Reed’s, Inc. reported double digit growth in its full year 2021 earnings report last week, with net revenue up 19% to $49.6 million. However, the ginger beer producer faced steep operating losses as supply chain disruptions drove up costs.
Gross profit for the year rose 7% to $13.6 million, with a gross margin of 27.4% compared to 30.7% the year before.
Net revenue in Q4 2021 was up 20% to $12.8 million. Gross profit for the quarter was $2.6 million, down from $3.5 million the year before, with a gross margin of 20.4% compared to 32.7%.
Despite strong sales driven by the company’s retail expansion initiative, Reed’s operating losses for the year nearly doubled to $15.9 million, compared to $8.6 million in 2020. Operating loss in Q4 was $4.4 million, versus $2.7 million the prior year. Citing rising freight costs, the company has increased prices 8% across all products.
Speaking during an earnings call, CEO Norman Snyder said that despite significant headwinds, operating and strategic improvements implemented since 2020 have helped the company maintain momentum in the market. The company said it has begun implementing “a series of cost saving initiatives” including prioritizing direct shipments, focusing on canned product sales rather than glass bottle products, “establishing minimum order quantities, restructuring third-party logistics agreements, and optimizing distribution center locations.”
Looking ahead, Snyder was optimistic that Reed’s will continue to improve this year, projecting 20-25% year-over-year net sales growth to approximately $59-$62 million for 2022.
“The cost increases in the global supply chain have decelerated in the first quarter and the benefit of our various cost saving initiatives from last year have begun to take effect,” Snyder said in a statement. “We expect margin improvements in Q1 and going forward as we have recently implemented price increases across our portfolio of products and have other cost saving initiatives to roll out in the coming months.”
The report reflects an ambitious retail expansion plan built around new product innovation. Snyder said the company increased its retail footprint by 10% in 2021 to over 45,000 doors nationwide, while velocity rose 11% for the 52-week period ending December 26. The company also added 30 new distributors to its national DSD network and case volume within DSD was up 60% year-over-year.
During the call’s Q&A session, Snyder noted that promotions have also contributed to the rising sales. In Publix stores, which is serviced through the DSD network, Reed’s products saw a 7x lift during promos, he said.
Reed’s ginger ales were up 150% year-over-year with velocity up 34%, Snyder said. The company also soft launched its ginger ale-based mocktails in 1,000 doors; the line has since expanded to 5,000 locations in the first quarter of 2022.
On the Virgil’s brand, the company is launching 12 oz. sleek cans for its Zero Sugar offerings next month in Sprouts. Virgil’s sales were up double digits last year, Snyder said, accounting for roughly 45% of all net sales.
As well, the company’s alcoholic RTD line, which launched in 2020 with a Classic Mule flavor, is set to expand its current 42 distribution partners with 10 new East Coast and 12 new West Coast distributors in the near future with Snyder projecting that the line will increase its store count tenfold by the end of the year. A second SKU, ginger ale, is set to launch in Q2.
“When I joined Reed’s in 2019, it was clear that we had significant brand heritage and brand equity,” Snyder said. “However, the majority of sales were driven by ginger beer, which in our opinion, is too narrow of a category for such a strong brand. While we have not seen any market share, we are critically focused on innovation to meet our goals within our established timeframe.”