Canadian energy drink maker Guru Organic Energy Corp. reported a full-year net revenue of CAD$29.1 million, down 3.7% from CAD$30.2 million in 2021, and announced plans to shift its primary focus from brand awareness to sales velocity in the upcoming fiscal year.
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 today, the company listed several key drivers of the brand’s dip in revenue despite a 31% year-over-year increase in consumer purchases, including a change in its Canadian business model and the negative impacts of an initial pipeline fill estimated at CAD$2.7 million.
As part of its new business model, which first went into effect in Q4 2021, Guru’s exclusive distribution partner, PepsiCo, takes care of distribution, sales, merchandising and after merchandising services in return for a discounted price. That discount had a $5.3 million negative impact on FY2022 net revenue.
“While this impact is significant, it is less than we anticipated when we decided to embark on this long term partnership,” said Guru president and CEO Carl Goyette during a call with investors on Thursday. According to Goyette, upon entering the agreement, the brand optimized its product portfolio in order to respect other distribution agreements the partner had in place by phasing out its energy water line at retail. The line had generated approximately CAD$600,000 in FY2021 net sales, he said.
Additionally, the brand chose not to release a new product in Q4 2022 as it has in the past. Calling the decision an intentional move, Goyette said the brand will push out the innovation launch to Q2 2023.
“While the change in our business model investments made in our expansion activities have had an impact on our financial performance in the short term, we firmly believe it was the right decision and that it’ll pay off in the long run,” he said during the call. “We are seeing steady progress and distribution, retail execution, brand awareness and sales velocity which bodes well for the future.”
In FY 2022, Guru saw gross profit totaling CAD$15.7 million compared to CAD$17.9 million the year prior. Meanwhile, gross margin was 54% in FY2022 compared to 59.2% last year, impacted by the change in the company’s Canadian distribution, sales and merchandising model effective as of Q4 2021.
Adjusted EBITDA for the full fiscal year was a loss of CAD$17.2 million compared to a loss of CAD$8.7 million in 2021. Meanwhile, net loss totaled CAD$17.6 million, or CAD$0.54 per share (basic and diluted) compared to a net loss of CAD$9.8 million, or CAD$0.32 per share (basic and diluted).
Looking ahead, the company will shift its focus away from top of funnel brand awareness aimed at marketing investments to concentrate on having a greater impact on sales velocity. According to Goyette, this will entail investing in more point-of-sale marketing such as fridges and less spending on broader visibility marketing like billboards outside of stores.
Additionally, Guru will work on building out its retail presence in the natural channel in California as well as exploring further opportunities in the club store space.
Despite ongoing headwinds such as high oil prices, high aluminum costs, the transport craze and supply and demand issues, the brand remains confident in its ability to mitigate the impact through its balance of production working with several co-packers and cans.
“Similar to our growth in Quebec, our brand’s Canadian growth trajectory will take time and sustained effort. With a focus on targeted marketing and disciplined execution at the retail level, we expect that this will translate into a return of net sales growth for 2023, following the end of our transition period,” said Goyette in a prepared statement.