Rodney Sacks
Chairman and Co-Chief Executive Officer at Monster Beverage
Thank you. The company achieved record first quarter net sales of $1.52 billion in the 2022 first quarter, 22.1% higher than net sales of $1.24 billion in the 2021 comparable period. As in recent quarters, to meet increased demand for our products, rather than experience out of stocks for certain lines at retail, the company incurred operational inefficiencies in the United States and in various countries, resulting in increased costs. During the 2022 first quarter, the company continued to procure additional quantities of aluminum cans from suppliers in the United States and abroad in response to increased consumer demand. In the first quarter of 2022, the company experienced significant increases in cost of sales relative to the comparative 2021 first quarter, primarily due to increased freight rates and fuel costs, including costs relating to the importation of aluminum cans, as well as aluminum can costs attributable to higher aluminum commodity pricing.
The company also experienced a significant increase in ingredient and other input costs, secondary packaging materials, co-packing fees and production inefficiencies. The company continued to experience additional global supply chain challenges, including the lack of adequate shipping containers and port congestion, which resulted in shortages of certain ingredients and finished products. This necessitated the company air freighting substantial quantities of certain ingredients internationally, particularly to EMEA, Asia Pacific and Latin America at additional costs and inefficiencies. Furthermore, the company experienced significant increases in distribution expenses, including increased fuel, freight and warehousing costs, which adversely impacted operating expenses. The company continued to address the challenges in its supply chain as it navigates through the uncertainty of the current global supply chain environment.
In the United States, the company secured additional co-packing capacity to meet increased demand for certain of its products. The company estimates that approximately $46 million of costs in the quarter were the result of operating inefficiencies due in part to strong consumer demand, including the importation of aluminum cans, as well as COVID-19-related issues such as port congestion, shortage of shipping containers resulting in the need to airfreight ingredients, which the company continues to address. In addition, increased commodity and raw materials costs, including aluminum, other ingredient costs and secondary packaging incurred during the quarter, amounted to approximately $45 million, and increases in freight rates and fuel impacted gross profits by approximately $6 million. Gross profit, as a percentage of net sales, for the 2022 first quarter was 51.1% compared with 57.5% in the 2021 frist quarter. The decrease in gross profit percentage for the 2022 first quarter was primarily the result of the items mentioned previously as well as geographical sales mix.
Additionally, [Drop] requires a first value step-up of the CANarchy inventories of $3.8 million, which together with expenses related to the acquisition of CANarchy of $4.2 million during the quarter, adversely affected both gross margins and operating expenses. The decrease in gross profit as a percentage of net sales for the 2022 first quarter was partially offset by pricing actions. Operating expenses for the 2022 first quarter was $377.2 million, compared with $300.8 million in the 2021 first quarter. As a percentage of net sales, operating expenses for the 2022 first quarter were 24.8% compared with 24.2% in the 2021 first quarter. Distribution expenses for the 2022 first quarter increased to $81.4 million, which is an increase of 49.7% or 5.4% of net sales compared to $54.4 million or 4.4% of net sales in the 2021 first quarter. The $27 million increase in distribution expenses was primarily due to increased freight out costs of $20.6 million as a result of higher outbound freight rates and fuel, increased volume and out-of-orbit freight, as well as higher warehouse expenses of $6.4 million as a result of higher raw material and finished good product inventories in the United States and EMEA.
We believe that a portion of the increase in distribution expenses that we experienced in the quarter are likely to be transitory. The increase in other operating expenses was primarily due to increased expenditures for travel and entertainment, increased payroll expenses, increased professional services expenses, including accounting and legal expenses, increased commissions and increased sponsorships and endorsements. During the comparative 2021 first quarter, the company decreased expenditures for travel and entertainment as well as our marketing programs largely as a consequence of the COVID-19 pandemic. The impact of the COVID-19 pandemic was less pronounced on such expenses during the 2022 first quarter. Operating expenses as a percentage of net sales for the 2022 first quarter were 24.8% as compared to operating expenses as a percentage of net sales for the 2019 first quarter pre-COVID, which was 27.7%. Our two new suppliers of aluminum cans in the United States are now operational. And as a result, we are able to decrease our reliance on the use of imported aluminum cans in the United States.
In the United States, we anticipate seeing a reduction in cost of sales related to the use of imported aluminum cans in the latter half of 2022. Although, we expect to reduce the importation of aluminum cans into EMEA in the second half of 2022, we will only see a reduction in cost of sales after we have worked through current inventories of imported cans in EMEA. We rebuilt and increased finished product inventory levels across the United States and EMEA to reduce excessive cost of long-distance freight to satisfy demand and to return to our orbit strategy of producing in closer proximity to our customers. The cost of repositioning finished products to distribution centers are included in freight-in cost. Operational income -- sorry, operating income for the 2022 first quarter decreased 3.5% to $399.5 million from $414.1 million in the 2021 comparative quarter, primarily due to the company's operations in EMEA and Asia Pacific. Net income decreased 6.7% to $294.2 million as compared to $315.2 million in the 2021 comparable quarter. Diluted earnings per share for the 2022 first quarter decreased 6.8% to $0.55 from $0.59 in the first quarter of 2021.
Through pricing actions during the quarter, the company was able to record positive pricing actions in excess of 3% in the United States and in EMEA. Due to continued cost pressures, the company is planning for a net sales price increase in the range of 6% market-wide in the United States effective September 1, 2022. The company is also monitoring the opportunity for additional pricing actions internationally as well as in United States. According to the Nielsen reports, for the 13 weeks through April 23, 2022, for all outlets combined, namely convenience, grocery, drug, mass merchandisers, sales in dollars in the energy drink category, including energy shots, increased by 11.5% versus the same period a year ago. Sales of the company's energy brands, including Reign, were up 8.6% in the 13-week period. Sales of Monster were up 10.6%. Sales of Reign were down 6.1%. Sales of NOS decreased 3.5% and sales of Full Throttle increased 5.5%. Sales of Red Bull increased 7.8%. Sales of Rockstar increased by 0.4%. Sales of 5-Hour decreased 1.2% and VPX Bang's sales decreased 8.1%. The sales growth of the Monster brand exceeded that of Red Bull in the period.
According to Nielsen, for the four weeks ended April 23, 2022, sales in dollars in the energy drink category in the convenience and gas channel, including energy shots in dollars, increased 3.8% over the same period the previous year. Sales of the company's energy brands, which include Reign increased 4.8% in the 4-week period in the convenience and gas channel. Sales of Monster increased by 5.7% over the same period versus the previous year. Reign sales decreased 2%, NOS was down 2.3%, and Full Throttle was up 7.1%. Sales of Red Bull were down 0.4%. Rockstar was down 1.7%. 5-Hour was down 5.2% and VPX Bang sales decreased by 11.7%. According to Nielsen, for the four weeks ended April 23, 2022, the company's market share of the energy drink category in the convenience and gas channel, including energy shots in dollars, increased 0.4 of a point to 37.5%. Monster share increased 0.6 share points to 31.6%. Reign share decreased 0.1 of a share point to 2.4%. NOS' share decreased 0.2 points to 2.6%. And Full Throttle share remained at 0.7 of a percent.
Red Bull's share decreased 1.5 points to 35.3%. Rockstar share was down 0.2 points to 3.6%. 5-Hour share was lower by 0.4 of a point to 4.4%. And VPX Bang share decreased 1.2 points to 6.6%. According to Nielsen, for the four weeks ended April 23, 2022, sales, in dollars, of the coffee plus energy drink category, which includes our Java Monster line in the convenience and gas channel, decreased 5.3% over the same period the previous year. Sales of Java Monster, including Java Monster 300 and Java Monster Nitro Cold Brew were 2.4% higher in the same period versus the previous year. Sales of Starbucks Energy were 11.7% lower. Java Monster's share including Java Monster 300 and Java Monster Nitro Cold Brew of the coffee plus energy category, which primarily included Java Monster, Java Monster 300, Java Monster Cold Brew, Starbucks Doubleshot and Tripleshot, Rockstar Roasted and Bang Keto Coffee, for the four weeks ended April 23, 2022, was 55.3%, up 4.2 points, while Starbucks Energy share was 42.9%, down 3.1 points.
According to Nielsen, in all measured channels in Canada, for the 12 weeks ended March 26, 2022, the energy drink category increased 13.5% in dollars. Sales of the company's energy drink brands increased 11.6% versus a year ago. The market share of the company's energy drink brands was 41.5% down 0.7 points. Monster sales increased 13.3% and its market share remained at 37.1%. NOS' sales decreased 12.8% and its market share decreased 0.4 of a point to 1.5%. Full Throttle sales decreased 14.9% and its market share decreased 0.2 of a share point to 0.05 share points. According to Nielsen, for all outlets combined in Mexico, the energy drink category increased 25.4% for the month of March 2022. Monster sales increased 28.9%. Monster's market share in value increased 0.8 of a share point to 28.3% against the comparable period the previous year. Sales of Predator increased 67% and its market share increased 0.9 of a share point to 3.7%. 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 OXXO convenience chain, which dominates the market.
Sales in the OXXO 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 March 2022 compared to March 2021, Monster's retail market share in value decreased in Argentina from 45.2% to 45%. Monster's Energy continues to be the leading energy brand in value in Argentina. According to Nielsen, for the month of March -- month of March 2022 compared to March 2021, Monster's retail market share in value increased in Brazil from 34.9% to 40.2%. Monster is now the leading energy brand in value in Brazil, marking another important milestone for our brand in South America. In Chile, Monster's retail share for the month of March 2022, decreased from 40% to 36.3%, due to a shortage of shipping containers. Our bottler in Chile is in the process of validating its new production line in order to increase our in-country production.
I would like to point out that 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 ending April 2, 2022, Monster's retail market share in value as compared to the same period of the previous year, grew from 14.7% to 16.2% in Germany. Monster's retail market share in value as compared to the same period the previous year declined from 20.7% to 20.3% in South Africa. According to Nielsen, in the 13-week period ending March 27, 2022, Monster's retail market share in value as compared to the same period the previous year, grew from 25.5% to 27.1% in Denmark, from 31.9% to 32.1% in France, from 27.9% to 29.3% in Great Britain, from 27.2% to 27.6% in Norway, from 18.1% to 21.4% in Poland, from 36% to 37.8% in Spain, and from 14.9% to 15.9% in Sweden.
Monster's retail market share in value as compared to the same period the previous year declined from 15.2% to 14.9% in Belgium, from 8.1% to 7.9% in the Netherlands, and from 28% to 27.9% in the Republic of Ireland. According to Nielsen, in the 13-week period ending February 27, 2022, Monster's retail market share in value as compared to the same period the previous year grew from 15.8% to 17.7% in the Czech Republic, from 37.2% to 38.3% in Greece, and from 27% to 27.6% in Italy. According to Nielsen, in the 13-week period until the end of February 2022, Predator's retail market share in value as compared to the same period the previous year grew from 14.5% to 23.3% in Kenya, and from 3.3% to 14.7% in Nigeria. According to IRI in Australia, Monster's market share in value for the month ending April 10, 2022, increased from 13% to 13.6%, as compared to the same period the previous year. Mother's market share in value decreased from 11.5% to 10.4% during the same period.
The market share of the company's brands in Australia for the month ended April 10, 2022, decreased from 24.5% to 24%. According to IRI in New Zealand, Monster's market share in value for the four weeks ended April 17, 2022, increased from 12.7% to 12.9%, as compared to the same period the previous year. Live+'s market share in value decreased from 6.4% to 6.1%, and Mother's market share in value increased from 5.6% to 5.7%. The market share of the company's brands in New Zealand for the four weeks ended April 17, 2022, remained at 24.7%. According to INTAGE in Japan, in the last month ending March 2022, Monster's market share in value in the convenience store channel as compared to the same period the previous year, grew from 50.1% to 52.5%. According to Nielsen in South Korea, in the last month ending March 2022, Monster's market share in value in all outlets combined, as compared to the same period the previous year, grew from 54.8% to 59.4%. We again point out that in certain market statistics that cover single months, or 4-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. were $553.4 million, 36.4% of total net sales in the 2022 first quarter compared to $459.4 million or 36.9% of total net sales in the corresponding quarter in 2021. Foreign currency exchange rates had a negative impact on net sales in U.S. dollars by approximately $32.9 million in the 2022 first quarter. Included in reported geographic sales are our sales 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 2022 first quarter increased 21.8% in dollars and increased 30% in local currencies over the same period in 2021. Gross profit in this region, as a percentage of net sales, for the first quarter was 29.6% compared to 37.3% in the same quarter in 2021. Gross profit in the first quarter was impacted by higher aluminum commodity pricing, increased freight for imported cans, increased raw material and ingredient costs, as well as airfreight costs. In -- the company is continuing to address the controllable challenges in its supply chain in EMEA.
We're also pleased that in the 2022 first quarter, Monster gained market share in the Czech Republic, Denmark, France, Germany, Great Britain, Greece, Italy, Norway, Poland, Spain and Sweden. In Asia Pacific, net sales in the 2022 first quarter increased 1.9% in dollars and increased 9.4% in local currencies over the same period in 2021. Gross profit in this region, as a percentage of net sales, was 40.9% versus 48.8% over the same period in 2021. In Japan, net sales in the 2022 first quarter decreased 5.8% in dollars, but increased 3.4% in local currency. Sales decreased over the same period in 2021, largely due to COVID-19 restrictions in Japan. In South Korea, net sales increased 71.7% in dollars and 86.1% in local currency as compared to the same quarter in 2021. Monster remains the market leader in Japan and South Korea. In China, net sales decreased 8.9% in dollars and 10.8% in local currency as compared to the same quarter in 2021, largely impacted by COVID-related lockdowns. We remain optimistic about the prospects for the Monster brand in China.
In Oceania, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea and Guam, net sales decreased 13.8% in dollars and 7.9% in local currencies. Sales in Australia and New Zealand were negatively impacted by shipping delays of certain flavors, concentrates and ingredients. Furthermore, sales in Australia were also impacted by severe flooding in that country in the 2022 first quarter. In Latin America, including Mexico and the Caribbean, net sales in the 2022 first quarter increased 52.5% in dollars and increased 59.7% in local currencies over the same period in 2021. Gross profit in this region, as a percentage of net sales, was 35.4% for the 2022 first quarter versus 37.9% in the 2021 first quarter. In Brazil, net sales in the 2022 first quarter increased by 72.1% in dollars and 67.4% in local currency. Net sales in Mexico increased 37.7% in dollars and 41.4% in local currency in the 2022 first quarter. Net sales in Chile increased 28.4% in dollars and 45.5% in local currency in the 2022 first quarter.
Net sales in Argentina increased 103.1% in dollars and 146.4% in local currency in the 2022 first quarter. I will now discuss our litigation with Vital Pharmaceuticals, Inc., which I will refer to as VPX, the maker of Bang Energy Drinks. In June 2020, Monster Energy Company, which I will refer to as MEC and Orange Bang, Inc., a family-owned beverage business and the rightful owner of several trademark registrations to the Bang marks, initiated an arbitration against VPX. MEC and Orange Bang allege that VPX reached a 2010 settlement agreement with Orange Bang that restricted VPX's use of the Bang trademark to products that are creatine-based or marketed and sold only in nutritional channels as well as claims at VPX infringed Orange Bang's trademark rights to the Bang marks. In April 2022, the arbitrator issued a final award finding in favor of MEC and Orange Bang on all claims. The arbitrator found that VPX's Bang Energy Drinks, which VPX advertisers containing super creatine and other Bang branded products do not contain creatine, and do not provide the benefits of creatine. Because Bang branded products are thus not creatine-based, and are not limited to nutritional channels, the arbitrator found they are being sold in breach of the settlement agreement.
The arbitrator also found that VPX's Bang branded product infringe Orange Bang's trademarks. The arbitrated rewarded MEC and Orange Bang $175 million to remedy VPX's past misconduct and attorney's fees and costs, which amounted to nearly $9.3 million. The arbitrator also ordered VPX to pay MEC and Orange Bang an ongoing 5% royalty on all future net sales of Bang products. Pursuant to the terms of the agreement between MEC and Orange Bang, the award and future royalties will be shared equally between MEC and Orange Bang. Under the arbitrator's order, if VPX fails to pay the royalty, VPX is prohibited from using the Bang mark, subject to certain limited exceptions. MEC and Orange Bang have filed a motion to confirm the arbitrator's award. VPX has filed a motion to vacate the arbitration award. A hearing on VPX's motion is scheduled for June 27, 2022. MEC's lawsuit against VPX for false advertising, unfair competition, and misappropriation of trade secrets in the Central District of California is still pending, with trials scheduled to begin in August 2022.
As this litigation and other pending proceedings with VPX are subjudicate, we will not be answering any questions on those matters in today's call. In January of 2022, we introduced our first 16-ounce Ultra Variety 12 packs, which are being well received by consumers, and we are continuing to expand our multi-pack portfolio in the 2022 first quarter. In February of 2022, we introduced new flavor innovations with Ultra Peachy Keen, Juice Monster Aussie Style Lemonade, Rehab Watermelon and Reign Reignbow Sherbet. In February 2022, we launched our newest brand nationally, True North Pure Energy Seltzer in 4, 12-ounce flavors through the Coca-Cola distribution network. At the end of the 2022, 1st quarter, we launched two new ready-to-drink nitro-infused coffee products, Java Monster Cold Brew Latte and Java Monster Cold Brew Sweet Black. In Canada, in January of 2022, we introduced Monster Ultra Gold. In February of 2022, we grew Canada's Reign portfolio by launching Reign White Gummy Bear. We successfully launched several new products across Latin America in the first quarter of 2022. In Argentina, we launched VR46 The Doctor.
In Chile, we expanded our Reign Lemon by launching Melon Mania, Lemonades and Orange Dreamsicle. In Mexico, we launched our second Predator SKU with Predator Mean Green. We also launched Monster Ultra Gold in Puerto Rico and Monster Mango Loco in Colombia. In the 2022 first quarter, we launched Monster Ultra Gold and Mother Kiwi Sublime in Australia and New Zealand. We launched our third Super Fuel flavor in Tropical Thunder. In EMEA, in the first quarter of 2022, we launched Monster Mule, Monster Nitro and Monster Assault in a number of countries. We also launched Ultra Fiesta, Watermelon and Gold and Juiced Monarch, Khaotic and Pacific Punch in a number of countries during the 2022 first quarter. During the 2022 first quarter, we also launched Predator and Reign in additional countries. During the first quarter of 2020, we launched Monster Pipeline Punch in Singapore. We also introduced the Predator brand in India. In April 2022, we launched Monster Mango Loco in Japan. We are planning to introduce the Predator brand in several additional countries in APAC in the course of 2022.
Our co-packing network is an integral part of the company's production model, which we intend to preserve. The owner of one of the co-packing facilities with which we contracted located in Norwalk, California, announced earlier this year that they would be selling this facility and ceasing its operations at this facility. To maintain adequate supply of the company's products, we have acquired the associated real property, leases and equipment of this co-packing facility for a purchase price of $62.5 million. Following the purchase, the facility will be closed for a period of time, before the company is able to commence production. We estimate April 2022 sales including CANarchy to be approximately 6.7% higher than in April 2021 and 4.8% higher than in April 2021, excluding CANarchy. On a foreign currency adjusted basis, excluding CANarchy, April 2022 sales would have been approximately 7.7% higher than the comparable April 2021 sales. April 2022 had one less selling day compared to April 2021.
We mentioned that April 2022 sales had a challenging hurdle to meet over April 2021 sales. You may recall that in our 2021 first quarter conference call to shareholders, we estimated that April 2021 sales were approximately 71.3% higher than in April 2020. Please keep in mind that the comparative 2020 sales were materially adversely impacted by the COVID-19 pandemic. In our 2020 first quarter conference call to shareholders, we estimated that April 2020 sales were 22.2% lower than our April 2019 sales. April 2021, April 2020 and April 2019, all had the same number of selling days. The company had sufficient can capacity and co-manufacturing filling capacity across all regions to address demand for April.
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 where our bottlers are responsible for production, and unilaterally determine their production schedules, which affects the dates on which we invoice such bottlers, as well as inventory levels maintained by our distribution partners, which they alter unilaterally 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. If the COVID-19 pandemic and related unfavorable economic conditions continue in certain regions, our new product innovation launches in those regions could be delayed. In conclusion, I would like to summarize some recent positive points.
The company continues to address challenges in its supply chain by sourcing cans and primary ingredients and blends, increasing its manufacturing capacity and increasing finished product inventories. This should enable us to improve our service levels and lower transportation costs across North America, EMEA and LatAm. Our AFF's flavor facility in Ireland is now providing a large number of flavors to our EMEA region, enabling better service levels and lower landed costs to our EMEA region. We are pleased with the new additions to the Monster Energy portfolio. We are planning to continue additional launches of our Reign, Total Body Fuel high performance energy drinks in additional international countries. 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 an additional number of international countries. We are enthusiastic about the opportunities that CANarchy presents. While we believe that we will be able to address many of the supply chain challenges we have faced, we anticipate still having to face certain ongoing challenges in the future. I would now like to open the floor to questions about the quarter. Thank you.
