Rodney Cyril Sacks
Chairman & Co-Chief Executive Officer at Monster Beverage
Thanks, Tom. On July 31, 2023, the company completed its acquisition of Bank Energy, which is the bank transaction. The acquired assets primarily include bank energy drinks and a beverage production facility in Phoenix, Arizona. Inventory purchased as part of the bank transaction was recorded at fair value. Certain of the purchased inventory was subsequently sold in the 2023 third quarter and was recognized through cost of sales at fair value, which we defined as the bank inventory step-up hereafter in the call. As a result of the bank inventory step up, gross profit was adversely impacted by approximately $7.8 million during the 2023 third quarter.
During the 2023 third quarter, in connection with the bank transaction, the company recorded a gain of $45.4 million, which will be referred to hearing after as the Bain transaction gain in interest and other income and expense net within the condensed consolidated statement of income. During the 2023 third quarter, the company incurred approximately $8 million of acquisition expenses related to the bank transaction. Those are referred to also later in this call as the bank transaction expenses.
The company achieved record third quarter net sales of $1.86 billion in the 2023 third quarter, 14.3% higher than net sales of $1.62 billion in the 2022 comparable period and 16.1% higher on a foreign currency adjusted basis. Gross profit as a percentage of net sales for the 2023 third quarter was 53% compared with 51.3% in the comparative 2022 third quarter.
Gross profit as a percentage of net sales was 53.4% for the 2023 third quarter, excluding the bank inventory step-up. The increase in gross profit as a percentage of net sales for the 2023 third quarter as compared to the 2022 third quarter was primarily the result of pricing actions decreased freight-in costs and decreased aluminum can costs. Promotional allowances for the 2023 third quarter were higher than in the comparable 2022 third quarter as well as the 2023 second quarter.
Operating expenses for the 2023 third quarter were $473.2 million compared with $415.8 million in the 2022 third quarter. As a percentage of net sales, operating expenses for the 2023 third quarter were 25.5% and compared with 25.6% in the 2022 third quarter. Operating expenses for the 2023 third quarter included approximately $8 million of bank transaction-related expenses.
Distribution expenses for the 2023 third quarter were $85.7 million or 4.6% of net sales compared with $8 million to $83 million or 5.1% of net sales in the 2022 third quarter. Operating income for the 2023 third quarter increased 22.2% to $510.5 million from $417.9 million in the 2022 comparative quarter. Interest and other income expense net for the 2023 third quarter increased to $71.4 million from $2.1 million in the 2022 comparative quarter. The increase was due to $39.3 million of interest income and a gain of $45.4 million related to the bank transaction. Such amounts were partially offset by foreign currency transaction losses of $13.2 million.
The effective tax rate for the 2023 third quarter was 22.2% compared with 23.3% in the 2022 third quarter. The decrease in the effective tax rate was primarily attributable to an increase in deductible interest expense. Net income increased 40.4% to $452.7 million, as compared to the $322.4 million in the 2022 comparable quarter. Diluted earnings per share for the 2023 third quarter increased 41.3% to $0.43 from $0.30 in the third quarter of 2022. Diluted earnings per share adjusted for the bank transaction gain the bank inventory step-up and the bank transaction expenses, net of tax, was $0.41 for the 2023 third quarter, an increase of 34.1%.
The company plans to implement additional price increases in certain international markets during the remainder of the 2023 year. We will continue to review further opportunities for pricing actions in order to mitigate inflationary pressures.
According to the Nielsen reports for the 13 weeks through October 21, 2023, for all outlets combined, namely convenience, grocery, drug, mass merchandisers, sales in dollars in the energy drink category, including energy shots, increased by 9.2% versus the same period a year ago. Sales of the company's energy brands, excluding Bang, were up 6.7% in the 13-week period.
Sales of Monster were up 4.8%. Sales of Reign were up 36.3%, Sales of NOS increased 10% and sales of Full Throttle increased 7.6%. Sales of Red Bull increased 3% the company continues to have market share leadership in the energy drink category for all outlets combined in the United States in both the 13- and four-week periods ended October 21, 2023. According to Nielsen, for the four weeks ended October 21, 2023, sales in dollars in the energy drink category in the convenience and gas channel, including energy shots, in dollars, increased 6.7% over the same period the previous year.
Sales of the company's energy brands, excluding Bang, increased 4.5% in the four-week period in the convenience and gas channel. Sales of Monster increased by 1.9% over the same period versus the previous year. Reign sales increased 35.2%, NOS was up 9.7% and Full Throttle was up 7.8%. Sales of Red Bull were up 1.8%. According to Nielsen, for the four-weeks ended October 21, 2023, the company's market share of the energy drink category in the convenience and gas channel, including energy shots, in dollars, decreased from 36.8% and to 36.1%, excluding bank.
Monster share decreased from 31.1% a year ago to 29.7%. Reign share increased 0.6 share to 3% MPS share increased 0.1 of a share point to 2.6%, and Full Throttle share remained at 0.7%. Bang share was 1.4%. Red Bull's share decreased 1.7 points to 34.5%. 5 share was lower by 0.5 point at 3.5%. Rockstar share was down 0.4 point to 3.4%. Celsius' share is 7.4% and C4 share is 3.3% and Ghosts share is 2.7%.
According to Nielsen, for the four weeks ended October 21, 2023, sales in dollars in the coffee plus energy drink category which includes our Java Monster line in the convenience and gas channel increased 8.9 % over the same period the previous year. Sales of Java Monster including Java Monster 300 and Java Monster Nitro Cold Brew were 2% lower in the same period versus the previous year. Sales of Starbucks Energy were 14.9% lower.
Java wants the share of the coffee plus energy drink category for the 4 weeks ended October 21, 2023 was 55.9% up 3.9 points, while Starbucks Energy's share was 43.8% down 3.1 points. According to Nielsen, in all measured channels in Canada, for the 12 weeks ended October 7, 2023, the energy drink category increased 8.6% in dollars. Sales of the company's energy drink brands increased 6.5% versus a year ago. The market share of the company's energy drink brands was 40% down 0.8 of a point. Monster Sales increased 7.7% and its market share decreased 0.3 of a point to 36.2.
NASDAQ sales decreased 0.5 and its market share decreased by 0.1 of a point to 1.2%. Sorry, the sales decreased by 0.5%. Full throttle sales increased 12.8% and its market share remained at 0.5%. According to Nielsen, for all outlets combined in Mexico, the energy drink category increased 20% for the month of September 2023. Monster sales increased 22.7%. Monster's market share in value increased 0.7 points to 29.3% against the comparable period the previous year.
Sales of Predator increased 60.3% and its market share increased 1.5 share points to 6.1%. 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 September 2023 compared to September 2022, Monster's retail market share in value increased in Argentina from 52.8% to 56.8%, in Brazil from 43% to 45.1% and decreased in Chile from 41.7% to 39.9%. Monster Energy is the leading energy brand in value in Argentina, Brazil and Chile.
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 until October 8, 2023, Monster's retail market share in value as compared to the same period the previous year, grew from 30.5% to 31.3% in France, from 29.9% to 32.4% in Great Britain, from 5.4% to 5.6% in the Netherlands, from 31.6% to 34.7% in Norway and from 40.3% to 40.5% in Spain.
According to Nielsen, in the 13-week period until the end of September 2023, Monster's retail market share in value as compared to the same period of the previous year, grew from 15.6% to 18.4% in Germany. Monster's retail market share in value as compared to the same period of the previous year remained flat at 31.6% in Italy. Monster's retail marketing value as compared to the same period the previous year declined from 19% to 18.4% in Poland and from 19.8% to 17.9% in South Africa.
According to Nielsen, in the 13-week period ended September 10, 2023, Monster's retail market share in value as compared to the same period the previous year, grew from 15.4% to 16.8% in Belgium, from 19.3% to 21.3% in the Czech Republic, from 28% to 30% in the Republic of Ireland and from 15.4% to 16% in Sweden.
According to Nielsen, in the 13-week period until the end of August 2023, Monster's retail market share in value as compared to the same period the previous year declined from 38.8% to 38.2% in Greece. According to Nielsen a 30-week period until the middle of August 2023, Monster's retail market share in value as compared to the same period the previous year grew from 27.5% to 28% in Denmark.
According to Nielsen in the 13-week period until the end of August 2023, Predator's retail market share in value as compared to the same period the previous year, grew from 29.8% to 32.8% in Kenya and from 17% to 20.3% in Nigeria.
According to IRI in Australia, Monster's market share in value for the four weeks ending October 15, 2023, increased from 14.8% to 16.4% as compared to the same period the previous year, Mother's market share in value decreased from 11.7% to 10.1%.
According to IRI in New Zealand, Monster's market share in value for the four weeks ended October 22, 2023, decreased from 13.6% to 13.3% compared to the same period the previous year. Live+'s market share in value decreased from 6.2% to 5.2% and Mother's market share in value increased from 6.1% to 6.4%.
According to INTAGE in Japan in the month ending September 2023, Monster's market share in value in the convenience store channel as compared to the same period the previous year, increased from 55% to 58.9%. According to Nielsen, in South Korea, in the month ending September 2023, Monster's market share in value in all outlets combined as compared to the same period the previous year decreased from 61.4% to 51.9% due to overly aggressive price promotions by a competitor.
We again point out that certain market statistics that cover single months or four 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 US were $733.7 million, 39.5% of total net sales. In the 2023 third quarter compared to $610.6 million or 37.6% of total net sales in the corresponding quarter in 2022. Foreign currency exchange rates had a negative impact on net sales in the US -- in US dollars by approximately $29.2 million in the 2023 third 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 2023 third quarter increased 22.3% in dollars and increased 23.6% in local currencies over the same period in 2022. Gross profit in this region as a percentage of net sales for the third quarter was 31.1% compared to 34.7% in the same quarter in 2022. We're also pleased that in the 2023 third quarter, Monster gained market share in Belgium, the Czech Republic, Denmark, France, Germany, Great Britain in the Netherlands, Norway, the Republic of Ireland, Spain and Sweden.
In Asia Pacific, net sales in the 2023 third quarter increased 16.8% in dollars and increased 21.9% in local currencies over the same period in 2022. Gross profit in this region as a percentage of net sales increased to 43.2% from 37.4% in over the same period in 2022.
Net sales in Japan in the 2023 3rd quarter increased 22.5% in dollars and increased 29% in local currency. In South Korea, net sales increased 18.7% in both dollars and local currency as compared to the same quarter in 2022. Monster remains the market leader in Japan and South Korea.
In China, net sales in the third quarter increased 20.2% in dollars and increased 28.3% in local currency as compared to the same quarter in 2022. We remain optimistic about the prospects for the Monster brand in China.
In Oceana, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea and Guam, net sales increased 13.3% in dollars and increased 18.7% in local currencies.
In Latin America, including Mexico and the Caribbean, Net sales in the 2023 third quarter increased 25.2% in dollars and increased 38.8% in local currencies over the same period in 2022. Gross profit in this region as a percentage of net sales was 37.7% for the 2023 third quarter versus 34.7% in the 2022 third quarter.
In Brazil, net sales in the 2023 third quarter decreased by 4.3% in dollars and decreased by 9.6% in local currency due in part to inconsistent purchasing patterns by our bottlers. Net sales in Mexico increased 54.4% in dollars and increased 30.1% in local currency in the 2023 third quarter.
Net sales in Chile increased 60.2% in dollars and increased 44.3% in local currency in the 2023 third quarter. Net sales in Argentina increased 61% in dollars and increased 243.4% in local currency in the 2023 third quarter.
We continued with the launch of the Beats Unleashed during the quarter, which is now available in 43 states through a network of beer distributors. We are pleased with the initial results of the Beasts Unleashed and are continuing to expand distribution with the goal of being available in substantially all of the United States by the end of 2023.
We plan to launch Nasty Beast's Hard Teas in the first quarter of 2024 with the goal of being national of national distribution in the first half of next year. Nasty Beast Hard Teas will be available in four flavors and will be sold in 24-hour single-serve cans as well as in a variety 12-pack of 12-ounce sleek cans.
In the United States, we launched Bang Energy in 12 single SKUs and two multipack SKUs through our Coca-Cola bottlers in the month of September. In the 2023 third quarter, we also shipped NOS Zero Sugar, 16-ounce cans to support our planned 2023 fourth quarter launch.
In Mexico, during July 2023, we launched our third Predator SKU with Predator Purple Rain and expanded our Monster Zero Sugar offering with the launch of Monster Ultra Watermelon in August 2023. In El Salvador and Honduras, during the month of September, we launched Reserve White Pineapple. And in Puerto Rico, we launched Monster Aussie Style Lemonade in July 2023. And in September, we introduced our rainstorm total wellness energy drinks.
In Australia, Monster Ultra Peachy Keen was launched in July 2023. In September, we launched Mother Rainbow Sherbet in Australia and Mother Lava Guava in New Zealand.
In EMEA, in the third quarter of 2023, we launched Monster Nitro Cosmic Peach, Reserve water Mellon and white pineapple juice Aussie lemonade, juice Khaoticm, Ultra Gold and Ultra Peachy Keen in a number of countries. We are excited about the launch of Monster Zero Sugar in Great Britain in the 2023 third quarter. We will expand distribution to Poland and the Republic of Ireland in the 2023 fourth quarter and to an additional 28 markets by the end of the first quarter of 2024.
During the third quarter of 2023, we launched Monster Ultra Peachy Keen in Japan and launched Predator in Iraq.
In October 2023, we launched Monster Aussie Lemonade in Japan. In India, we participate not only in the premium energy drink segment with Monster, but also in the more affordable segment with Predator. We recently introduced Predator in a 250 ml PET format in a limited region in India to complement our existing product offering in 300 ml cans.
We also transitioned the Monster brand in the Philippines from our independent distributor to our Coca-Cola Philippines bottler. During the 2023 third quarter, the company purchased approximately 7.3 million shares of its common stock at an average purchase price of $54.83 per share for a total amount of $400 million excluding broker commissions.
As of November 2, approximately $282.8 million remained available for repurchase under the previously authorized repurchase program. We estimate that on a foreign currency adjusted basis, including the alcohol brand segment, October 2023 sales were approximately 25.8% higher than in the comparable October 2022 sales and 25% higher than October 2022, excluding the alcohol brands segment.
We estimate that October 2023 sales, including the alcohol brand segment to be approximately 24.8% higher than in October 2022 and 24% higher than in October 2022, excluding the alcohol brand segment. October 2023 had one more selling day compared to October 2022.
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, our bottlers are responsible for production and determine their own production schedules. This affects the dates on which we invoice such bottlers. Furthermore, our bottling and distribution partners maintain inventory levels according to their own internal requirements, which they may alter from time to time 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.
In conclusion, I would like to summarize some recent positive points. The energy category continues to grow globally. We are pleased to report that our pricing actions, which have been implemented to partially mitigate inflationary pressures have not significantly impacted consumer demand. Our AFF 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 continuing with our plans to add a juice facility to our AFF flavor facility in Ireland.
We are pleased with our 2023 new product innovations, notably Monster Energy Zero Sugar, Ultra Strawberry Dreams and Reign Storm in the United States and Monster Energy Lewis Hamilton 44 Zero Sugar in EMEA. We are pleased with the early results from the launch of the Beast Unleashed. We are continuing to expand distribution with the goal of being national by the end of the year.
We are excited for the launch of Nasty Beast Hard Tea early next year with the goal of national distribution in the first half of 2024 as well as the additional alcohol opportunities that the CANarchy acquisition presents.
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 a number of additional countries internationally. We are excited about the opportunities that the acquisition of the Bang Energy brand presents to us and believe that the brand will fit well within our broader portfolio of energy drink brands.
I'd like to now open the floor to questions about the quarter. Thank you.
