Quebec-based energy drink brand GURU Organic Energy Corp. reported quarterly net revenue of CAD$7.7 million, down 3.75% from CAD$8 million in 2021, in its fiscal year Q3 earnings report yesterday.
Founded in 1999, GURU produces a portfolio of natural, plant-based energy drinks and energy waters crafted with ingredients such as green tea, ginseng and guarana. During the earnings call, the company cited three key drivers of GURU’s dip in revenue despite a 14% increase in shipment volume: a change in the company’s Canadian distribution, sales and merchandising model, labor availability and logistics constraints.
“We will continue to improve in-stock positions and execution to mitigate industry-wide labour and logistics disruptions, which we felt more over the course of the summer than in previous quarters,” said president and CEO Carl Goyette, in a press release.
The Canadian brand saw gross profit totaling CAD$4.2 billion in the quarter, compared to CAD$5 million in 2021, which had been anticipated due to distribution, selling and merchandising fees. Gross margin was 58.4% in Q3, compared to 62.6% for the same period last year, impacted by the higher product costs driven by inflationary pressures on input and transportation costs.
Selling, general, and administrative expenses, which include operational sales and marketing costs totalled CAD$11 million in Q3, compared to CAD$7.2 million for the same period last year. According to the brand, selling and marketing accounted for CAD$8.5 million in Q3 2022, a 76% year-over-year increase.
The increased expense reflected the launch of the company’s largest campaign to date, “Good Energy for the Everyday,” which launched in July and included event sponsorships, out-of-home and digital ads, and a sponsorship of CTV reality TV program The Amazing Race Canada. The program was part of the brand’s broader “Made in Plants” campaign which launched this spring in coordination with PepsiCo.
Adjusted EBITDA amounted to CAD$(6.5) million, compared to CAD$(2.0) million in 2021.
In the U.S., Q3 sales remained relatively flat, totalling CAD$1.0 million compared to $1.1 million the previous year. In an effort to replicate the success of its #1 ranked 2022 Innovation SKU in Quebec, the company launched Guayusa Tropical Punch in August in targeted U.S. banners. GURU is currently executing its 12-week Costco California Road Show.
However, during the earnings call, Goyette noted that the brand has seen 23% year-over-year growth in the Golden State in Q3.
He added, “we are aiming to expand our distribution network in that state, as California lifestyle and progressive value is the perfect match for our brand […] many more banners will be launching next spring, during [the] planogram reset period.”
Looking ahead, GURU’s “ultimate goal” is increasing brand awareness and conversion “to drive growth with a clear path to profitability.” Following its “Good Energy for the Everyday” campaign and its latest round of research, the brand is seeing momentum in English Canada consumer scan data, the most significant to date with 4,000 consumers.
Last week, the brand unveiled its third national campaign, “Back to Reality.” According to a press release, the campaign is aimed at “reaching out to people that are in need of Good Energy as September looms, along with work, university, day-to-day reality and weekend fun.” The campaign will primarily focus on major urban centers, where the brand has seen the largest increases in consumer purchases.
“While we are encouraged by our growth in consumer purchases and market share, more work is required in execution and marketing,” said Goyette in the report. “In the beverage industry, executing well at store level is just as important as creating demand through marketing, and we will be laser-focused on these two tactics over the coming quarters.”