01—Abstract
Summary
Summary of the 10-K filed February 28, 2022. Cited figures are marked; the original filing is the authoritative source.
Monster Beverage (MNST) closed fiscal 2021 with record net sales of $5.54 billiona, up 20.5% from $4.60 billion in 2020, driven by strong worldwide volume growth of the Monster Energy brand (case sales up 21.5% to 613.4 million).
Operating income rose 10.1% to $1.80 billionb, but operating margin compressed to 32.4% from 35.5% as gross margin fell to 56.1% from 59.2% on higher aluminum can costs, other raw material and ingredient inflation, and freight-in costs. Net income declined 2.3% to $1.38 billion, and diluted EPS fell to $2.57 from $2.64, largely because 2020 included a one-time $165.1 million non-recurring tax benefit and 2021 income tax expense rose to a 23.5% effective rate from 13.3%. The balance sheet remains very strong, with $1.33 billion in cash, $1.75 billion in short-term investments, and working capital of $3.72 billion.
Operating cash flow was $1.16 billionc, down from $1.36 billion, reflecting a $278 million inventory build and a $254 million rise in receivables. No dividends are paid, and the company repurchased no shares under its program in 2021, leaving $441.5 million authorized. The company also completed its $330 million cash acquisition of CANarchy (craft beer and hard seltzer) on February 17, 2022, marking its entry into alcoholic beverages.
Key risks flagged in the filing include heavy dependence on The Coca-Cola Company (TCCC, roughly 19%d shareholder and primary distribution partner), near-total reliance on energy drinks, aluminum can shortages, co-packer capacity constraints, regulatory pressure on energy drink sales, taxes, and caffeine limits, and ongoing COVID-19 supply chain disruption. Management expects these cost and supply pressures to persist into 2022.
02—Key points
Key Highlights
- Record 2021 net sales of $5.54B (+20.5% YoY); Monster Energy Drinks segment provided 94.2% of revenue at $5.22B (+21.3%).
- Gross margin contracted about 310 bps to 56.1% from 59.2% on aluminum can inflation, other input costs, freight-in, and geographic mix.
- Operating income grew 10.1% to $1.80B, but operating margin fell to 32.4% from 35.5%; operating expenses rose 20.2% on outbound freight, sponsorships, and digital marketing.
- Net income fell 2.3% to $1.38B and diluted EPS to $2.57 (from $2.64) because 2020 included a $165.1M one-time tax benefit and the 2021 effective tax rate rose to 23.5%.
- Strong liquidity: $3.08B in cash and short- and long-term investments, zero debt on the revolver, and $1.16B operating cash flow, though working capital build pressured cash generation.
- Concentration risk remains high: TCCC owns about 19% of shares and is the principal distribution channel, and its bottlers account for roughly 34% of net sales from the three largest customers.
- Entry into alcoholic beverages via the $330M CANarchy acquisition closed February 17, 2022, a post-year-end strategic step with integration and new-sector risks.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, Monster Beverage kept $0.25.
- Revenue$5.54B100.0%
- Cost of revenue−$2.43B43.9%
- Gross profit$3.11B56.1%
- Operating costs−$1.31B23.7%
- Operating income$1.80B32.4%
- Interest, other & tax−$420.0M7.6%
- Net income$1.38B24.9%
Where FY2021 revenue went
$5.54B- Cost of revenue: $2.43B, 44% of revenue
- Net income: $1.38B, 25% of revenue
- Operating costs: $1.31B, 24% of revenue
- Interest, other & tax: $420.0M, 7.6% of revenue
Kept 25% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 28, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $5.54B$4.60B | +20.5% |
| Cost of Revenue | $2.43B$1.87B | +29.8% |
| Gross Profit | $3.11B$2.72B | +14.1% |
| Operating Expenses | $1.31B$1.09B | +20.2% |
| Operating Income | $1.80B$1.63B | +10.1% |
| Net Income | $1.38B$1.41B | −2.3% |
| EPS (Basic) | $0.65$0.67 | −2.3% |
| EPS (Diluted) | $0.65$0.66 | −2.3% |
| Shares Outstanding (Basic) | 2.12B2.12B | −0.2% |
| Shares Outstanding (Diluted) | 2.14B2.14B | +0.2% |
05—Questions
Frequently Asked Questions
Why did net income decline in 2021 even though sales grew more than 20%?
Net income fell 2.3% to $1.38 billion because gross margin compressed from 59.2% to 56.1% due to aluminum and ingredient inflation and freight costs, and operating expenses rose 20.2%. Also, 2020 benefited from a one-time $165.1 million non-recurring tax benefit, so the comparison is distorted. Excluding that item, 2021 earnings would have grown.
How concentrated is Monster's customer and distribution base?
Concentration is significant. U.S. full-service bottlers/distributors accounted for 51% of gross billings and international bottlers for 39%. Coca-Cola Consolidated (12%), Coca-Cola Europacific Partners (12%), and Reyes Coca-Cola Bottling (10%) each represent a large share of net sales. TCCC also owns roughly 19% of Monster's stock, and the company has ceded most distribution to TCCC's network, so its performance is highly dependent on that relationship.
Is Monster's balance sheet strong enough to fund growth and acquisitions?
Yes. At year-end 2021 Monster held $1.33 billion in cash, $1.75 billion in short-term investments, and $99.4 million in long-term investments, with working capital of $3.72 billion. It carries minimal debt, has a $10 million credit line, and expects capital expenditures of about $150 million through 2022. These resources funded the $330 million CANarchy purchase in February 2022 and leave room for share repurchases, although no buybacks were executed in 2021.
What are the main risks investors should monitor going into 2022?
Key risks include aluminum can and ingredient shortages and rising costs that could further pressure gross margins; co-packer capacity constraints limiting growth; the ongoing COVID-19 pandemic; growing regulation of energy drinks (age limits, excise taxes, caffeine caps, container-size limits); litigation and negative publicity about energy drink health effects; and the company's dependence on TCCC. The entry into alcoholic beverages also introduces new competitive and integration risks.
06—Continue