Reed’s, Inc. ended FY 2022 on an optimistic note, announcing a 7% increase in full year net sales to $53 million and a reduction in operating losses.
Speaking on the company’s quarterly earnings call earlier this week, CEO Norman Snyder reiterated guidance that the company will achieve break-even cash flow in the second half of the year with gross margins above 30% and double-digit sales growth.
The earnings suggest Reed’s is making progress in its effort to turn around declines, particularly after a difficult start to 2022 when it reported a nearly $5 million loss in Q1. In Q4, the company reported an operating loss of $2.8 million, an improvement from $4.4 million the year before, while its full year loss was $14 million, compared to $16 million in 2021.
On the call, Snyder highlighted Reed’s efforts to reduce its cost of goods last year after it experienced sharp increases amid record inflation. He said Reed’s renegotiated contracts across its supply chain, including its cans, ingredients, labels, packaging and co-packing fees. As well, the company lowered transportation costs “by increasing freight throughput and reducing out-of-network shipments,” he added, while saving more capital by reducing its marketing spend.
“While there are still more benefits to come in 2023 from our cost savings initiatives – and cost of goods sold, transportation and sales, selling, general and administrative costs – I am proud of our team’s ability to execute in 2022 while continuing with the macroeconomic challenges throughout the year, including supply chain bottlenecks and inflationary pressure on both consumers and businesses alike,” Snyder said. “We are well positioned to realize additional cost savings in 2023.”
Gross profit for the year fell slightly to $12.1 million with a gross margin of 23%, compared to $13.6 million with gross margin of 27% in 2021. However, Q4 proved strong as net sales grew 18% to $15 million and gross profit was up 32% to $3.4 million.
Last month Reed’s named former Fever-Tree sales manager Chris Burleson as its chief commercial officer, charged with leading the company’s sales organization and continuing its cost reduction initiatives.
In the call, Snyder also called attention to new retail gains made during the year, including the introduction of 12 new SKUs at Sprouts stores, as well as expansion with Whole Foods this month to add seven additional SKUs. The company is also authorizing Canadian retailer Loblaws to distribute Reed’s to more than 500 stores and it has “migrated to a concentrate model” for its European export business.
“We are no longer utilizing capital to support export sales,” he said. “Instead, we are shipping margin-accretive concentrate, and we have local manufacturing partners, producing finished goods at a significantly lower landed cost.”
On its alcohol business, the Reed’s Hard Ginger Ale line launched in retail in the second half of 2022 and the company launches its Zero Sugar Classic Mules in 50 Trader’s Joes locations in the Northeast, he added, with over 300 stores across New York, New England, California, Minnesota and Wisconsin.
Reed’s alcoholic products have also grown their distribution in Whole Foods, Sprouts, Total Wine, Ralph’s and Roundy’s stores, as well as 630 Cracker Barrel locations nationwide, with 16 new DSD distributors covering the brand.
“We continue to believe the $7 billion market for ready-to-drink alcohol is a strong opportunity for growth,” he said. “We expect to see more promotional activity in these stores such as tastings and displays as we work to increase shop space and presence.”