: The next question is from Vivien Azer with TD Cowen. Please go ahead.

Vivien Azer: Hi. Good evening. Thank you. I wanted to follow up on your commentary, just now in terms of the conversations that you are having with retailers, recognizing that it might be a little bit early days in terms of driving for extended shelf reset and increased placement on Bang, but operationally, kind of how are you thinking about that? Is it kind of a one-for-one for every market share point of improvement you think you can drive for Bang that’s incremental square footage? Are you willing to sacrifice some linear square footage on tertiary, SKUs within your own portfolio to revitalize that brand, any incremental color would be helpful? Thank you.

Rodney Sacks: Yeah. We have set our sales team an objective and that is they are not compromise any of our existing shelf space to incorporate the Bang brand. The Bang brand has emerged as a lifestyle brand and we believe it should be positioned in a — hopefully in a separate cooler away from the energy beverages that includes the wellness beverages and the performance beverages and that’s the mission that we are focusing on with our sales teams.

Operator: The next question is from Charlie Higgs with Redburn Atlantic. Please go ahead.

Charlie Higgs: Hey, Hilton and Rodney. I hope you are both well fine. I got a question on China, please, and the good 28% growth you posted there. Just wondering if you could give any color on that number. It’s a lot stronger than competitors seem to be posting in China. And then, just how the portfolio shaping up there, and then, you — have you launched Predator there? Thanks.

Hilton Schlosberg: Perhaps, I will just take that. The brand, we have sort of looked at realigning the brand and focusing on the main SKUs and we are gaining additional sales and traction with the brands. So the brands, particularly, Green and Ultra, are doing very well in China and continuing to grow and getting solid sales per SKU — per point of distribution. With regard to Predator, we are proceeding with our plans to launch Predator and that will happen towards the middle of next year, probably, the second quarter as presently planned. So that will go ahead in a PET bottle. So we are also pretty hopeful that we will have two offerings at different price points to attack the Chinese market. Thanks.

Operator: The next question is from Mark Astrachan with Stifel. Please go ahead.

Mark Astrachan: Yeah. Hey, guys. Good afternoon.