Encouraged by improved gross margins and optimized production efficiencies, premium water brand Flow Beverage Corp. has raised its FY2022 net revenue target for branded products by up to 55%, according to financial results released by the company today.
The Canadian publicly traded company — marketers of a pure U.S.-sourced spring water, alongside flavored and collagen-infused SKUs, that’s sold in over 24,600 locations — has continued to put up impressive top-line growth numbers over recent years while scaling its cross-border operations in both Ontario and Virginia. Yet Flow has recorded significant costs along the way, to which it has responded by targeting a 45%-50% reduction in overall EBITDA losses by the end of FY2022. The company reiterated that goal today.
“We are very encouraged with our efforts at increasing velocity in target distribution channels and maintaining industry-leading growth,” said Flow CEO Maurizio Patarnello in a press release. “We remain fully committed to accelerating the profitable growth of Flow branded products and aligning with the needs and aspirations of our consumers. Combined with a continued focus in our disciplined approach to cost management, we are confident that we can drive higher net revenue while significantly improving our EBITDA.”
Consolidated net revenue increased by 86% during FY2021 to $42.7 million, fueled by a 47% rise in retail and e-commerce channels. Co-packing revenue was also “significant,” particularly in Q2, though the company noted that growth was actually lower than prior quarters due to reduced demand from certain customers. In the release, the company stated it “will continue to utilize co-packing opportunistically to optimize capacity and absorb fixed costs.”
Increased utilization of already installed production lines also helped boost gross margin 26% last year, compared to 6% growth in 2020. Increased efficiency on production runs and consistent costs of raw materials and packaging on a per unit basis also played a role.
During Q4 2021, net revenue was up 74% to $10.4 million, with 69% growth for branded products in retail and e-commerce. Gross margin increased to 21% of net revenue in the quarter, up from 4% in the same period last year, impacted in part by “higher relative shipping costs to service COVID-related re-openings of certain customers.”
The company recorded an adjusted loss of $7.9 million during the quarter, which it attributed to increased sales and marketing support, general and administrative expenses, increased insurance costs and expenses related to operating as a public company, and salaries and benefits.
After reporting in September that YTD adjusted EBITDA losses were down 12% to $19.3 million, Flow reported a loss of $27 million for the full fiscal year 2021, down just slightly from $27.3 million in FY2020. The company attributed the change to higher gross profit, offset by increased sales and marketing, general and administration expenses and an increased headcount.
Speaking to BevNET today, Patarnello said the company’s reiteration of its commitment to trim losses comes as a result of brand growth and cost management.
“We don’t see a trade-off because we just want to be disciplined in cost management but at the same time we will continue to invest in the growth of the brand in retail and ecommerce,” he said.
Asset optimization, including “both improving its working capital position and significantly reducing capital expenditures,” will also be a priority, according to the release. Late last year, the company eliminated its president/COO position, held at the time by Dave Mock, as part of a management reorganization that Patarnello told Beverage Business Insights “will empower decision making, reduce management layers, streamline communication and allow Flow to better execute its 2022 strategic framework.”]
Looking ahead to the next 12 months, Patarnello said the company is concentrating on building distribution across four key geographies: Florida, the Mid-Atlantic, the West Coast and Ontario, Canada. To fuel growth, Flow plans on leaning into its latest innovation — a vitamin-infused flavored water line — as well as marketing partnerships with the New York Marathon and the Montreal Canadiens of the NHL.