Jones Soda Co. announced the close of $2.8 million in financing on Tuesday, bringing some positive news for the company following a disappointing end to fiscal year 2017.
The funding, raised from convertible promissory notes, is the company’s first outside capital since Jennifer Cue took over as CEO in 2012. As part of the transaction, Christopher Beach, an existing company shareholder who “became significantly more invested in this latest financing,” according to Cue, will join the company’s board of directors as its seventh member.
“As the current largest shareholder and an investor in this offering, I am more confident than ever that Jones is set up to grow and return shareholder value by focusing on these high margin and high growth potential initiatives,” Cue said during an earnings call on Tuesday, according to a transcript.
The news brightened an otherwise dreary 2017 for Jones Soda Co. Revenue for Q4 dropped to $2.2 million from $3 million in the same period last year, while total revenue for the year fell approximately 14.8 percent from $15.7 million to $13.3 million. The company recorded a loss of approximately $1.3 million in the most recent fiscal year, compared to $183,000 in 2016.
“Revenue declines were due to the de-listing of our 12 oz. can as well as some softness with the Jones bottles and declines in secondary lines like Zilch and the now discontinued Stripped product line,” said CFO Max Schroedl during the earnings call.
The new funding will be directed towards supporting two of the Jones Soda’s more successful initiatives: the Lemoncocco soda line and its on-premise fountain program. Cue said the former, a non-carbonated Italian-style lemon and coconut drink launched in 2016, was only 3 percent of the company’s total 2017 business, but has enjoyed 40 percent year-over-year growth in the specialty and food service channels. As of late 2017, Lemoncocco was in 1,700 chain retail locations.
By mid-April, Cue said the company will have “a completely brand new network of independent distributors” that will enable Jones Soda to service accounts statewide in New York, including all of New York City’s five boroughs for the first time in over eight years. Further expansion in the Northeast includes retail placements at Kings and Wegmans.
Cue said Jones would use the new funding to support Lemoncocco at those locations with samplings, demos and promotions for the brand, as well as expanding its sales team.
“Based on retailer and distributor request, in 2018, we will also add a four pack for Lemoncocco for retailers to sell the product in quantity, create unique in-store displays and allow ourselves entry into more chain stores that demand such a multi-pack,” Cue said during the call.
Fountain soda has also been a strong performer for Jones, with revenues increasing by 197 percent in 2017. Cue explained that the transition from independent accounts to regional and national chains will have a substantial impact on the business.
Part of that plan involves an expansion of its partnership with 7-Eleven, which currently comprises 400 locations in the Pacific Northwest. Cue said that by May, the company will add a further 425 locations in Northern California and 550 locations in Canada, bringing a total of 1,507 stores in North America. Jones Soda will also be available as a Slurpee at stores in the Pacific Northwest in May and June.
Jones also offers a co-branded glass bottled line with 7-Eleven, called “7-Select,” in four flavors: sour patch, blueberry lemonade, blood orange and mango lemonade. Revenue for the line, which debuted in 2016, was up 4.8 percent in 2017, representing about 19 percent of total company revenue. A fifth variety is set to be added this summer.
“We have expanded our Fountain program to also include new products and brands that allows for a broad assortment of carbonated and non-carbonated beverage options for each of their Fountain programs,” Cue said.
Cue also commented on Spiked Jones, an alcoholic hard cider-soda beverage that was launched in the company’s home market in September in honor of the Jones’ 21st birthday. The line is currently being beta tested in independent grocery and on-premise accounts in the Pacific Northwest, where it is being serviced by Columbia Distributing.
Cue said it was too early to gauge whether Spiked was resonating with consumers, but that Jones Soda will apply lessons learned from the roll out of Lemoncocco.
“We really focused in on one market made some changes quite frankly to the product line based on consumer response, tweaked it within that market,” she said. “So that now we’re ready and extremely confident with Lemoncocco to take it everywhere. We want the same thing with Spiked Jones.”