Conference Transcript - MNST 2026-06-04

Operator

all right thank you everybody uh welcome welcome to the next session for this session i'm i'm thrilled to welcome for the first time um the monster beverage corporation to the conference with us today from monster our executive sorry chief executive officer and vice chairman hilton schlossberg chief executive officer of emia and oceana south pacific guy carling and And President of AsiaPAC, Philippe Votquet. So thank you guys for joining us. Before we start, we're going to have Mark Astrican from Investor Relations address the Safe Harbor Statement. It is not. I think it might be, want me to read it, want me to read it?

Mark Astrachan, Head of Investor Relations

All right, great. So before we begin, I would like to remind listeners that certain statements made during this conversation may constitute forward-looking statements. Management cautions that these statements are based on its current knowledge and expectations and are subject to certain risks and uncertainties, many of which are outside of the control of the company that may cause actual results to differ materially from the forward-looking statements. Please refer to the company's filings with the SEC for a discussion on specific risks and uncertainty that may affect its performance.

Operator

Very good. Thank you, Mark. Okay, with that, let's dive in. And I guess, Hilton, thanks again for doing this. You know, I think it's been evident to everybody who's observed Monster for a long time, but especially, you know, coming into this year, that just exceptionally strong growth, exceptionally strong growth. Lots of both category momentum, but also company-specific momentum, not only in the U.S., but globally. I guess for everybody, including those less familiar with the story, I guess, what do you think are the key pillars of that growth story today? And is there anything that investors you think underappreciate? Well, that'd be interesting to hear. Sure.

Hilton Schlosberg, CEO

Before we start, I just like to talk about the category, generally the size of the category, because we always try and talk about the opportunities, and this is from global data. But the energy drink category in the US is It's estimated to be about $26.9 billion, and globally, you talk about $89.4 billion, so that's a percentage of 31%. That's the energy drink category in the U.S. relative to the global market. If you look at it internationally, we've got Guy here from EMEA and OSP, And you're talking about the energy drink category as a percentage of NARTD, which is a non-alcoholic ready-to-drink business. You've got in EMEA, you've got 13%. In LATAM, you've got 8%. And in APAC, you've got 9%. And in the U.S., we're talking about a percentage of 19%. So what's interesting is as we look forward and as we address the consumer, which is something that we're very passionate about and that we focus on, we can see that there are opportunities not only in the U.S. but also very much internationally. The group today is in 160 countries worldwide. And it's something that we, again, are very passionate about. The percentage of sales in the last quarter on international was actually 45%, which is a very significant number relative to other consumer goods industries. So we're growing and we're expanding internationally, And I believe we've got the organization to be able to equip and deal with the growth. So one of the pillars that's very key to us, as I mentioned earlier, is the consumer. And the consumer has a really insatiable need for energy. They're always looking for energy. They need energy. And we are supplying that energy. So against that factor, we are an image-related brand that serves a real function to a consumer. And as the pricing mechanisms in the market have taken place since COVID, we're actually very favorably and economically priced relative to ready-to-drink coffees from coffee houses and, in fact, CSDs as well. So, you know, you put all that together, you've got a category that's driven by need with an image that consumers aspire to. And we've got distribution through the Coca-Cola system, which is probably the best distribution system in the world, and great relationships with the Coca-Cola bottlers and also with the Coca-Cola company. and we could talk about that maybe later if there's time um so all in all you have a consumer that's that's motivated to buy the product that we're giving i believe the product at at the right price and uh overall um we you know we have a range of different products today and and uh different offerings from uh you know the mainstream offerings the monster through our strategic brands, some of the brands we acquired from the Coca-Cola company at the time we did the deal in 2015, the redirection of restructuring of the interests, we have that, and we also have our affordable brands which are really geared towards those countries where the consumers cannot afford a monster drink, and we've tailor-made affordable brands to service that market and affordable affordable brands are nine about 39 countries in the world so so they're growing as well as as as the market develops so you know I really believe we're we're in our infancy there's you know there's there's a lot of runway for us and we're doing what we can to you know continue to achieve growth we had great growth in the first quarter as those of you who read the the first quarterly statement saw all regions were in double-digit growth some regions like I was in I don't know multi times that which is something we really proud of because the category in EMEA is a lot older than the category in the US so maybe I could talk about a little bit about that and get his sentiments on what he sees as you know the opportunities in the business and the pillars that are important to our consumers thank you Hilton the category

Guy Carling, CEO

is older in any MA not across the board but has been around for longer but I think what's exciting about the category is it continues to evolve structurally from a consumer perspective and essentially energy drinks have become a an everyday beverage there's a strong value proposition the strong brand equity there's functionality and there's innovation across zero sugar and sugar energy drinks and what that's taking energy into a multi-occasion multi-day part kind of beverage so we see energy drinks increasingly consumed across all the day parts but also by consumers in multi-day parts so not just one one time of day across occasions you know the basic i need energy but also you know from relaxing at home energy is now 30 percent of consumers drink it as a treat as well as for sport as well as on the go as well as the kind of generic pick me up so across the piece the categories just broadened its kind of profile and that means it's able to recruit consumers both male and female across all age groups and i think in emea at the moment we've got 30 percent of consumers coming into the category on an annual basis so it's a it's a huge amount of recruitment into the category but then i think the product offerings enable and the kind of relevance of the products to people's daily lives enable people to stay in the category and then ultimately increase their consumption so through the offerings we're seeing 20 of energy consumers are buying more energy than they were a year ago so there's more consumers buying more and staying in the category through day parts and through the age group.

Operator

Very good. And Philippe, let's talk a little bit about your region as well because it's the region with significant per capita headroom where affordable energy is really laying the groundwork for what I think can be very explosive category growth and development. How are you positioning the business against those opportunities and, you know, how do you frame the opportunities?

Philippe Votquet, Other

Okay, and you're very right. If we look at South Asia, Southeast Asia, East China, you have more than 4 billion people in that part of the world. It's half of the world's population, which is living over there, and the category is underdeveloped. Okay, if we, Hilton told you about the U.S., guy about Europe. In the U.S., the per capita consumption is 54. In Europe, it's 38. On average, in Asia, it's 12. okay so it's just showing you have the population which is only drinking 12 serving per person per year on average which is showing the size of the opportunity so the category is underdeveloped but now growing we have seen in a place like India where the category is even less developed the pair consumption the pair there's a consumption per person in India is only five okay but it was less than one five years ago okay so it is showing that in in all these countries, when we find the right product at the right price, in the right pack, in the right channel for the right occasion, is we're able to unlock the potential of the category. But Asia is very complex because you have countries as diverse as Japan or India, if I take the other side of the spectrum. So we really now segmented is Asia in two different segments. What we looked at the developed market, your Japan, Korea, Taiwan, Hong Kong, Singapore, which are more premium market where we are very happy with Monster. We are now leader in the vast majority of this market with significant shares. On there the category is very similar to what we have to have heard from Guy, okay? Category is already developed, is premium. We continue to innovate, continue to develop new occasion, continue to chase every distribution opportunity. For instance, in Japan, we now, we are distributed by Acai, okay, which is the last country where we are, not with the Koch system, but on the back of that, we just agreed with CCBGI, which is the main coca-cola butler system to be in their vending machine because they see the category as an incremental opportunity for them so in the developed market it's continued innovation distribution making our brand more relevant to more people in the developing market your south asia your southeast asia china it first is maximizing the monster opportunity we believe the population there are four billion people we believe there are dozens of millions of people who can afford Monster, who likes a lifestyle of Monster, who likes the taste of Monster on first is maximizing the opportunity for them. But it will not be everyone. But now in every of these countries, we found a way to to recruit new consumer with Monster. Okay, and I will talk about China on India a bit later. But we we now, for instance, launch Monster in Thailand. Monster was not in Thailand. We launched with Swire in Thailand in quarter one on because we we adjusted some of our proposition or distribution. We found the right consumer for for Monster in Thailand is on the developing of the more affordable side we have been adjusting our proposition okay first is Asia is a vast majority of what consumer drinking in South Asia and China is non carbonated okay which need a different taste is a different packaging to reach the right price point and we have been learning over the past years to say how do we complement Monster with the right proposition which is helping us to want to have a full new segment where we never offer the right product to the right consumers. And then in the part where it is carbonated, it's a matter of finding out to have the right price and the right pack. We just launched Pakistan two weeks ago, and where you have now 250 million consumers who are not serving until now, and we are unlocking these type of opportunities in the more developing part of Asia.

Operator

Very good, very good. Hilton, Philippe kind of makes an interesting observation. I mean, the company over time has become more and more a portfolio of brands within energy. Obviously, Monster's still at the core. But in order to address different consumer needs, the company's evolved the portfolio to introduce brands to serve those needs. As you think about the growth opportunities over time, how much of those opportunities is Monster able to serve? of how far can that brand go without diluting the magic that represents this core of the brand versus how much of growth is going to be reliant on kind of satellite brands that you've developed in support of Monster?

Hilton Schlosberg, CEO

That's a great question because, you know, the Monster demographic is very clearly 28 to 35-year-old males. That's the demographic. And what's happened is the demographic has broadened as some of our consumers have got older and also women are huge participants in the energy category today so we you know we were in discussions we had meetings with CCI and Hellenic and CCP here in Paris and the numbers in the European markets you know almost 45 55 which is very different to how the brand started And in the U.S., we see that there are big opportunities to address the woman consumer. Traditionally, we've had a 16-ounce can, which is 473 milliliters, and that's been the can that we've used extensively, other than for some new products, which I'll talk about. We're now directing 12-ounce size cans, ready to address a more female-forward market, because if, you know, the research that we've done is that, you know, people don't want waste, women don't want waste, and, you know, they'd rather get a product that's a size that's, you know, convenient for them to drink. So, that's something we're addressing. Historically, and that'll be in the Monster Ultra line, because we're still very passionate about Monster, and we believe that Monster can gravitate into other parts of the new consumers in the energy drain category. I mean, what have we done already? We've got Rehab, which is tea. We've got Monster Java, which is our coffee line that we've had for many years. We have regular Monsters, we have Juice Monsters, we have Monsters that are Zero Sugar, the Ultra Line, which today the Ultra Line, if it stood on its own, it would be the third biggest category in the United States. So it's the third biggest energy group of brands in the United States after Monster and Red Bull. and Monster and Red Bull always kind of neck and neck. Last week, we were exactly the same in the U.S. this week. If those of you who read Weekly Nielsen, we're ahead of them, and next week, I don't know, I hope we'll stay ahead of them. But that's the way the U.S. market has emerged. Then we do performance energy, and that we do under a very different brand. It's called RAINN, and we do that. under a different brand we have other brands for wellness called storm and other brands for particular parts of of of the market affordable we use predator and fury depending on trademarks we have a great brand that we bought from as a result of the the bang collapse and bang is a really good brand and we're using that to test. We started in the US and we're doing that to test as affordable in some markets internationally and in Europe and in fact in Asia. So I think that we believe we have the ability to use Monster in a particular fashion but then we also have the ability to create new brands to address particular markets that we don't think will resonate well with the with a monster brand one brand you didn't mention is that is the brand you've just recently introduced flirt in the US yeah that's that's directed to a female forward consumer and we testing that in certain markets where that demographic shops and we've spoken about it on our calls and we keeping a very close eye on it we're monitoring its progress the media it launched a month or so ago the media is about to kick off and it's very much directed we've got a total woman structured management team that's running that brand they've just kicked off the media so you know I don't talk too much about it until we know you know the green shoots are actually growing so but we do we have this brand called float which is uh you know i think should do well but you know again uh it's in the hands of the consumer and uh you know the brand's just been launched great guy um as we think about

Operator

that theme as it relates to your your markets as you mentioned you know in some ways you know the original energetic markets um here in europe um how do you at the same time the the market is maybe less developed than some of the zero-sugar fitness-oriented brands that we've seen disrupt the category in the U.S. How do you think about positioning the portfolio here in EMEA to maybe get ahead of those trends and make sure that Monster is at the lead?

Guy Carling, CEO

I think it's been interesting to see how the energy category, whilst being older in Europe than the US has developed in slightly different ways over time I think one of the things we see in Europe especially is less segmentation than is in the US and I think the Red Bull a monster that have been around for a long period of time occupy a large piece of consumer consumption in some of those segments so you know we've seen you've all heard and you know the phenomenon that's been on social media white monster but ultra white which you know just even this year according to Nielsen is growing over 50% you know it's a 12 year old skew it's our one of our lead skews and is growing over 50% when we took when we first took brands like rain into gyms we've discovered ultra was already there ultra as a brand platform and again here would be like the number two brand in Europe it's 50% female is 50% male so it's actually bringing in female consumers in line with the category so I think we see a strong role for our core business in monster our fantastic relationship with the bottling partners again we met with CCP with Hellenic this week are taking our existing monster skews into more and more channels of distribution especially away from home food service and it's giving the fan favorites a platform in channels and occasions that it wasn't previously available we're also increasing our multi-pack business of those core foundation skews the fan favorites so people can take four packs nine packs 12 packs home ready for a treat ready to relax at home so we're getting half of our growth and I think that's what we're excited about from our base business and that is different from the rest of the category so the category as a whole is in kind of a decent double-digit growth but outside of monster is predominantly through innovation yeah whereas we're actually growing in line with the category from that existing base monster business and skews and then we're getting an extra double-digit growth from our innovation yes and the innovation is coming in sugar so this year we talked on the call our Viking berry product was the best innovation launch most successful we've ever had in in Europe full sugar and we've got a really strong consumer base that wants full sugar about 47% of our consumers only drink sugared energy and and sort of deliberately so and so we've got innovation there then we've got innovation in the ultra line innovation last year Lando Norris zero sugar was brilliant 25% of its consumers were new to the category 25% were new to the brand and 25% were drinking more as a result of as a result of the innovation and obviously tied in with a wonderful asset a hero people could uh sort of hold in their hand as they were consuming so um innovation is a huge part of what we do um and i think you know growing our business 55 through the existing skews and 45 through innovation um to grow ahead of the category is a real kind of foundation for the future um and then i mean the the portfolio the strategic brands from um that we've had uh since the coke deal over time, Relentless in GB, Nalu in Belgium, Burn across countries, play a really important role. It's a different consumer looking for a different lifestyle, different price point, different personality. And the affordable business we have with Predator and Fury in Africa, I think it's really important. It's affordable vis-a-vis European pricing, but in Africa it is just mainstream energy. The pricing compared to CSD matches that from monster in Europe. And it plays that same role has equity, it has a value proposition, it has fans, we do marketing to support it. And across Africa, we've seen predator and fury, you know, turn into the most valuable brand in Africa from a Nielsen sales perspective. So different things for different places and different consumers.

Operator

Yeah, each of you mentioned partnership with Coke, so let me let's spend a minute there. Because I think, you know, from the outside, that's that partnership has um well partnerships both with coke and and the bottling the bottlers seems to have only strengthened over time and it's a time when we just talked about there are more brands that are being activated within this within the monster portfolio there's more innovation we'll talk about that in a bit there's more packages there's more sophisticated revenue growth management all of which is is not able to be accomplished by you alone right it's in partnership with the with the coke system so we could never we could never operate without the cocoa system i mean in in the u.s it was you know somewhat easy but internationally it's it is a it is an issue

Hilton Schlosberg, CEO

because um when we started off internationally we had to find distributors um it was tough to find them there were a lot of trademark issues a lot of issues dealing with uh you know competitors And the one good thing that we've achieved with the Coca-Cola organization, and particularly with the Bartlers, is a seamless manner of operating a business where they are the distribution partner. So we haven't had to go and look for distribution partners. We haven't had to kind of analyze the better and the worst. And this is a long-term relationship, and it's worked really well with the Bartlers. And with the company, we have a great relationship with Enrique coming on board and John Murphy. And, you know, we're working together to build a great business.

Operator

I mentioned more innovation. You got to talk a little bit about EMEA. But in the U.S., you've got limited time offers coming to the market really for the first time. You've added some splashes of flavor, strawberry to the core monster. These are things we haven't seen Monster do before. At the same time, there's a big push right now on more sophisticated price-back architecture, RGM. Maybe talk about how that evolved, why now is the right time, and how much runway you see on those initiatives.

Hilton Schlosberg, CEO

Well, RGM, we always had an RGM department, and lately we've built it up And we're working more aggressively with, you know, with that department on the basis of, you know, kind of looking at opportunities to increase price, opportunities for different packages, for different sizes. And what Guy said earlier about EMEA is 100% true of the U.S. I mean, we were in, we've been in four packs for a long time. We've been in eight packs, we've been in 16 packs, we've been in 24 packs. and the skills that this group is able to deliver to the organization is exactly what it should be doing, and that is advising which packages, which sizes. For example, I spoke earlier about the 12-ounce, we've got a 12-ounce, 24-ounce, 12-ounce, 24-pack, I'm sorry, that's going, for example, into the club channel. And these are all initiatives that have been moved by the RGM department. The increase in price in November 1 was very much structured by that department or advised by that department because it wasn't a one size fits all. It was a mix, and we said that on our calls, of different kind of structures for different markets, some with promotional allowances, reduction promotional allowance, some with increases in prices um so it's it's it's a kind of mix of of the two and then we've always had an aggressive innovation pipeline as guy mentioned innovation it always for us is incremental to the core our core grows uh sugar products grow and non-sugar products grow more than than the sugar products but um overall we we uh you know we move ahead with innovation we've always had good innovation but this year has been exceptional we have the america's 250 celebration and we have a number of skews that are limited time offers that are addressing that particular situation which is you know it's it's something very special in the united states and you know we're really privileged to be able to offer products across the board to satisfy you know that that kind of opportunity so we have limited time offers we have a monster juice we have red white and blue which is an ultra line which is you know if you look at the recent Nielsen that screamed right up near the top of the charts in in in the the the Nielsen skews we have limited time offers for for our bang line for our rain line and we also have a limited time offer which we may keep as a permanent offer for one one of our other brands that were acquired from the from the Coca-Cola company which is full throttle so there's a lot of a lot of great things that are happening this year we've had a full calendar of innovation and yes we did and have launched our what we call our flavor shots initially they were launched with strawberry in both regular and zero sugar variants and actually are doing really nicely so in the autumn we come in with vanilla shots which will be the traditional classical monster energy drink and the zero sugar drink with a shot of vanilla and it really does make a difference to drink and gives the consumer an additional reason to purchase a product. And your confidence in pipeline one of the concerns is that there's so much this year that so much incremental innovation that'll be hard to cycle about that we've got a good calendar for 27 i don't want to talk much about it but there's a good innovation calendar for 27 and some of these lto's we maybe bring back as lto's in 2027 as well you know these lto's for the america's 250 could very well sit there's a fourth of july uh promotion so you know there's a lot of great things that are happening and uh we just got to stay true to our course and run our business run our play which is what we've always been that's why we've never attended these conferences we've been running our business but we have uh mark astrocan now who's um whoever he is uh i i our head oh there he is at the back so he makes us come and do these conferences.

Operator

Well, we all thank Mark. Philippe, maybe putting back to your markets and really focusing in on India and China, you mentioned just the huge theoretical runway for growth, which has been there for a long time, but it really feels like we're seeing inflection. I think India doubled essentially in the first quarter.

Philippe Votquet, Other

To what do you attribute that that spike do you think this is the moment where you can really scale those start to scale those businesses and and and I guess some of the key initiatives you have in place to do so definitely we see this to market as gigantic opportunities you have more than 1 billion consumers in both the categories underdeveloped in both but there are two very different stories if I start with China is we've been in China nearly for 10 years is on what we got into China we realized that we had to have two challenges we didn't have in most of the countries. One is we had to create the sparkling energy drink category. It was not existing in China. It was Red Bull, Austria, was not existing in China. The product which were giving the energy was a small traditional, is non-carbonated product that the Chinese are naming flavored vitamin drinks. so there was no so-called energy drinks, and all of this was non-carbonated. So bringing Monster was very different from anything they've tried before, but it was not only that challenge, is what in the rest of the world when we brought Monster to Europe, is we had already some equity, built from our global asset, from our presence in social medias. China has been a great digital war. Okay, so the numbers of Chinese who had heard about Monster Brand would recognize the claw was very small. So we had to create new category and build a brand nearly from scratch. Okay, and therefore we took the time to say who are the consumer, will be open to an international brand, would be liking a carbonated drink, which is not tasting like anything else I've had in China, and then build it step by step with the bottlers. We have two great bottlers in China, Covco and Swires, and they've been very committed to the energy drink category because they've seen the opportunity in the rest of the world on step by step we found the right consumer with the right marketing approach and sampling our product to the right people we are much more focusing on the tier one cities instead of going to the factories is we are much more focusing on the universities where the cook system has great access to the thousands of mega universities you have in china on step by step we are building the recruitment so we have now we believe we have now built a very healthy foundation these our product are growing our distribution is ticking and therefore we are able to build on what we believe is solid and because now we have built a good base for monster we're able to say how do we start addressing the other opportunity which is a non-carbonated drink so we launched a predator in in china two years ago here and we are learning because they're very different consumers it's a consumer which is not speaking any english which is drinking non-carbonated which is living in factories or what they name in the factory villages where we were with Hilton two years ago in Foxconn. You have, in that plant you have 120,000 people who are living in the plant on that where the traditional added drink is big. So we're working on building monster where we believe we have a strong foundation on learning how to get into that more traditional factory blue collar segment in China. And we see both as great opportunity. One we have to create the category on the other one we have to learn how to get share in what is already a big enough category. India is a very different story. Red Bull has been in India for a long time. We have been in India for nine years. So people knew what energy drink was. They're following the social media, they've heard about it. But the price of a soft drink is very low in India. It's even lower than China. It's selling for 20 rupee, which is $0.23, that the price of a soft drink, is when we launched Monster on Red Bull, we sold it at six times the price of a CSD. Okay, and you have 1.4 billion people, so some people can afford a Monster, but we could not go everywhere. We had to find where to go specifically to target the right consumer, doing mass advertising would be very inefficient. But now we have done that work, same thing, the co-computers have been great partners, we have been able to cluster India, to be very segmented to say, where are the dozens of millions of people, who can afford a monster? Because trying to be available to people who cannot afford it is a waste of space and a waste of time. And once we did that, we said, now we can complement monster and we created a price-back architecture which is unique to India, where we have monster at six times the price of a CSD. We have predator in a can at three times the price of a CSD because we believe there is an emerging middle class. The people who are working in all the call centers in Bangalore all the tech part cannot afford a monster but they can afford a predator at 60 rupee. And then over the past two years we've been complimenting that with a PET which is still premium to CSD because we believe is a functionality, is a taste, a lifestyle can justify a premium. And now we have this three tier price architecture which is helping us to go to with the right product to the right consumer with the right taste to be the right marketing. We have monster friends and very focused on gaming which we have seen in association with people, people who can afford to spend on gaming as people who can afford to spend on a monster can. Well, Creditor is going more after the people who are following cricket, but we are going to street cricket to make sure that we build a lifestyle which is very close to what they are doing. So we have now that price pack architecture with very clear portfolio to help us unlock the opportunity of India. Again, we believe we have now a good foundation to go after that market.

Operator

Very interesting. All right, Hils and I spared you. We almost have, we're almost at time and I haven't even talked about aluminum. So I'm gonna ask you the requisite question on aluminum and costs, what you're seeing on that front, your confidence in being able to manage through it. And as we think about holistic profitability and margins, I also love a little bit of insight, if you would, on how you think about SG&A management, SG&A leverage as we realize some of the growth we're talking about.

Hilton Schlosberg, CEO

Okay, so let's start with the second point, SG&A management. You know, we're very careful with the way that we operate and the way, you know, we spend particularly on marketing dollars. Our business is focused on not on advertising in the classical sense per se, but in establishing relationships with athletes, relationships with and endorsing opportunities like Formula One, UFC, and you know all of those things you know they they have a cost to them you know there's some other ones that we've been working on that we're really excited about you know the point is that we believe in our brands we're a growth company and we we need to support the brands of marketing so you've seen what's happened with SG&A it's kind of you know I think being well managed up now and i i don't see why it wouldn't be well managed going forward and um as i say we take opportunities when when we see it we see a need for example with the relaunch of storm it's requires marketing dollars with the relaunch with the launch of flirt it's you know you can't just drop a product in a market and hope for the best so you know there's um the the business is growing the revenues are growing sgna um i think is is well managed and will continue to be well managed and then just very quickly on aluminum um so um we have a very active hedging program in place in the company and we've spoken about this on our calls we hedge on a ladder basis something that is we're involved from the top down from from me to our cfo our deputy cfo our head of treasury we're very focused on doing the very best we can with aluminum. As I mentioned in the first quarter, we had a 1% hit to gross margin from aluminum. And in the U.S. we have this Midwest premium, which I still don't understand, but it's kind of expensive and goes up year on year. I'm kidding. But it's a difficult financial metric that we have to pay for. and so we've been able to manage aluminum in what we called in a modest sense and our pricing, the increased price that we took in November actually offset that increase in aluminum in the first quarter. As we go forward, we believe that it will continue to be modest and one of the reasons is that when you look at the cost of a can, aluminum is a small portion of that cost. Because you have the can, you have the sheet, you know, you have the ingot, you have the, which is aluminum, ingot to sheet, sheet to can, so, you know, so it goes on. And because our margins are, you know, are good, you don't see the same impact that you would ordinarily in a company that had lower margins. So I hope that answers the question.

Operator

Sorry to end on aluminum, but we're out of time. And I thank you all for your time, and thanks for joining us, everybody.

Hilton Schlosberg, CEO

Yeah, thank you.