Volume gains and reduced discounting helped craft soda maker Reed’s report a nearly 50% increase in net sales during Q4 2020, according to an earnings report released by the company yesterday.
The Norwalk, Connecticut-based brand, a publicly traded company, reported net sales of $10.7 million in the quarter, compared to $7.2 million for the same period in 2019. Gross sales were up 38%, driven by balanced growth across the company’s Reed’s ginger ale brand (+49%) and its Virgil’s products (+38%). In a conference call with investors, CEO Norman E. Snyder credited the introduction of Reed’s Real Ginger Ale and “triple-digit growth” from the Zero Sugar products for pushing volumes up. The former is now distributed in Publix, Harris Teeter and all divisions of Kroger, along with numerous other regional stores.
In a press release, the company credited increased revenue from sales and “the benefits of aggressive expense controls” and “the impact of several discrete items during the year ago period” for helping drive gross profit up 490% ($3.5 million) from Q4 2019.
Reed’s also managed to trim its losses, with operating losses falling from $3.5 million in Q4 2019 to $2.7 million in Q4 2020. The company also spent nearly half as much cash on operating activities than it did in 2019. However, delivery and handling costs were up 17% ($1.9 million) during the quarter, while selling and marketing expenses shot up 44% ($2.1 million), fueled by higher stock and compensation.
For the full year 2020, net sales were up 23% from $33.8 million to $41.6 million, with core brand gross sales up 20% in that time. Gross profit rose 62% ($12.8 million) and operating loss declined to $8.6 million from $14.9 million.
“We also remain focused on driving operational efficiencies and expect profitability trends to improve further as sales growth continues to outpace expenses,” said Snyder. “We remain confident with our brands and growth opportunity, and are proud of the entire Reed’s team and our valued partners who are working diligently to make sure we can deliver on the significant opportunity ahead of us amidst the challenging time of COVID-19.”
During the quarter, Reed’s raised $11.3 million in an equity offering, which Snyder said was used to retire its debt with Raptor Harbor and pay off its equity line with its senior lender.
“Accordingly Reed’s is well capitalized to support significant growth in 2021 and beyond,” he said.
The CEO also offered an update on Reed’s ongoing DSD expansion: the company is currently adding new partners in New York, Colorado, Massachusetts, Utah, Delaware, Kentucky, Indiana and Ohio, as well as with the Anheuser-Busch system to support retail sales at Publix and Winn-Dixie stores in the Southeast. Elsewhere, e-commerce sales were up 43% over the prior quarter in Q4 2020.
Looking ahead, Reed’s CFO Tom Spisak said the company is projecting 2021 net sales to increase 14% to 16% “given the potential uncertainty arising from the recent pandemic.” Gross margin for 2021 is expected to range from approximately 32% to 33%, “assuming a consistent pricing environment for ingredients, packaging and production costs each of which has been and could continue to be impacted by COVID-19.”
Concluding his remarks on the call, Snyder called Q4 2020 “a significant year of growth and success,” adding that so far in 2021 those “trends have remained consistent” as the company strives “for five consecutive solid quarters.”
“From a sales standpoint, we have some of the most significant momentum in recent memory reflecting positively on our aggressive innovation and new product development efforts, focus on core SKUs and broader distribution. Our margins and profitability are showing solid improvement helped by volume growth, and ongoing efforts to drive efficiencies,” he said.