Reed’s: Strong Virgil’s Sales Drive Q1 Growth

Following the completion of its three-year recovery plan, Reed’s Inc. announced yesterday growing sales across its product portfolio in its first quarter 2019 earnings report.

The company generated $8.4 million in net sales during the first quarter, up 2% from 2018. Sales of the core Reed’s Ginger Beer line declined 8% while craft soda Virgil’s grew 46%. Total sales for both lines were up 14%. Gross profit increased 9% to $2.5 million and gross margin increased 185 basis points to 30%.

The company reported operating losses of $2.9 million, compared to $1.1 million in 2018. About $1 million of the losses was due to increased investment in sales and marketing to support Reed’s recent new product launches. Net loss was $3.3 million, up from $1.6 million last year.

Speaking to investors and analysts during a conference call yesterday, Reed’s CEO Val Stalowir said the sales growth came prior to the rollout of several new Reed’s Ginger Beer products which launched at Natural Products Expo West 2019 in March and began hitting store shelves in April. Alongside new packaging for the core line, the company also introduced zero sugar and CBD-infused SKUs, along with ready-to-drink alcoholic “Ginger Mule” products.

Reed’s is also preparing to launch a line of ginger wellness shots later this year. Stalowir said the products, which include other functional ingredients, are in the “final stages” of formulation.

“Our organizational focus is now completely zeroed in on building our brands, executing on our innovation plans, opening incremental retail outlets, and accelerating sales growth,” Stalowir said. “We have demonstrated with the acceleration of Virgil’s that our innovation and sales efforts can drive incremental growth, and we’re now executing our Reed’s innovation and marketing plans. We have the capital, the team, and support partnerships in place to successfully execute these plans.”

According to Stalowir, Reed’s added several new retail chain accounts in the first quarter, including Walmart, Gelson’s, Bashas, Lawson’s, Harmon’s, and Ingles. This month the company also added two Costco regions for both the Reed’s and Virgil’s lines.

The company is currently working to build out its distributor network and is seeking to partner with beer and nonalcoholic DSD distributors in the Southeast, Midwest, and South Central regions, as well as Canada. Reed’s is also increasing its on-premise channel strategy, which added more than 500 restaurant, bar, and nightclub accounts over the past year.

“There’s a lot of opportunity and work that needs to be done,” Stalowir said in the Q&A portion of the call. “Reed’s, the innovation is on the core, it just started this month and so the new can lines are going into new channels, the zero sugars [are] going hopefully everywhere in both bottles and cans, that’s going to require a lot of focus and effort and support over the next 12 months to 18 months to really take full advantage of the opportunity there.”

The report comes on the heels of the company moving its stock listing from NYSE American to NASDAQ on Friday. As part of a new multi-channel marketing campaign tied to the move, the company purchased digital billboards in Times Square with the ginger beer line’s new tagline “Ready for Real Ginger?” According to Stalowir, Reed’s plans to focus the campaign in key markets including New York, Boston, Seattle, Los Angeles, and San Diego with digital, outdoor, print, and radio advertising, along with social media, instore displays, coupons, and sampling events.

Reed’s stock closed today up 2.67% at $3.84 per share.