Monster struggles to move aluminum can supply to US

Diving brief:

  • Monster continued to face high costs from importing aluminum cans last quarter as the beverage maker struggled to shift its supply to the United States amid strong consumer demand for its energy drinks.
  • The company paid about $66.7 million in higher freight charges in the second quarter, which includes the cost of importing the cans. Operational inefficiencies, including the import of cans, cost Monster $46 million in the first quarter.
  • Monster co-CEO and vice-president Hilton Schlosberg says the company is less reliant on imported cans overall, but continues to incur higher costs to meet demand. “We’re not in this business for the second quarter of 2022,” Schlosberg said. “We are in this business for the long term and it is important to us to ensure that our customers and consumers continue to have energy products.”

Overview of the dive:

Port congestion and soaring freight costs have pushed Monster will shift more of its aluminum can supply to end-consumer markets. But high demand made it difficult for the company to control costs, and Monster opted to pay to import cans last quarter rather than let the shelves empty.

“Yeah, maybe we had a hiccup in gross margin in….second quarter 2022,” Schlosberg said. “But at least we’ve been able to get our inventory back to a situation where we’re able to serve customers and we’re able to serve consumers.”

Executives say Monster has decreased its overall reliance on imported cans and the company has worked to redistribute finished inventory to US fulfillment centers to reduce lead times and costs. The energy drink maker expects a reduction in the cost of sales “thanks to increased use of household cans” in the coming quarters.

The continued reliance on imported cans comes as the company struggles to ensure it has adequate availability ahead of price increases scheduled for September 1. some international markets.

“Look, it’s going to be a terrible situation, when our prices go up on September 1 and we don’t have enough inventory to meet demand. I mean, that would just be the end,” Schlosberg said. “So we did our best to stay on track and work in a very, very challenging supply chain environment.”