Canadian energy drink maker GURU Organic Energy Corp. reported quarterly net revenue of CAD$7.6 million, up 7% from CAD$7.1 million in 2021, in its fiscal year Q2 earnings report today.
The Toronto-based brand saw volume sales improve 26% in the quarter, with new product launches, increased distribution in Canada, and a rollout in the U.S. club channel driving the growth. Gross margin was 54%, compared to 55% in Q1 2022, “reflecting careful supply chain management and prudent pricing practices,” the company said. Gross profit totaled CAD$4.1 million, compared to CAD$4.4 million in the prior year. GURU reported a 14% market share of the energy category in Quebec retail accounts.
However, selling, general and administrative expenses including operations costs totalled CAD$8.2 million in Q2, compared to CAD$5.5 million the period last year. Selling and marketing expenses made up 70% of the total. Contributing to those costs was the launch of GURU’s new Guayusa Tropical Punch, larger cans and 4-packs across Canada.
Adjusted EBITDA amounted to CAD$(3.7) million, compared to CAD$(0.8) million in 2021.
In the U.S., sales were up 31% sequentially, with a 61% increase in California where the brand has placed the majority of its American business. U.S. sales represented about 28% of total net revenue.
According to president and CEO Carl Goyette, GURU’s U.S. sales have been boosted by a limited time variety packs in the wholesale club channel, including 200 Sam’s Club locations, and the brand is “also pursuing other selective customer acquisition initiatives,” in addition to an expansion in ecommerce.
During an earnings call today Goyette noted that Sam’s Club was a significant part of U.S. business growth along with natural retailers, but he noted that the big box chain was only a rotational program. Guayusa Tropical Punch is set to expand to the American market this summer.
“When we’re looking at our largest retailer, Whole Foods, performing extremely well,” he said. “Some other banners like Sprouts as well where we have SPINS data are doing well. So really, across the board and whether it’s in the natural channel or in the conventional growth channel we’re seeing some very positive [results].”
GURU also implemented a price increase of 6% to 10% on May 16 for all products. On the call, Goyette said rising transportation and input costs made the increase necessary, but that the brand aims to keep its price positioning in line with competition.
Last year, GURU announced it had partnered with PepsiCo Beverages Canada to distribute the brand in the country. During the company’s Q4 earnings call earlier this year, Goyette said the transition into the PepsiCo system had helped increase revenue but also led to higher losses, though the company believes the long term benefits of the partnership will outweigh short term growing pains.
During the Q&A portion of today’s call, Goyette said the partnership has now helped expand the brand’s footprint in Canada and given it the support and reliable distribution network it needed to accelerate marketing campaigns.
While the company had to delay campaigns intended for Q2 in order to reduce marketing spend, GURU is now launching its summer ‘Good Energy for the Everyday’ national campaign which includes event sponsorships, out-of-home and digital ads, and a sponsorship of CTV reality TV program The Amazing Race Canada. The program is part of the brand’s broader “Made in Plants” campaign which launched this Spring in coordination with PepsiCo.
“It’s more difficult than in the past to predict exactly our revenues because we don’t control the distributors anymore, so as always it’s a transition year and until we’ve done a full round with PepsiCo it’s going to be difficult to say exactly,” he said. “But one thing we can say for sure, we’ve seen our [scanner] data accelerate, we’re the fastest growing brand in Canada. Obviously, we always said COVID-19 was negative for us, that’s behind us and we’re going full steam ahead with marketing now that we have distribution in place.”