Reed’s: After Underperforming, Management Aims to Right Supply Chain Challenges
The recent history of Reed’s has been defined by the company’s efforts to recalibrate its supply chain, whether via divesting its California-based production facility or fighting to decrease out-of-stock issues. Yet manufacturing obstacles have continued to hamper the brand, as evidenced by a Q2 earnings report that showed operating losses more than doubling against modest sales gains.
Speaking to investors during an earnings call last week, Reed’s CEO Norman Snyder said net sales growth of 4% during the quarter was “below expectations,” citing “supply chain challenges negatively impacting our ability to fill orders at a normal level,” including “extended supplier delay” with aluminum cans and swing-top bottles caught in seaport cargo traffic. In addition, he said, labor shortages have created a crunch in production line time, meaning co-packers have been forced to forego second and third shifts.
Adjusted for EBITDA, the company posted a loss of $3.1 million during the quarter, compared to $1.4 million in the same period last year. Volume was up across both the Reed’s and Virgil’s brands, with case growth clocking in at 5% and 13% respectively.
However, Synder expressed confidence that the company’s issues in securing packaging materials had been solved and that it has adequate materials “to meet current and future levels of demand.”
Outside of soft drinks, Snyder said Reed’s has gained stronger traction for its zero-proof Mocktails (available in Shirley Tempting and Grape Transfusion), which are now authorized in Sprouts, Ralphs, Fred Meyer, QFC, Stop & Shop, Ingles and other regional chains.
During the Q&A portion of the call, Snyder declined to elaborate on the recent exit of senior operations VP Rich Hubli, but affirmed the company’s commitment to exploring cost-saving measures, such as implementing minimum order requirements and bringing on a Midwest co-packer, along with its continued adoption of canned formats.
Despite the underwhelming quarterly performance, Reed’s is reiterating net sales guidance for the fiscal year 2021 to increase 14% to 16%.
Zevia: Record Sales in First Post-IPO Earnings
Fresh off its debut as a publicly traded company last month, zero-calorie CSD brand Zevia reported its best-ever net sales quarter in Q2 2021, rising 24% from the same period last year.
Gross profit increased to $16.2 million, or 47% of net sales, while net losses were tagged at around $700,000.
“Our recent initial public offering solidified our balance sheet, fueling our next phase of growth, helping to build on the 32% compound annual net sales growth we’ve delivered for the past 10 years,” said CEO Paddy Spence in a press release. “With a powerful brand, asset-light business model and high gross margins, Zevia is well positioned for future growth in the global beverage industry. The Company is committed to improving global public health by reducing consumers’ intake of sugar, replacing single-use plastic beverage packaging with sustainable alternatives, and providing better-for-you products that are affordable for households across a broad range of income brackets.”
The B Corp-certified company also shared that, as of August 1, Spence will forgo his $306K-plus annual salary and 100% target bonus — he’ll take a symbolic $1 in cash compensation — as a reflection of his confidence in Zevia’s future and his “commitment to allocating financial resources to drive shareholder value,” the release said.
“We are in an environment in which we believe CEO compensation is moving in the wrong direction relative to worker pay, and in so many successful companies, rewards are not being shared broadly across the employee base. Income inequality is a top-of-mind concern for me, and our leadership team, and we are committed to making a change, starting now,” said Spence.
Laird Superfood: Changes Afoot Amidst Sales Gains
Strong sales numbers helped offset changes behind-the-scenes at Oregon-based snack and powdered beverage maker Laird Superfood during the second quarter of 2021.
Thanks to momentum both online and in-stores, total sales for Laird rose 64% to $9.8 million during the quarter. Ecommerce sales grew 57% ($2.1 million) a 94% growth in D2C year-over-year.
Developed by big wave surfer and brand founder Laird Hamilton, Laird Superfood has leveraged its company-owned production facility in Sisters, Oregon to move aggressively across categories, uniting its portfolio under the banner of natural health and wellness. According to the earnings report, its creamers grew 27%, while hydration and beverage enhancing supplements were up 54%.
Within creamers, the company reported much of that growth came from its refrigerated liquid version, having achieved targets in extending shelf life and reducing waste. However, a shelf-stable liquid creamer has been delayed until 2022 after running into issues with a co-packer requesting a change in formulation. Unwilling to compromise, Laird will instead move the launch to next year’s schedule while searching for additional co-packer capacity.
However, the big takeaway was the announcement that president and CEO Paul Hodge is transitioning into a non-executive role with the company (he will remain on the Board of Directors). The transition will be completed once a successor has been named.
“It’s been a privilege to lead this company for the past six years and I’m extremely proud of all we’ve accomplished together and such a short period of time,” Hodge said, according to a transcript. “By bolstering the expertise of our team, it only enhances our competitive decision and makes the long trip potential even more compelling and mightier.”