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Executives

Rodney C. Sacks - Chairman of the Board, CEO

Analysts

Judy Hong - Goldman Sachs

Scott Van Winkle - Canaccord Adams

Alton Stump - Longbow Research

Mark Astrachan - Stifel Nicolaus

Hansen Natural Corp. (HANS) Q1 FY08 Earnings Call May 7, 2008 5:00 PM ET

Operator

Good day everyone and thank you for joining today's Hansen Natural Corporation's First Quarter 2008 Financial Results Conference Call. As a reminder today's conference is being recorded. I would now like to turn the call over to Chief Executive Officer, Mr. Rodney Sacks. Please go ahead sir.

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Good afternoon, this is Rodney Sacks speaking. I have Hilton Schlosberg, our President with us and Tom Kelly, our Controller, Vice President of Finance. Thank you for attending the call.

At this time I’d like to record that certain statements made on this call may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding the expectations of management with respect to revenues and profitability. Management cautions that these statements are qualified by their terms or important factors, many of which are outside of the control of the company that could cause actual results and events to differ materially from the statements made herein. The company assumes no obligation to update any forward-looking statements.

As indicated in the announcement, gross sales for the 2008 first quarter increased 28.4% to $244 million from $190.1 million a year earlier. Net sales for the first quarter increased 27.9% to $212 million from $165.9 million a year ago. We estimate that both gross and net sales for the quarter were reduced by approximately 8% to 9% as a result of purchases made by customers in advance of the price increases effective January 1, 2008 for Monster Energy in 16-ounce cans and the Java Monster line.

Net sales of the DST division increased 32.4% for the quarter, while the net sales for the Warehouse division decreased 0.4%. In the DST division sales attributable to Monster and Java Monster products increased 36.1% during the quarter, while sales of Energy, Juice, Unbound, and Lost were lower.

In the Warehouse division, sales of apple juice and juice blends and tetra pack were higher, while sales of teas and Hansen's Energy were lower. Sales of 192-ounce case equivalents increased by 2.9 million cases or 15% from 19.4 million cases to 22.3 million cases in the quarter. Average net sales price per case increased 11.3% from 8.55 per case to 9.53. The increase in average net sales price per case is attributable to an increase in the proportion of case sales derived from higher priced Monster Energy and Java Monster products, as well as the price increases mentioned previously, which were effective January 1.

Over the quarter the entire US ready-to-drink beverage business has seen weakness across all categories. This weakness was most pronounced in c-store cold drink channels where the vast majority of energy drinks are sold. Consequently the moderating growth we have seen in energy drinks appears in part due to the challenging macro economic environment, and the resulting declines in store traffic primarily in the C&G sector and especially in Southern California.

During April, Coke reported that their North American beverage volumes for the quarter were flat and would have been down without acquisitions, namely Glaceau. PepsiCo reported that their North American beverage business had declined almost two points in major channels versus earlier expectations of modest growth. CCE notes of their total non-alcoholic ready-to-drink beverages in Nielsen measured channels, all channels combined actually had declining cases during the quarter, and PPG also reported that the liquid refreshment beverage category was down in measured channels in the quarter.

Other beverage categories, which have historically shown growth, have also slowed considerably. For example, the sports drink category was only up 1% in the quarter. Against this general slow down, the Energy drink category still managed to achieve good growth. In the C&G channel, the Energy drink category grew 18%, while in the grocery channel, the category grew 13%. Consequently, the Energy drink category’s continued gain in both dollars and volume despite the macro economic environment demonstrates the strength and continued growth of the Energy drink category. Consequently the growth of our Monster Energy brand outstripped continued positive category growth. The Monster brand grew 51% in the C&G channel and 42% in grocery. According to Nielsen all outlets combined for the 13 weeks ended March 29, 2008, the Monster brand grew nearly 50% and increased its market share by nearly six points to 27% market share compared to Red Bull, which grew 17% but had no gain in market share, which was flat at 37%.

Rockstar grew 5.1% but lost 1.3 points and now have a... at the end they are having 11% market share. Full Throttle was down 3.5% in sales and lost 1.2 points to a 5.6% market share, while Amp grew 22% with a 0.2point gain to a 5.5% market share. Java Monster performed particularly well and in dollars, sales of Java Monster in the convenience channel had reached about half of the Starbucks Frappuccino line. We think that this is a remarkable achievement bearing in mind that Java Monster was just launched a year ago and throughout the year was continuing to gain distribution and is still below… distribution figures are still not up to the levels of Starbucks Frappuccino.

Energy drink sales in certain non-measured channels such as club stores have experienced some softness in the quarter. The Energy drink category has overtaken and is now larger than both the Sports drink category, like Gatorade, Powerade etcetera and the ready-to-drink category AriZona, Lipton, and Nestea by a substantial margin. The growth of the Energy drink category continues to outpace the growth of both the sports drink and ready-to-drink tea categories. This clearly supports our view that the Energy category is not a fad and its continued growth is further evidence that Energy drinks are becoming an integral part of everyday life. In fact, Energy drinks are now the second biggest category in c-stores by dollars of the CSDs and continue to take shelf space and market share primarily from CSDs. In dollars, in c-stores, this premium priced category is even bigger than bottled water, sports drink, and ready-to-drink teas.

The latest Nielsen figures for the 13 weeks ended 4/26/08 were received by us yesterday and reflected increase in sales for Energy drinks in the convenience category of 16.5%, 12.5% in grocery, and 27.7% in drug. According to Nielsen all outlets combined, the Energy category grew 15.9% during the period. Monster grew 47.5% has picked up 5.9 points of market share to 27.5% while Red Bull grew 14.2% and lost point six of a point of market share. Rockstar grew 4.6 and lost 1.2 points of market share to 11% while Full Throttle lost 6% and 1.2 points of market share down to 5.3 in total. Amp decreased sales 29.3% and gained 0.6 points of a point to a 6.2% market share, but at the expense of Pepsi’s other Energy drinks No Fear, Adrenaline Rush, and Sobe, which lost in excess of 3 points in aggregate.

The NOS brand which was acquired by Coke as part of the FUZE transaction benefited from a substantial increase in distribution levels as a result of that brand being taken through the CCE system. In the latest four-week period, in the convenience category, Monster share increased to 29.1% while Red Bull share declined to 35.1% and so we all continuing to close the gap on Red Bull.

Gross margin for the quarter decreased 2% to 49.4% from 51.6% for the comparable quarter in 2007. Factors, which positively affected the gross margin was the increasing product mix to DST products from 84% to 88% for the quarter as well as increases in the past of certain of the Monster and Java Monster products. Gross margin was negatively affected by the change in sales mix primarily the increasing sales of lower margin Java Monster products. Sales of Java Monster increased to just over 14% of our gross sales for the quarter. Additionally, we experienced an increase in certain raw material costs principally the process apple juice concentrate, which had a greater effect on the Warehouse division.

We believe that the price increases for Monster and Monster Java absorbed the increases in the cost of goods for those products. However the Warehouse division incurred substantial increases in cost of goods for its juice and soda products. This increase had a material impact on the gross margins for the Warehouse division and resulted in a negative contribution margin for that division for the quarter. We have a process of increasing prices of selected products in that division to offset such price increases and we are able to negotiate an early termination of the WIC contract, which going forward will be on a non-exclusive basis and this will address the losses that were incurred in the quarter with our apple juice and juice blend products.

For example market prices for apple juice concentrates have almost doubled over the last year. Sales mix and additional cost contributed about 1.7% of the decreasing gross margin. The balance was attributable to the increasing promotional allowances principally an increasing chain marketing allowances and programs to increases shelf space. Although the cost of the programs is equally amortized over the calendar year, the bulk of shelf resets did not take place until the second quarter. In fact in certain chains shelf resets are full at this time in the process of being implemented. The cost of the company for shelf space on a per shelf basis in 2008 is comparable with the cost that was incurred by us last year for similar programs. The amount of additional shelf space that we were able to secure varies greatly from chain to chain but on average has come down to between 30% and 60% of incremental space.

We caution that we do not believe that there is a direct correlation between the amount of addition shelf space and sales. However we do believe that the increased shelf space will provide additionally visibility for our product and will result in increase sales. Additionally, as we have been able to secure shelf space for Java Monster in the coffee door we believe that this will reduce the cannibalization that we believe occurred in the past due to Java Monster having been placed directly into Monster's existing space in the energy door.

We are hopeful that going forward the cost of promotional allowances particularly chain CMAs and MDF will be lower as percentage of net sales as our sales increase over the remainder of the year. Operating income for the three-months increased 34% to $42.8 million from $31.9 million a year ago. Operating income as a percentage of net sales increased to 20.2% for the three-months ended March 31, 2008 from 19.2% for the same quarter last year. Net income for the three-months increased 43% to $28.8 million or $0.29 per diluted share from $20.2 million or $0.21 per diluted share last year. Interest income was $3.6 million compared to $1.5 million a year ago and our effective tax rate for the three-months was approximately 38%. The change in the tax rate is attributable to the domestic deduction previously described. We expect our tax rate to be in the 38% range going forward.

Distribution cost was slightly lower at 5.7% compared to 6% in the same period last year. Increased cost of warehousing was offset by freight savings primarily due to the addition ... of additional co-packers around the US. Selling expenses for the quarter were 14.9% versus 10.1% a year ago. The increase in selling expenses was largely attributable to increased commissions and royalties which increased to 1.7% from 1.2% in the 2007 quarter largely due to commissions payable to Anheuser-Bush under the AB Coordination Agreement as a greater proportion of our sales are now being affected though the AB wholesalers.

Sponsorships were 4.8%, up from 2.7% a year earlier. A large component of sponsorship cost during the quarter relates to our sponsorship of the Supercross Series, which is now called the Monster Energy Supercross series, which we believe is a very important property for us and for the brand and helps expose our brand not only in the US but internationally where the series is shown on television and throughout Europe. The Supercross season takes place between January and May. As this is the sponsorship of an event as opposed to an annual sponsorship of athletics where we traditionally have focused and which are usually amortized over the full year, the cost of this sponsorship has been fully amortized over the season, which resulted in about two-thirds of the sponsorship cost for the event being expensed in the first quarter.

The cost of sponsorships also increased due to the sponsorship cost incurred by us to launch… support the launch of Monster in the United Kingdom. Cost incurred by us in connection with the launch in United Kingdom were both sponsorships as well as G&A amounted to some $2 million in the quarter, but we obviously didn't have the benefit of sales, there were very nominal sales that took place and we are now starting to get listings and starting to sell going into the second quarter.

Additionally merchandise displays increased from 1.1% to 2.2%, [inaudible] was up from 0.9% to 1.5% and in-store demos primarily in connection with the launch of Java Monster in some club stores was up from 0.4% to 0.9%. We believe that the selling expenses as a percentage of sales will be lower going forward as sales that occurred at the end of last year in anticipation of the price increases impacted sales in the quarter, timing issues occurred with respect to both Supercross sponsorship and the launch cost of Monster in the United Kingdom will not reoccur.

Payroll and G&A costs excluding legal fees associated with the stock option investigation and distributor terminations were approximately the same in both periods. With regard to customer mix in the quarter, retail groceries sales decreased from 10% to 9%, sales to club stores, drug chains and mass merchandisers decreased from 16% to 14%, while sales to full service distributors increased from 69% to 73%. Sales to health food distributors remained flat at 2% and generally other sales reduced were from 3% to 2%.

With regard to sales by market area, gross sales outside of California increased from 68.9% to 76.4% this quarter. Sales in California now represent less than 25% of the overall gross sales of the company. In fact, in the DST division, sales outside of California now represent 82.7% of that division sales, up from 75% last year. Gross sales to customers outside of the United States increased from $5.6 million to $17 million and as a percentage such sales increased from 2.9% of gross sales to 7%.

I think that it is pertinent to point out that if one were to basically take into account the estimated buy-in at the end of the fourth quarter and add those sales and the effect that they would have had on this quarter had they fallen in the quarter, and excluding the extraordinary one-off cost with Monster UK, which really didn't have any corresponding income, the result would be a pro forma earnings diluted EPS of about $0.36 as opposed to the reported EPS. I think that just… we believe just shows a more normalized trading position.

Moving to the... moving to the balance sheet, working capital increased from $187.3 million to $276.3 million. Accounts receivable were $81.8 million at March 31, slightly up from the $81.5 million at December and up from $68.8 million at end of March last year. Days outstanding was 32.7 for receivables at March 31, up from 28.7 in December, but down from 35.4 the year before. Our inventory balances were $109.8 million as of March, up from $98.1 million at December 31, and up from $61.6 million the year before. The increase in inventories over the prior year was primarily attributable to increased raw materials and finished goods related to Java Monster. Average days of inventory was 92 days at March 31, which is about the 73 days of inventory as of the end of December, and 69 days the year before.

Accounts payable balances was $60.7 million at March 31, up from $56.8 million at the end of December. Cash and cash equivalents were $51.2 million from $12.4 million at the end of December and short-term investments increased to a $107.9 million from $63 million at the end of December. Long-term investments reduced from $227 million at the end of December to $164.4 million. Long-term investments are comprised of municipal or educational other public body related notes with an auction reset feature. With the liquidity issues experienced in the global credit markets certain of our holding in our... of our auction rate securities having a face value of $207 million as of March 31, experienced failed auctions.

The face value of such securities have since been reduced to $169.8 million as of the end of April after redemptions during the month. This bought the strong credit ratings attributable to these notes for liquidity reasons we determine that a temporary impairment of $5.4 million had occurred as of March. And therefore recorded a charge of $3.2 million net of tax as a component of accumulated other comprehensive loss. These securities continue to accrue interest at their contractual rates, until their respective options succeed or they are redeemed.

Based on our cash and other short-term investments and expected operating cash flows and other sources of cash, we do not anticipate that the current lack of liquidity of these investments will have a material effect on our liquidity or our working capital. To give you a trading update, gross sales for April were approximately $103.6 million, 29%-odd up on April last year. Sales of Monster and Java Monster brands in the month are up approximately 35.4% over last year. We have continued to make progress with our international growth plans in the United Kingdom. As I indicated earlier we incurred approximately $2 million in cost relating to the United Kingdom operations, but do not have a benefit of sales. Sales have commenced and we believe will gain traction going into the third quarter of this year. We were also revaluating the potential launch of Monster in certain additional countries, in Europe later in the year, but have not finalized arrangements in that regard at this time. Sales in both Canada and Mexico continue to improve and we are continuing to gain market share in both those countries.

Additionally, distribution of sales are also continuing to improve in South Africa, which is another overseas market, which commenced sales recently. On the Hansen Natural side, we are continuing with the roll out of our new sports beverages in 10.5-ounce sleek cans.

In conclusion I would like to reiterate that the additional sales of approximately $21.5 million that occurred in December and would otherwise have occurred during the first quarter had a materially effect on our results for the first quarter and the impact there are ought to be taken into account in evaluating the level of expenses that are likely to be incurred by the company for the reminder of the year. Our ability to increase our operating income in the phase of increased operating expenses as compared to the decrease in operating income suffered by all of our major competitors in their respective North American beverage businesses in the quarter underscores in our view the long-term sustainability both in sales and profitability of the Energy drink category.

One of the other housekeeping items I would like to address, we have experienced an unbelievably large number of requests for telephone discussions, consultations, in person interviews, making it literally almost impossible for us, particularly myself, to spend the time and attention to vote to the growth of the business and the expansion of the business. As a policy in future, we are going to limit the amount of discussions and meetings that we hold with investors... potential investors and what we are proposing to do is there will be an annual meeting later during the course of this... next... current quarter where we will be available to answer questions and also what we are proposing to do is to set up a procedure in the future where we will we have a... we call it a mid-period or mid-quarterly discussion with investors through a conference call where we will be available to give a trading update and to answer specific questions and investors will be invited to attend that call and to ask questions.

And in that way, we will try and limit the time taken by management to deal with these requests. We don't object to dealing with the requests, its just some people come very, very burdens and not enough time to actually deal with the large number of requests that we have been experiencing. I would like to open the floor to your questions at this time.

Question and Answer

Operator

Thank you, sir. [Operator instructions] We will start with Judy Hong at Goldman Sachs.

Judy Hong - Goldman Sachs

Hey Rodney, how are you?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Fine. Hi, Judy, thank you, good in you.

Judy Hong - Goldman Sachs

I just wanted to understand just the sales number in the first quarter, you talked about the inventory destocking affecting the first quarter by 8 or 9 points and then you had some of the non-Monster brand showing some decline, so if I understand you correctly, is that Monster... on an underlying basis was up... just for 7or 8 points of inventory destocking, what do you think the underlying number was for Monster in the first quarter?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

So Judy, I am just not completely sure, I think I gave the number for Monster itself was up in the quarter was up 36%.

Judy Hong - Goldman Sachs

It's up 36%, right. But that was also depressed by the inventory destocking that happened in the first quarter?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Right, right.

Judy Hong - Goldman Sachs

So on an underlying basis, if we add 8 or 9 points that you said impacted the first quarter number?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Right.

Judy Hong - Goldman Sachs

The underlying number would have been closer to 44%, 45%?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Yeah.

Judy Hong - Goldman Sachs

Okay. Now, where does the inventory level stand at the end of the first quarter at the wholesale level, has that now come to normalized rate?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

We think it has, but again it's something we've... I don't have precise numbers on.

Judy Hong - Goldman Sachs

Then you also said in four weeks ending April 26 in the c-store data, Monster was up 48% to 47.5%?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Right.

Judy Hong - Goldman Sachs

Why is there such a disconnect then between that number and your gross sales number quarter-to-date, because you said quarter-to-date your gross sales are up 29%?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

29% for the company.

Judy Hong - Goldman Sachs

Okay.

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

And I gave you the breakup. So, just on other question, we said about 44% is probably a little bit higher than that 45% if you take the effect of the buy-ins into accounts, probably slightly higher.

Judy Hong - Goldman Sachs

Okay.

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

The number is about 36%. 36% is the actual and... what we're saying is that, if you take that $21 million, yes, we would be closer to 50% increase in the quarter for Monster.

Judy Hong - Goldman Sachs

Right.

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Now in the month of April, there what we've said is that the month of April is up 29% but the number for Monster and Java Monster is closer to 36%.

Judy Hong - Goldman Sachs

36%?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Yeah.

Judy Hong - Goldman Sachs

Okay. And so if I... but then you also said that in the c-stores those brands are running up 47% or so?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Right.

Judy Hong - Goldman Sachs

So I'm just trying to understand why there is the disconnect between the 47% versus the 36% gross sales number, I think you've reported?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

There is timing, there maybe a little weakness in some of the other channels, there is unmeasured channels, I can't tell that exactly, but it's a timing issue with the purchases from distributors and their stocking. I just don't have a handle on that. I can only tell you what our numbers are and what the sell-through is.

Judy Hong - Goldman Sachs

Okay. And can you just give us a little bit more perspective on what's going on with these other brands, the LE brands that are showing more of a decline?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Yeah. They just have shown a decline, we've repositioned the Lost Energy brand, we've got new packaging, we've actually gone out and done a test market in Florida with that and we're busy with that now, resetting shelves that we have a better line up, full line of on that and we're seeing the results and then we are going to implement that to enroll and new packaging and the extra... the product out across through the U.S. We believe that is still a viable brand and we think that that's got legs. The case of Unbound... that's something that we are seeing a sort of falling off and we're not looking to promote that going forward and the same thing would jog up. In the case of Energy juice, what has happened there we believe in the brand, we are currently repositioning that brand, it was one SKU, it was just lost on that juice shelf. We are now going to... we are in the process of launching three SKUs for that brand and will be... that will be going out within the next couple of months. Once you do that, we all going to have a fully-fledged launch of the three juice items, which are all 100% juice and are non-carbonated. So, that we think that, I have a point of difference, we think that there is a niche for those products, and we believe by having the three products, we will be able to gain visibility on the shelf and really be able to make something of them. So, that is where we are, but in the, while we've been repositioning that brand, we haven't put Monster behind it, because of the repositioning and the re-doing of the packaging and that brand has certainly fallen off in sales as compared to last year there were some pipeline in the brand last year with the AB distributors, but we believe that, that will pick up as we launch going into the end of this quarter, or the beginning of the third quarter.

Judy Hong - Goldman Sachs

Okay. And then, on your gross margin line what is your expectation in terms of how that number could behave for the rest of the year. I mean clearly you are taking more price increases in some of the other brands but you've got the average impact of the Java mix, are we looking at the first quarter as sort of the trend line going forward or how do you think that that margin will behave.

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Well, one of the biggest factors on that margin, there are two areas, one is the mix of product, as I indicated Java Monster is now about 14%… it’s over 14.5% of our gross sales. We think that's not going to have a much larger percentage increase from where it is now, it will creep up probably a little bit still but not by much. What we do, what we have managed to contain is the pretty much the cost of Monster products within the cost increase on the Monster side, what we will find is some relief, we believe some relief in our gross margin by reducing our promotional allowances as we go forward. The promotional allowances are a big factor in between the gross and net amounts and then obviously on the margins. As I indicated, we've sort paid for a lot of the shelf programs, they've been amortized over the year, and we haven't really got the benefit of those programs going forward. We think that, by getting the benefit of those programs in additional shelf space, we will have increased sales, and what's going to happen is you're going to not have a commensurate increase in the price obviously of those allowances. They're going to basically continue at the level that we've expensed them at. So as a percentage they are going to go down and that will have a positive effect with think on the margins. In the Warehouse division, the WIC contract is also stimulated in April, and the results of that, quite a large portion of the allowances between gross and net in the warehouse division, but on the blended right was attributable to the rebates payables to the state under the WIC program, those will also no longer apply which will effect that. So, we do think that going forward, once we start looking at those costs a percentage of sales they will reduce and there will be a commensurate increase in gross margins. I can't tell were they will go to. But, we do believe that they will be an increase in our gross margins going forward.

Judy Hong - Goldman Sachs

Okay, then just my final question, you said that you are starting to get some listing in the UK market. Can you just give us some perspective and how optimistic you are about that opportunity and how quickly we would see some contribution from your sales and profit perspective?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

We are very optimistic about the market, it's a large market, it's a big market for energy drinks, we estimate that market to be probably about $800 million to $900 million probably even close to $1 billion. We think that we can make an impact in that market. It is going to take time. They have pretty strict rates reviewed dates. And so we've got fit into and make the difference schedules of the different channels. That's taking time, but it is not as though we can press a button and put it into existing space. We don't have existing space. And so for us to roll out our brand versus a Coke or a Pepsi is a very different scenario. So, we've gone into two of the big wholesalers there. We all start... starting to take steps to get into the, what they call garage four course the gas stations. We are all looking at a number of other avenues and it is going. So whilst we are very hopeful it is going to take time and I'm can't put a time on it, but I'm hopeful that by the time we get to the third quarter, we will be starting to achieve some decent distribution levels and start to see some sales. But again, as we go forward into the year I don't expect there to be a contribution from the UK for a little while. I do obviously anticipate that we will not have this sort of negative cost that we had in the first quarter where we didn't have any sales to offset it. But hopefully we believe that we are hoping to get to a sort of breakeven by the year-end. But that will depend on how quickly we were able to ramp up sales in the UK. But long-term or the medium-term, we really think that's an exciting market, it will give us a good base, and that's really helping us get to understand the European markets and how to launch in Europe, and we all started to obviously as I indicated making enquiries about appointing distributors in other countries and setting up an infrastructure in other countries to start launching the products there. We're in the middle of that now and hopefully that we will be able to actually go into some additional countries before the end of this year.

Judy Hong - Goldman Sachs

Okay. Thank you.

Operator

Thank you. Next we will move to Scott Van Winkle with Canaccord Adams.

Scott Van Winkle - Canaccord Adams

Hi Rodney, how are you doing?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Hi, Scott. Fine, thank you. And you?

Scott Van Winkle - Canaccord Adams

I'm good. The first question you mentioned in the mid-quarter update, which I like the idea. Have you ever thought about hiring an IR person to help you out with all these questions?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

We could hire an IR person, but I... the business is very, as you know, it's very personal, it's very, we are very much on of top of it. It's... I don’t think anybody from the other side would be very impressed when they get a formal presentation from somebody who really doesn't have a real handle on the business or the... some of the issues and the intricacies. And we just believe we are better served where we are being involved and remain involved in dealing with investors, but at the same time it is a pretty big drain on our time.

Scott Van Winkle - Canaccord Adams

So, Rodney, two questions that I have really revolve around I think most have asked this question. And that is the category deceleration and second is gross margins. So first on the category, your business in general starts accelerating year-over-year growth rate. You mentioned the strong Neilson growth rate in the 13 weeks ending April, but can we look at the March quarter may be the Neilson data relative to December quarter. Obviously it was up year-over-year at a good pace. But did we see the dollars up on a sequential basis from the December quarter into the March quarter?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

I can… we think they are about... I'll give you the number here, if you could calculate…about 150 or just deduct it from that. The actual number on the measured channels was about 150 and then in December, the difference was the increase in actual dollars was 220.

Scott Van Winkle - Canaccord Adams

I was thinking more of not the increase, I assume what you are giving me is the increase year-over-year, but that is actual dollar sales according to Neilson in December were 220 and then what was the number in the March period?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Okay. If you look at the actual dollars in the... I can give you that figure, the actual dollars in December for the category was $1.06 billion and the actual dollars in the first quarter was $1.24 billion.

Scott Van Winkle - Canaccord Adams

And I assume that the monster brands were up as well on a sequential basis. They would certainly be. So my conclusion is that you were seeing year-over-year growth but we are also seeing sequential growth in two periods that should be relatively similar. Obviously, there’s going to be some seasonality business, but I assume December and March are about the same considering weather and what people drink you know.

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Yeah. In fact, Monster numbers are pretty much the same in those two periods in this all outlets combined. The first period is usually a weaker period than the fourth period... fourth quarter.

Scott Van Winkle - Canaccord Adams

Okay. So there is normally a sequential decline that you are seeing growth on a sequential basis?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Well, it's flat.

Scott Van Winkle - Canaccord Adams

That’s it.

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

It's flat, but we believe that is positive because the first quarter traditionally is weaker than the fourth quarter.

Scott Van Winkle - Canaccord Adams

Okay. Excuse me, and then moving on to margins...

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Sorry. Scott.

Scott Van Winkle - Canaccord Adams

We all understand that Java Monster lower margin business, can you remind us what the delta is between the margin on your traditional monster brands and the Java at lease in round terms?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

All right. Just before I got into margins, what I want also say to you in those numbers again you have that volume issue on these two periods you are comparing. So if you took $21 million, which is at higher level and this at retail so it’s probably closer $30 million, $40 million, mid 30's out of the December numbers and added them into the Monster numbers for the first quarter. You would then... we would get a sequential we would have sequential growth.

Scott Van Winkle - Canaccord Adams

Right. That's why I was focusing on the Neilson numbers rather than your shipments. I would assume the consumers didn't give a lot of volume but your retailers.

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Yes. No, that is correct, I will take your point, sorry.

Scott Van Winkle - Canaccord Adams

Okay. And on the margins, can you give us a delta between Java obviously rose from what was it, 8% of your shipments in the December quarter to 14% in the March quarter? Can you give us the delta on the margin there?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Margins are roughly about 58 and 37, 38 the differences.

Scott Van Winkle - Canaccord Adams

Okay. That was more than I thought. And you mentioned lower margins in the wholesale business because of higher input cost, can you give us a decline on a year-over-year basis on what the wholesale gross margins were versus obviously focusing on the soda and juice side?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

And just...

Scott Van Winkle - Canaccord Adams

I am sorry, warehouse not wholesale, pardon me.

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Let me see if I can find that for you. Sorry, I’ve got warehouse financial… margins in the Warehouse division went down from 19% to 9%.

Scott Van Winkle - Canaccord Adams

Okay. So that's a fairly significant number?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Yeah, yeah. That's pretty much cost of goods were up particularly apple juice and things of that nature. Sugar was up during the year, year-on-year... cost of fructose and sucrose and cans and we were locked into the week program that caused us to have to go and buy in the open market, because we had a... obviously we had increase in Monster and apple juice both.

Scott Van Winkle - Canaccord Adams

And what was the specific date of ending the WIC contract and what percentage of the warehouse sales was the WIC contract?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

The WIC contract terminated in April, so there will be a little bit of a tail coming through probably in May stocks of rebates but of the May to June, but of the... it's $22 million, gross, you take the $30 million, it’s about a third of that division... just over a third of that division.

Scott Van Winkle - Canaccord Adams

Okay. And last question is... well, its kind of two pieces. First, I believe if I have heard it correctly, when you reported the December quarter you talked about it was a 31% or 33% growth for the January/February period, and obviously you were posting lower growth for the full March quarter. So there was a fairly significant deceleration in March quarter sales and I assume that correlates with the inventory being much higher on a sequential basis, what was the primary reason for that deceleration from the Jan/Feb period into the March? And then second, well, I asked the question about dollar sales from Nielsen between December and March, can you look at April Nielsen data versus the March data and sales were up sequentially there? Sorry, that was a lot in one question.

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Yeah, okay. In March, it was [inaudible] a couple of points, but we had a strong March last year and that's all I can suggest on that number. The number... I'm just going to get the number... April versus March.

Scott Van Winkle - Canaccord Adams

And while you are looking at that, Rodney, you are talking about that March versus Jan/Feb, with the category slowing, was there any change in your customers algorithms for how much inventory did they destock inventory in that March period?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

I don't have… have no knowledge about that.

Scott Van Winkle - Canaccord Adams

Okay.

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

I don't have a sales on Nielsen for the four weeks, all I, on a four-week basis, I am just working in the convenience category, there we've continued to increase our share, our share in convenience has gone up from sequentially from 27.2% at the end of December to 29.1% at the end of April as the share of the category, but I just don't have actual hard dollars on a Nielsen basis on month-by-month.

Scott Van Winkle - Canaccord Adams

With the shipment dollars up from March to April?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Our shipment dollars... I can get that information for you.

Scott Van Winkle - Canaccord Adams

The question is about, obviously the category growth rate is the biggest question, here.

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

It's substantially up.

Scott Van Winkle - Canaccord Adams

It's substantially up.

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

January versus March, yes.

Scott Van Winkle - Canaccord Adams

Great thank you very much.

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Pleasure.

Operator

Thank you. We’ll next go to [inaudible] with Citi.

Unidentified Analyst

Thanks. I just wanted to see, are you still seeing shortage issues on the Java product?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

No.

Unidentified Analyst

Okay, and as there’s still some cannibalization going on with the Green Monster?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

We think there is because most of the Java Monster products have basically found they are well into the shop in the middle of the Monster Chow. With these store resets at all taking place now have been for some weeks and we’ll continue for the next reason till we’ll set. I told that happens, you’re all going to have the cannibalization. We believe that once they go across and find their own home into the coffee door, that cannibalization will at least be reduced if, it might not be eliminated completely but it will be reduced.

Unidentified Analyst

Okay, and then just wondering if you could give us sense for our promotional the Energy drink market is versus last year, versus last quarter?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

We think it's very comparable, we have been looking at processing [ph]. Processing has been reasonably be steady, there hasn’t been major processing fish-ups, but there is aggressive promotions out there. I mean that, it hasn't been, even I say, it's perhaps distinguished between cross promotion and promotion. It’s been aggressive promotion, there hasn't been aggressive cross promotion since they are all cross promotion is going on obviously, but it hasn't affected the actual every chilling process of our products in the trade.

Unidentified Analyst

Okay and then just wanted to see if you can update on the on-premise initiative and sort of what we think the potential is there?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

The potential is still very strong and it's quite large, but it is taking time to work away through it, just taking... it just takes time and we are all seeing results, we have seen substantial numbers of additional accounts being opened, but we are... but it is taking time. We are starting to put a new system in place, whereby we are getting specialist managers in store at the distributor level. At distributors, we have a focus on on-premise and not just general market and we’re seeing... starting to see some successes when there is that focus now, we are all starting to see successes, we are all seeing successes in various areas, for example, we have recently secured a contract with Southwest Airlines, whereby we’ve… Monster, the 8.3-ounce size is being, it will be sold as from pretty much in the last few days now on all Southwest Airlines Flights throughout the U.S. That’s… it's a very big carrier, it carries a lot of people, has thousands of flights a day. And so we believe that will give us good exposure we’ll help... be good business for us and also give us good sampling and exposure. So, it is happening, but it is happening, it's taking time.

Unidentified Analyst

Okay. Then, my last question has to do with your views on Red Bull 16.9 ounce can. What are you seeing there? Are they pretty much cannibalizing their 8-ounce or--?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

We believe they are cannibalizing their 8-ounce and the 12-ounce. What happened was they got an initial lift when they launched 12-ounce and then it sort of fell... they fell back a bit and then they launched the 16, they got another initial lift and then it fell back. If you look at the... if we look at the graph for Red Bull, we see those two sort of bumps, but they basically backed on. If we look at the last four weeks inconvenience for example, let me give you some of the Red Bull numbers, which I think are quite interesting. The Red Bull's numbers... they introduced... here Red Bull share, Red Bull share went up to 35%, 36.8% in January and that is sort of about, just after that really started to launch the 16-ounce. They did I think November, December time period. So, they went up from 35.1% to 36.1% to 36.8% by the end of January and then they dropped to 36.2%, they dropped to 35.7% and now they have dropped to 35.1%. And over that same time period, Rockstar was completely flat and we basically went up from 27.2% to 27.2%, 27.9%, 28.8% and 29.1%. So, that's really what's been happening in the last four or five months. We have actually increased share and are closing the gap between Red Bull and us and increasing the gap between the other competing brands below us, which... there's quite a big gap below where we are.

Unidentified Analyst

Okay. Thank you.

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Thanks. So, just one point to add, I gave you the number earlier. In the last 13-week period, Red Bull's sales were up 14.2% against a category increase of 15.9%. So even with the 16-ounce, they've really just barely kept pace with the category effect that slipped marginally, but against the category and that’s in dollar terms. They clearly have lost substantially more in units. In volume, Monster has... sometime ago really surpassed Red Bull on a volume basis. There are some people who look at volume as to looking at a brand of strength and share of stomach. On a volume basis, we do so more than Red Bull.

Operator

Thank you, sir. We will go next to Alton Stump with Longbow Research.

Alton Stump - Longbow Research

Thank you. Good afternoon. I just had two... I hope should be pretty quick questions. First off, just to clarify on the disconnect for the March growth, on the last conference call, I think you noted, Rodney that overall sales were up 33%, but if you took out buy ahead impact, we've been up something in the low 50s and it looks March was up something like 20%. Was the buy ahead still impacting results even in the month of March? Is that what's going on or is there something else that I missed?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

We are not sure. Just I don't have an accurate enough answer to give you a positive answer on that. We think there may have been some ... there were some distributors who bought very heavy and we didn't see high levels of purchase from some of those distributors. There were quite large distributors right until late in March or early April. There was one market that was somehow explicably weak for us which was a big market, which was Los Angeles and we looked at the market and whatever reason the whole market was down, you may recall in January, February, March time period, it dropped quite substantially in January. The growth in ... for the market in Los Angeles and then it dropped off in March and again in April and we looked at that, because we were just out of line with the rest of the markets in the US. So, it was the only market that was down. What has happened in Los Angeles is that the market had the effect... it's a little up and sorry, it’s not up, the percentage down has reduced, but we've been able to turn the brand around there and we've grown our market share in Los Angeles and we are now up in Los Angeles. So from having... we were in line with the market because by large measure we... between Red Bull and us pretty much constitute or represent the bulk of the market. But we were able to turn that around, we were up in that market, which should be positive for us. But that may have also impacted that just that period of time as to why we didn't get buy-in on sales in a big market like Los Angeles for us where we were slightly down and that has turned around and moved back up now.

Alton Stump - Longbow Research

All right. And then just a quick follow-up. I guess what's confusing is looking at Hansen Nielsen c-store data even with the weakness in the LA market, it looks like Monster was up, I think it was 49% year-over-year rolling down starting from February, that's where I am just trying to figure out, was there a disconnect versus what you reported on the last call, but it looks like they are not, is that for sure?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

No, we are not sure why... the timing issues, there is inventory issues, there is a difference between the two. They should technically match up pretty closely, but there has been this difference, and that's... it's still is there, but I think what's important is that the sell through right at retail is really, really, that's where the amount comes from. And that is still stronger, that is in the high 40s. So we believe that we will start... we will get a catch-up on our sales to the trade.

Alton Stump - Longbow Research

Okay. And then just one other question on the gross margin, it sounds like an awful lot of the year-over-year decline was due to weakness outside of the energy drink business for you. Just looking at the price per case, I guess it was $9.53, it looks like it’s fairly in line, may be up a little bit, but not much from the back half of last year, just trying to get an idea where the price increase came in, was it still late in the quarter, because of the buy ahead that didn't really hit the bottom line as much as you would have thought, or is there something else going on there?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Yeah. I don't know, I mean it did... it was implemented, but it was implemented for the 16-ounce package, it’s not all packages and it was implemented for Java. So it didn't... it wasn't across every package, it didn't affect our 24-ounce... we'd increased price on that in about July, and it doesn't need to affect the 8-ounce.

Alton Stump - Longbow Research

Okay. Well, was there an decrease in price rebates that you are offering either for the energy drink lines or elsewhere during the quarter that maybe you might cause that?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

No, no, no. As I said, our CMAs and things are pretty much the cost of the programs on a per shelf basis, because obviously we have more shelves and the cost is going to increase because of the programs per store. But on a per shelf basis we pretty much have the same cost and we're trying... the way we're trying with kind of obviously is to equate it back to a per case cost. And a lot of it will depend on what sales that we get and what the sales are for the rest of the year. But the… our branding is based on a similar sales... very similar sales per case cost as we had in the previous year.

Alton Stump - Longbow Research

Okay. That's all I have. Thank you.

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Thanks.

Operator

And we will take our final question from Mark Astrachan at Stifel Nicolaus.

Mark Astrachan - Stifel Nicolaus

Good afternoon, guys.

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Hi, Mark.

Mark Astrachan - Stifel Nicolaus

I guess, just a couple of questions here. One, any idea about the amount of support that you put behind some of your secondary brands, you talked about cutting some of the support out for Joker and for Unbound, but obviously some of the other brands have been weak as well? I'm just trying to figure out how much money you are throwing behind those brands versus how much you are throwing behind your Monster, your core business including Java?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

We really stopped putting money behind Unbound and Joker. Lost, we are still putting money behind because we still believe it is a viable and it's still a solid brand. But, some of the things that you have in place... just take some time to run down, if you have annual agreements or annual sponsorship agreements. And as those are running down, you're not going to renew them. We haven't spent very much behind Rumba, but obviously once we reposition it, we will spend something behind it and we obviously need to give it the support it will need in order to enable it to succeed. I'm not able to answer the questions any more, because they are not... they are not the big number, the majority of our marketing is put behind, efforts behind, obviously behind Monster.

Mark Astrachan - Stifel Nicolaus

All right, okay. And shifting to the distribution opportunities, we've been finding that where you’re in the AB system, you continue to outperform in a lot of the markets where you’re not in the AB system, have you given any more thought in terms of wanting to switch incremental volume through that system. And in particular, would you consider something like that in a market like LA where you have been weak?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

We... you say we're weak, but we have a 40% share in LA. So there is not much high you could go, but we are reevaluating the possible transition of additional territories to AB, that is under discussion at the moment and we are looking at it.

Mark Astrachan - Stifel Nicolaus

Okay. And along the same lines, when you think about the opportunity for incremental distribution point, what do you see there and what I mean is, from a penetration standpoint, if you look at the standard data obviously just having one facing in a store will give you that amount of penetration. But as I figure it, you have a lot of opportunity to increase the amount of incremental distribution, so convenience store, supermarkets and general, I mean what do you think of that opportunity?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

We think that we do have that opportunity, and we believe that the programs we are putting in place now will enable us to get the additional distribution for the ancillary brands or the ancillary brand extensions within the Monster line. And we'll enable that quality and depth of that distribution to be improved, particularly having working through a good distribution system and so, we are, we do believe there is opportunity and that is why we are also looking at that possibility of looking at additional… few things switched to the AB system. It is not with, it’s own issues as well. There are some territories where you have channels that don't line up or dry areas and that system may not actually give you a lift. When you... there is a trade-off and there are some distributors who just spot the fact that they’re in the AB system, don't devote the time and attention. There is a way of we believe working within that system that does show the results. We know that we have a method of doing it and we think it works. It doesn't sometimes, however, help because you can't persuade an individual owner to adopt that system. We continue to try and do so and we show them the results of some of their compatriots and those and the success that they had and that has improved and we will continue to do so. But, there are those opportunities but it's just really a distribution game and it's a question of being able to persuade them to give more focus to the brand and how to do it within their own companies, but that is something we are all working on and we are looking at additional alternatives at this point in time with the AB Group.

Mark Astrachan - Stifel Nicolaus

Okay. Great. And then the final question just relates to the category generally and building on a previous question. I guess what I'm trying to figure out is what your thoughts are on the outlook for the Energy category in general and specifically we have seen new market entrants, including Starbucks, they recently announced they are coming in. Do you see these new products coming in as further validation of the categories?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Undoubtedly, we think that is validation. I mean what they are doing is they’re sitting there. But, there are the reasons, Starbucks is seeing a decline in their market share quite substantially since we've launched Java Monster. And so that's where you're looking at and saying what I’d do to increase my sales and all of the sudden just Johnny come lately but Java making energy drink, but I don't think Starbucks necessarily has got the credibility to make an energy drink. But, they will go out there, they will get distribution, they have strong distribution partner in Pepsi and they will get the shelf space. But it will be... there will be a free for all following us in the energy coffee category as there's already it was... the sheep follow whether it was Rockstar, then it's going to be [inaudible], it's now going to be Starbucks. You are going to have your real followers, just don’t think there’re points of difference and come in. I don't think they're on its own is that material to really validate the category. I think the category is a validated category, I mean the category is... this year will be probably... our estimates is it will be over $10 billion at retail. I mean that's a substantial category, it's been in the U.S. now for over 10, 12 years. It's been in the Europe for 16, 17 years. Europe is still seeing very healthy growth in the high single digits, low double digits in the teens and it varies. In the early 2000, the growth in Europe generally slowed to the very low single digits and then the category picked up again, and I think it's accelerating. I think by going into the European market with our brand and there're other competitors going into that market, it will effect expand the category and they’ll continue to grow. We think that this is a very viable category. It brings benefits to consumers that aren't delivered by other products. Other products are variations of refreshment, different forms of refreshment. We think this has a different function and has different purpose and therefore we do believe there is a place in the sun for this category and that's being shown by the resilience of the category, the resilience of pricing and literally the continued growth. I mean we are seeing categories like Gatorade and things that are literally flattered down for the first time in years and years. The category in this first quarter as I indicated earlier in my remarks, has really contracted quite a bit, when you look at that in the light of where energy drinks are, the energy drink growth... it has moderated but it’s still very healthy. And we believe it can continue to possibly increase as we go forward, but we are obviously trading with bigger numbers, but by any stretch of the imagination on any argument of $10 billion category is part of what's... if you have to stay.

Mark Astrachan - Stifel Nicolaus

Right. Okay, great. And then just one final question, it looks like you started some of the share repel in the quarter, I think your share count was a little lower?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

That is not correct.

Mark Astrachan - Stifel Nicolaus

No, okay. So you haven't started it yet...

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

No, we obviously we thought, no.

Mark Astrachan - Stifel Nicolaus

Okay. So when will you start it and what are your thoughts in terms of burning through that since... obviously $200 million given the amount of cash flow you drove off, isn't a huge amount, just generally what are your thoughts there?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

The lowest stock price has been... is quite a large factor in coming out with a lower diluted share count number. It's just a question of how you value the options and the dilution factors.

Mark Astrachan - Stifel Nicolaus

Okay. So when do you plan then to start the share repel program?

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

We can't give you an [inaudible] to do so. When we are out of the quiet period, which is where we've all... once we've released our results, filed our 10-Q, we will then be in a position to deal with this and then we propose to... to deal with at that time we will talk to some personal advisors in the Board and we will make a decision on how to go forward. But obviously it's in our interest to do that sensibly and properly and then to... it's not something we are going to... we intend to just rush into overnight.

Mark Astrachan - Stifel Nicolaus

Okay.

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

We are committing the funds, we think that it is the right decision for the company and we are going to implement it at... over an appropriate period.

Mark Astrachan - Stifel Nicolaus

Great. Thank you.

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Thank you.

Operator

And that does conclude today's question-and-answer session. At this time, I would like to turn things over to you Mr. Sacks for any additional or closing remarks.

Rodney C. Sacks - Chairman of the Board, Chief Executive Officer

Thank you. I really don't have anything additional to add. I think that we have seen some challenging costs and spending in order to continue to support the brand and we are obviously... it's very important for us to make sure we invest sufficiently in the brand and in supporting the brand to make sure the brand stays strong, that is the prime asset that we have and... but we do believe that, as I did indicate earlier in the call that our spending will start immediate writing and we’ll be a bit lower as a percentage of ourselves as sales increased over the year. We've set programs in place, but we do anticipate increased sales going into [inaudible], which will have a benefit in that regard. We're still very excited about the energy category, it's continuing to grow, we are still excited about Java, we're getting great feedback from both buyers and consumers. If you look at the size of Java Monster, what it has been able to achieve in less than a year, it really has been quite remarkable and that prompted the responses we have got now that from Starbucks that they are introducing an energy drink, and as we said that all the other energy drinks have just followed us to try and introduce a coffee drink to try and grab some of the market. They obviously see the results. So we think that all goes well for us as a company, we do have plans to continue to be innovative and to innovate and increase, add new products as we go through the year and we are proposed to do so. So, thank you very much for your support and what we will do is we will obviously publish in order to... about the... what I'd call the mid-term conference call where we will give an update... trading update to investors in about six weeks time. Thank you very much.

Operator

And that concludes today's conference. Thank you for participating and have a nice day.

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