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Hansen Natural Corporation Q2 2010 Earnings Call Transcript

Hansen Natural Corporation Q2 2010 Earnings Call Transcript

Hansen Natural Corporation (HANS)

Q2 2010 Earnings Conference Call

August 5, 2010 5:00 PM ET


Rodney Sacks – Chairman and CEO

Hilton Schlosberg – Vice Chairman and President


Judy Hong – Goldman Sachs

Kaumil Gajrawala – UBS

Caroline Levy – SLSA

Mark Astrachan – Stifel Nicolaus

Alec Patterson – RCM


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Previous Statements by HANS
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Welcome to the Hansen Natural Corporation second quarter 2010 financial results conference call. During today’s presentation, all participants will be in listen-only mode. Following the presentation, the conference will be open for questions.

(Operator Instructions)

As a reminder, today’s conference is being recorded, August 5, 2010. I would now like to turn the conference over to our host, Rodney Sacks, Hansen Natural Corporation Chairman and CEO. Please go ahead, sir.

Rodney Sacks

Good afternoon, ladies and gentlemen. Thank you for attending this call. I am Rodney Sacks. Hilton Schlosberg, our Vice Chairman and President, is with me today, as is Tom Kelly, our Vice President of Finance.

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 our Securities Exchange Act of 1934, as amended, and which 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 management’s 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 herein.

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, 2010, and our most recent 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 obligation to update any forward-looking statements whether as a result of new information, future events, or otherwise.

An explanation of the non-GAAP measures of gross sales and certain expenditures which may be mentioned during the course of this call is provided in the notes designated with asterisks in the condensed consolidated statements of income and other information attached to the earnings release dated August 5, 2010. A copy of this information is also available on our website, in the investor relations section.

There appeared to have been an improvement in the beverage market in general in North America in second quarter of 2010. While certain sectors are still negative, some are showing positive growth, most notably the energy drinks, both drink and tea categories. Growth in the energy drink category including shots accelerated in the second quarter of 2010 into double digit territory when compared to previous quarters. According to Nielsen, for the 13 weeks through June 26, 2010, all outlets combined, namely convenience, grocery, drug, and mass merchandisers, excluding Wal-Mart, sales in the energy drink category including shots increased 10.8% versus the same period a year ago.

Sales of Monster grew 12.7% in the 13-week period concerned while sales of Red Bull increased by 15%. Sales of Rockstar increased 10.3%, sales of Amp dropped 8.2%, sales of NOS increased 7.1%, and sales of Full Throttle dropped 29.3%. According to the Nielsen report for the five weeks ending June 26, 2010, sales of energy drinks in the convenience and gas channel as defined by us increased by 12.9% over the comparable five-week period in 2009.

Over this five week period, sales of Monster increased by 15.4% over last year, while sales of Red Bull increased by 15.7% over last year. Rockstar was up 14.9%, while Amp was down 5.8%. Full Throttle was down 31.1%. No Fear was down 39.7%, while SoBe and Adrenaline Rush were each down in excess of 85%. NOS was up by 8.4%, which was considerably slower than in previous periods.

According to Nielsen, for the five weeks ended June 26, 2010, Monster’s market share of the convenience and gas channel of the energy drink category including energy shots was 27.9% against Red Bull’s share of 31.9% and Rockstar’s share of 9.6%. Nielsen numbers for chain convenient stores as reported by our third party for the four weeks ended July 10, 2010 indicated that the momentum of sales increases for both the category of Monster is increased. These numbers reflect that chain convenient store sales grew 11% versus 9% the previous month while sales of Monster grew 19% versus 14% the previous month.

In actual dollars, sales in the energy drink category for all outlets combined increased by $142.3 million to $1.5 billion in the 13 weeks ended June 26, 2010.

According to Nielsen, sales of Monster increased by $43.9 million as compared to sales of Red Bull, which increased by $62.5 million. Sales of Rockstar increased by $13.4 million, sales of Amp decreased by $7.6 million, sales of NOS increased by $3.3 million, while sales of Full Throttle dropped by $15.4 million.

According to Nielsen, sales of Java Monster represented approximately 11.3% of the sales of the Monster brand for the 13 weeks to June 26, 2010, which is a decrease of 1.8 percentage points as compared to 13.1% for the same period last year. The decline in the sales of Java Monster continues to be attributable primarily to the entry of Starbucks into the category in the middle of the second quarter of 2008 with its new line of Doubleshot Energy Plus coffee drinks in 15-ounce cans which compete directly with Java Monster.

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