Flow Beverage announced a reversal of fortune in its Q3 2022 earnings report on Thursday. The carton-packaged alkaline water company reported consolidated net revenue of CAN$12.7 million in Q3, a 79% improvement from the Q2 and 36% higher than Q3 2021.
Gross profits were CAN$3.6 million accounting for the quarter’s 28% gross margin, up from 22% in the same period last year. The company is maintaining its target net revenue growth of 25% to 30% in FY 2022. The company had previously lowered that target in Q2 after a 21% decline in consolidated net revenue in that quarter.
“Flow delivered broad-based growth across U.S. retail, Canadian retail and e-commerce channels in the third quarter, in addition to achieving contract wins that are expected to enhance distribution and help drive long-term growth,” said Nicholas Reichenbach, Flow founder and CEO, in the company’s press release. “The Company is also beginning to realize improved economics in trade spend, activation programs, capacity utilization and operating expenses that we expect will accelerate our path to profitability.”
Among the achievements that the company listed was its leadership position in the cartoned water segment. Flow increased its market share in MULO and Natural retail sectors to 43% in Q3 2022 versus 39% in the same period 2021.
The more favorable sales mix and improved efficiency helped bring the company’s earnings back into the green. The company launched its three-SKU line of vitamin-infused waters in June. Initially, the line was expected to launch in spring 2021 but was waylaid. The June launch was led through ecommerce channels as well as over 100 Fred Meyer (a subsidiary of Kroger) locations.
Flow also announced its successful release of a 1 liter format bottle of the blueberry peach and strawberry rose flavors in over 1000 locations.
The alkaline spring water company did experience some early summer uncertainty when Reichenbach stepped back into his former role as CEO after the abrupt departure of Maurizio Patarnello in June. The company had brought Patarnello, former chairman and CEO of Nestlé Waters, on as Flow CEO as it prepared to go public on the Toronto Stock Exchange in 2021.
The carton water company listed “ a significant reduction in stock-based compensation, as well as decreases to sales and marketing and salaries and benefits expenses” as helping to improve the EBITDA loss to CAN$7.6 million in Q3, a 42% improvement from the same quarter last year.
In June, when the company reported a double-digit decline in revenue and a more than CAN$2.5 million decline in gross profits from the same quarter in 2021, CFO Tim Dwyer cited “COVID hangover” leading to a decline in grab-and-go beverages.
In light of that, the company seems to have put more emphasis on its ecommerce distribution with a partnership with Ohi Inc. to offer two-hour, same-day, and next-day delivery in select urban markets as well as a distribution agreement with Primo Water Corporation bringing in 1.8 million possible subscription customers.
On the call, Reichenbach seemed exceptionally pleased with the Primo partnership citing the company’s distribution in 21 countries and the “shared core principles as they are related to ESG” as being building blocks to a long term partnership between the two companies.
“New distribution channels and added benefit from a selective approach to launching new product innovations are expected to maintain net revenue growth rates in Flow brand revenue. Notwithstanding near term changes in discretionary spending by households, consumer demand for sustainable products remains very high, Flow is realizing growth well above growth rates in the premium and functional water categories,” Reichenbach said in the press release.
Flow did report that it continues to face a reduced demand in its co-packing business this year continuing the “under-utilization of new production lines” at its Virginia manufacturing facility. New CFO Trent Macdonald reiterated that the company is continuing to focus on building the Flow brand as the “primary driver for shareholders margins.”
CEO Reichenbach finished up the prepared statements to steer the investor call towards the brand’s recent sponsorship of the U.S. Open tennis tournament and its coming sponsorship of the New York City Marathon in November.