Ginger beer maker Reed’s reported 21% increase in net sales to $10.6 million in the third quarter, according to the company’s latest earnings report, setting the company on track to project 19% growth for the year.
Gross sales for Reed’s core brands increased 18% year-over-year, driven by 32% volume growth on the core Reed’s line. Gross profit increased 35% to $3.4 million, compared to $2.5 million last year. Gross margin was up 350 basis points to 32%.
Meanwhile, operating loss decreased to $2.3 million, down from $4.4 million in Q3 2019. Quarterly net losses were $2.6 million — roughly $0.04 per share — versus a $4.6 million loss last year.
Speaking to investors in a call yesterday, Reed’s CEO Norman Snyder said Q3 marked the third consecutive quarter during which the company met or exceeded its guidance. The turnaround follows a tumultuous 2019 that saw revenue declines and the departure of former CEO Val Stalowir that September.
According to Snyder, the company has taken steps to shore up its production and distribution by making “enhancements” to its supply chain, adding a sixth co-packer and partnering with additional DSD distributors, as well as working to “tightly control spending” and reduce costs. The new distributors include DSD houses in Colorado, Massachusetts, Ohio and Utah. Meanwhile, the brand will continue to expand within the Anheuser-Busch network in the Southeast in order to grow its presence in retailers such as Publix and Winn-Dixie.
Reed’s added two SKUs of its ginger ale line to retailers including H-E-B, Stop & Shop, Southeastern Grocers, Harris Teeter and select divisions of Albertsons and Kroger, Snyder said. The brand’s first alcoholic product, its RTD Ginger Mule, is still “in early stages of distribution,” he added.
Ecommerce sales improved 105% over Q2, with Amazon helping to drive “strong quarter-over-quarter growth,” Snyder said.
Citing market research firm IRI, Snyder said dollar sales in MULO for Reed’s were up 49% in the past four weeks, while Virgil’s grew 28% in the same period. However, these increases were partially offset by lower sales in non-measured channels which have been more harshly impacted by COVID-19.
Reed’s has also hired former Harvest Hill Beverage Company executive Rich Hubli as its VP of operations. Snyder cited Hubli’s experience with end-to-end supply chain management as a key qualification.
“We are confident with the network we have built adding both capacity and capabilities on each coast, which not only supports demand but is reducing transportation costs to offset heightened cost amid the current pandemic,” Snyder said.
Delivery and handling costs were up 16% to $2.2 million in Q3, but as a percentage of net sales these costs decreased 86 basis points due to increased volumes. Marketing costs fell 25% to $1.9 million in the quarter, mainly due to a decrease in digital advertising, event sampling and a lack of personnel travel.
“We remain flexible and prudent as we navigate the current environment and we will continue to make any necessary changes to keep our employees and partners safe and our inventory on shelf,” Snyder said.
Reed’s stock was down 14.06% to $0.75 per share at the close of the market today.