Jones Soda Reports Double-Digit Q3 Growth, Moves Ahead on Cannabis
As the company continues to regain sales momentum, Jones Soda announced last week that Q3 total revenue grew 29% to $4.6 million, up from $3.5 million the year before, marking its fifth consecutive quarter of positive growth.
According to the company, gross profit as a percentage of revenue was up 600 basis points to 32%, compared to 26% last year, fueled by a shift towards higher margin product mix including food service sales.
Operating expenses in the quarter rose slightly to $1.4 million, compared to $1.3 million year-over-year. Adjusted EBITDA improved to $72,000, versus a negative $324,000 last year. Cash and cash equivalents were $5.9 million, up from $4.6 million on December 31, 2020.
Speaking to investors during an earnings call, Jones Soda president and CEO Mark Murray said the results were proof that the company’s turnaround strategy, which was put into effect at the end of 2020, is working.
Murray highlighted Jones’ core bottled soda business as the key driver of its growth, noting that both permanent SKUs and limited edition Special Release flavors have seen an uptick in sales. As well, the brand regained placement in Meijer stores in six Midwest states and has added 240 Cost Plus World Market accounts.
As Jones continues its push into the cannabis industry, Murray said the company is looking beyond the food and beverage edibles space and is also working to launch a Jones brand plant cannabis line, including pre-rolls, as well as vapes. The development of the cannabis products is being spearheaded by incoming CMO Bohb Blair and the company also aims to secure licensing partnerships ahead of a Q1 2022 portfolio launch.
“We plan to launch [cannabis] with products across formats that combine category opportunity, production capability and our unique brand positioning,” Murray said. “Products such as edibles, vapes, and pre-rolls in addition to, of course, our beverages.”
During the call’s Q&A portion, Murray said Jones is taking an “ambitious” approach to the cannabis launch and has “mapped out targeted geographies as part of our go-to-market strategy.”
The Alkaline Water Company Posts 50% Growth in Quarter
The Alkaline Water Company, maker of the Alkaline88 bottled water brand, announced its sales increased 50% to $15.2 million in its Q2 fiscal year 2022 earnings results this week, returning the company to a projected total fiscal year growth rate of 35% to 50%.
Gross profit for the quarter was approximately $5.2 million, up from $3.6 million in 2020. Gross margin declined, however, due to an increase in raw material and freight costs. Total operating expenses in the quarter were about $15.4 million, compared to $7.8 million last year, with the increase stemming from higher freight costs and additional marketing expenses from its sponsorship deal with NBA All-Star Shaquille O’Neal.
“We have been very fortunate that over the past two years we’ve taken action to strengthen and grow our infrastructure and logistical capabilities,” said CEO Ricky Wright on an earnings call Monday. “These steps paid off for Alkaline88 and our retailers pre-COVID and post-COVID. As a result of our planning and execution, we’ve been able to fulfill orders, when many of our competitors have left the store shelves empty.”
According to Wright, the company has added capacity to its warehousing and increased its inventory to allow it to meet its fiscal year full revenue guidance of $62 million. He noted that the company has also expanded its retail presence, which is currently about 75,000 stores nationwide, by adding Sam’s Club and GNC accounts. The company anticipates a 15% to 20% increase in store count over the next 12 months, with a number of activations slated for Q1 of fiscal year 2023.
While Alkaline88’s growth has typically been driven by multi-serving formats, Wright said the brand is now generating triple digit growth from its single-serve packages, up 180% year-over-year, with most of the company’s retail SKU expansion coming from its single-serve offerings.
As the company looks towards the future, Wright identified the convenience channel as a key target for the brand. He noted that the brand’s adoption of a DSD distribution model in the Southwest and Upper Midwest have already netted 1,000 new accounts, including Maverick, Circle K and QT stores.
While marketing campaigns built around the company’s Shaquille O’Neal sponsorship contributed to rising operating expenses in the quarter, Wright said that Alkaline88 has received a recent sales boost as a result. Last month, the brand launched 15 and 30 second television commercials featuring O’Neal as part of an omni-channel marketing campaign, with plans to announce “more Shaq related news over the next eight to 10 weeks.” In addition to serving as a brand ambassador, O’Neal is also an advisory board member for the company.
“This is a three-year deal and we’ve barely begun to see the true impact of Shaquille and [brand development company] Authentic Brands Group’s involvement in driving consumers to our products,” Wright said.
Reed’s Sees High Demand, High Transportation Costs
Despite heavy pressure from rising supply chain costs, sales of Reed’s Ginger Beer and Virgil’s Craft Soda increased 27% to $13.4 million in Q3 2021, the company announced today.
Core brand gross sales were up 22% in Q3 driven by a 25% volume increase. Reed’s case volume grew 34% and Virgil’s volume rose 16%.
Modified adjusted EBITDA loss was $3.1 million, compared to $2 million in 2020, driven by rising transportation costs. The company announced it would begin using “alternate materials” to protect from supply shortages “while providing pricing advantages.”
“The recognition and authenticity of our brands and strong position relative to better-for-you offerings, consumers taste and natural ingredient preferences is clear based on our recent growth as well as other sales category data,” said CEO Norman Snyder in an earnings call this week. “Supply chain challenges remain a factor, and while we are taking steps to mitigate the impact, there are many elements that remain and will likely pressure margins for the next several quarters.”
Snyder noted that transportation costs remain high, but said the company is “pleased” with its progress on instituting cost saving measures and operational improvements that helped to partially offset the inflation pressure. He noted that the company has hired a distribution consulting firm and an additional logistics executive to help optimize the business, with benefits expected to begin showing in Q1 2022.
The company increased its 2021 financial guidance for net sales growth to 20%, based on “strong demand” across the company’s portfolio, Snyder said.
Reed’s Real Ginger Ale product reported triple-digit growth in the quarter and expanded into the Costco Southeast region, based on a successful roadshow roll out in the retailer’s Nashville, Tennessee co-op, Snyder said. The company also expanded distribution by launching the Virgil’s Zero Sugar line in 100 ShopRite stores, as well as adding new stores with existing partners such as Smart and Final, Raley’s, HyVee, Wegmans, Hannaford, Big Y and The Fresh Market.
Snyder said the company is also working to expand its presence in the alcohol sector through new distribution for its Reed’s RTD Zero Classic Mule product, which added Costco, Whole Foods and Sprouts stores in Q3. Reed’s will also launch a Reed’s Hard Ginger Ale ready-to-drink line in the near future. The 5% ABV product will be available in Mango, Strawberry Watermelon, Pineapple Coconut and Cherry Lime flavors.
Next year, Reed’s will also relaunch Virgil’s Zero Sugar in 12 oz. sleek cans with a reformulated liquid that features an “improved proprietary sweetener blend and a more contemporary look,” Snyder added.