In taking up the reins from the company’s namesake Chris Reed after a tumultuous period, new Reed’s CEO Val Stalowir is seeking to take the craft soda maker back to basics.
Stalowir, a CPG industry veteran who joined Reed’s as CEO and board member on July 5, is the company’s first permanent CEO since Reed announced his resignation and reassignment to the newly created role of Chief Innovation Officer (CIO) in April. Board member Stefan Freeman had been serving as the company’s interim CEO. A former executive at Quaker Oats, The Coca-Cola Company and Yum! Brands, Stalowir was also a partner at private equity fund Emigrant Capital, where he helped lead investments in beverage brands like Boylan Bottling Co., Zola Super Fruits, Robeks and Jolt Cola. His most recent position was as founder and CEO of organic food supplier International Harvest, Inc.
“I have known Val for years, he is a talented leader with deep experience in the beverage industry,” said Reed’s chairman of the board John Bello in a press release. “He brings a clear vision for how to grow Reed’s valuable portfolio of brands balanced with the operational leadership to deliver that growth profitably.”
Stalowir’s appointment at Reed’s comes as the company continues to recover from significant supply chain issues that saw its core brands, Reed’s Ginger Beer and the Virgil’s line of craft sodas, lose shelf space at retailers last year. Reed told BevNET last October that out-of-stock problems led to the company losing between 15 and 20 percent of its distribution, about a quarter of which had been recovered at the time.
In an interview with BevNET, Stalowir explained that, after investing in a new production facility in Los Angeles that went online last year, Reed’s is well-positioned to reduce costs and operate more efficiently moving forward.
“I would say that our current focus is to execute a strategy of reducing our dependence on capital-heavy investments and try to go more asset-light. Whatever resources we have will be focused on Reed’s primarily and then Virgil’s as the secondary effort,” he said, noting that the two core brands as fitting in with the larger trend towards better-for-you carbonated drinks.
In the midst of a supply chain recalibration, gross sales of Reed’s Ginger Beer grew 2 percent last year, while the Virgil’s line was down around 10 percent.
In shifting away from building infrastructure, Stalowir is making good on a long-gestating approach. As a partner at Emigrant Capital, he tried to convince Reed to take a growth capital investment, but ultimately disagreed on how to spend the money; Stalowir wanted to focus on sales and marketing, while Reed was looking to investing in assets such as the production facility.
Now, as CEO, Stalowir hopes to revive that idea, positioning both Reed’s Ginger Beer and Virgil’s as premium products that match consumers desire for clean ingredients and, in the case of Reed’s, a healthy functional boost from real ginger.
“As opposed to other categories which have had brand champions and lots of interest and money flowing into telling the marketing story, there really hasn’t been a true champion in terms of craft soda,” he added. “As we improve the gross margins and overall growth of the company, we will be investing in marketing and sales programs, and we will definitely be looking to pull together more capital to put behind those efforts,” he added.
Stalowir said that he was confident the company’s production problems have passed; along with the Los Angeles plant, Reed’s has three co-packers on the East Coast, and Stalowir emphasized that even if a line were to go down it would not impact its ability to supply retailers. With production stabilized, he said the next step was to rebuild Reed’s equity with its retail partners.
“Now it’s our job to go back to all the retailers, admit our mistakes, ask for forgiveness, and say to them we are going to prove ourselves by committing to you to perform, to not have any out of stocks, to deliver on time and accurate, and have them hold us to this new standard,” he said. “We are lucky to get back on most of the shelves that we got displaced from, and we are lucky we have those leadership positions [within ginger beer and craft soda categories] to justify coming back in.”
Stalowir said that the company has kept most of its distribution partners. He noted that Reed’s is at only 26 percent all-commodity volume in the conventional grocery channel, and that the company is actively looking to add new accounts, including in the convenience channel, and take advantage of opportunities for on-premise service.
Innovation will come in the form of new low-calorie options from the Virgil’s line. Stalowir said the company was currently showcasing Virgil’s products made with new all-natural proprietary sweetener blend developed by Reed to retailers. The revamped product will replace Virgil’s current sugar-free Zero line, which is made with just stevia, when it debuts.
However, Reed’s Culture Club Kombucha is unlikely to play a major role in the company’s short-term plans. The line was out-of-stock for six months last year and sales plummeted 56 percent, a drop that CFO Dan Miles said in April caused the largest sales impact in year-over-year comparison. At least for the immediate future, Stalowir confirmed that the line is “not a high priority.”
“We had a very good entry into the space, but it’s very difficult to successfully fight on three different fronts,” he said. “There’s only so much sales and marketing resources that you have to pick and choose for which battles you are going to win. At this point, Culture Club will have to wait its turn as we stabilize the business and really accelerate the growth on the two core brands and eventually we’ll come back to the kombucha category and evaluate at that point how much we put behind that whole effort.”