After production issues hobbled growth last year, Reed’s Inc. reported in an earnings call yesterday that it has rebounded with 13% net sales growth to $9.5 million in Q1.
Speaking with investors yesterday, Reed’s CEO Norman Snyder said the company’s volume growth was driven by distribution expansion and higher velocities. Gross sales across its core brands grew 12% year-over-year and volume across all products increased 11%. Gross profit dollars grew 15% to $2.9 million, compared to $2.9 million the year prior. Gross margin grew 50 basis points to 30.1%.
Much of the growth occurred on the Reed’s brand (up 21%) driven by the expansion of the Reed’s Extra Zero Sugar line. Snyder called the company’s introduction of Real Ginger Ale in December its “most successful launch to date.”
“Ginger Ale is positioned to deliver an enhanced margin profile and is the first new product we have rolled out in our network where we have the ability to significantly bring down production costs,” he said.
Citing data from market research firm IRI, he noted that in the four weeks ending March 22, Reed’s dollar sales grew 26.2%, up from 8.1% over the 12-week period. In April, the brand reported a 32.4% increase in dollar sales with higher velocities and ACV as the company continues to target retail expansion.
Focusing on Ginger Ale, which Snyder said is the fastest growing sector within the CSD category, Reed’s added the line to about 3,000 new doors during the quarter, including Walmart, Food Lion, Giant Eagle, Albertsons/Safeway and Sprouts stores. The brand has also received commitments from additional retailers including Kroger, Stop & Shop, Shaws, Hannaford, Haggen, Ingles, Lowe’s Tops, The Fresh Market, United Supermarkets, Winco, Raley’s and the U.S Navy Exchange.
Beyond Ginger Ale, the company reported strong e-commerce sales for itsReed’s Ginger Wellness Shots, sold on its direct-to-consumer platform and Amazon. Meanwhile, Reed’s rollout into the alcohol space with its ready-to-drink Mule line has been slowed due to delays caused by the COVID-19 pandemic, but the product is available in some West Coast retailers, Snyder said.
Virgil’s reported 2% volume growth during Q1, though Snyder said velocities have improved over the past two months, with dollar sales up 24.7% for the four-week period ending April 19.
Last year, Reed’s saw quarterly losses rise to over $4 million after the company’s three co-packing partners all faced production disruptions. In September, CEO Val Stalowir left the company and chairman John Bello stepped in as interim CEO before handing the reins over to then-COO Snyder in March.
Since September, the company has focused on increasing its production and adding new co-packing partners. Snyder said five out of six planned co-packers are now online, with the final partner expected to begin producing later this year. The company is now working to achieve a “cash flow breakeven” and last month announced a $5 million underwritten public offering of over 13 million shares of its common stock.
“Our organization is … intently focused on removing costs from the system, including more targeted and efficient marketing efforts, gross margin improvement and simplification that is benefiting all aspects of our operational execution,” Snyder said. “Delivery and handling costs are being managed more efficiently as our enhanced network allows us to have the right inventory at the right place and improved ability to effectively plan.”