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Monster Beverage reports surprise drop in net quarterly sales due to choppy demand

Monster Beverage announced a surprising fall in revenue for the first quarter on Thursday. This indicates that consumers in America have cut back on spending on expensive energy drinks due to economic uncertainty.

Consumer spending was affected by the cold weather in January, and high inflation in March.

The company also attributed a decline in net sales due to changes in order patterns by bottlers and distributers in Europe and the U.S., as well as foreign currency headwinds.

Monster Beverage hedges its aluminum price increases, but will recognize the tariffs placed on the imports due to the higher U.S. Midwest duty paid aluminum premium. This premium grew by more than 70% over the past three months.

One of the company's flavor and concentrates subsidiaries plans to open a facility in Brazil that is expected to become operational next year to help reduce the impact of aluminum levies.

Executives said that the tariffs were not expected have a material effect on the company's results.

Coca-Cola, the beverage giant, warned last month about macroeconomic uncertainties due to tariffs that could affect consumer sentiment despite exceeding quarterly results expectations.

The net sales of Monster energy drinks, which includes the Reign Total Body Fuel and Monster brand, decreased by 0.8%, to $1.72 billion.

According to data compiled and analyzed by LSEG, its total net revenue decreased 2.3% during the quarter ending March 31. Analysts had estimated a rise of 4.3% to $1.98billion.

The Corona, California based company reported that the sales were also affected by the continued weakness of its alcohol brands segment.

Monster increased its prices in the past year. This helped to increase gross profit, as a percent of net sales from 54.1% one year ago.

It earned 45 cents a share, instead of the 46 cents estimated.

In extended trading, Monster's shares fell 2.2%. (Reporting and editing by Shilpa Majumdar in Bengaluru, Juveria tabassum from Bengaluru)

(source: Reuters)