Stevia-centric beverage company Zevia saw net sales grow 3.5% to $35.4 million in Q4 while full-year sales hit double digits, increasing over 18% to $163.2 million, according to an earnings report released today. These results have put the company on a “faster path toward profitability,” the report states.
According to Amy Taylor, Zevia president and CEO, the company saw significant growth in household penetration over the past 12 months, adding 1.4 million new households and reporting a slight uptick in total dollars spent (+$1), among existing consumers. Looking toward 2023, the company is focused on maximizing top line growth throughout the year.
“We are pleased to have delivered solid fourth quarter 2022 results, including net sales above the top end of our guidance with significant improvements in margins and profitability,” said Taylor in an earnings release. “Our team’s diligent execution against our operational and strategic priorities, along with strong cash management, improvement on the Adjusted EBITDA line and step-changes in cost containment in the back half of the year, positions us well to deliver continued strong growth and a faster path towards profitability.”
Zevia will also unveil a “radical brand refresh” next week at Natural Products Expo West and throughout the coming months at additional industry events, Taylor said. She expects Zevia’s revamped “look and feel” to help drive consumer awareness in-store and noted its on-shelf visibility remains the company’s greatest asset to driving trial.
In terms of consumer acquisition, the company has expanded its strategy, introducing a slim can format that is merchandised in branded cold cases at the checkout register at a national retail account. Taylor did not specify which retailer, but said the refrigerated single cans’ high velocity is allowing Zevia to reach new demographics via impulse purchases – despite carrying a price point up to a 63% higher than the brand’s standard cans. Taylor said this strategy will continue to evolve as the brand looks to apply that route to market strategy into future expansion in the convenience store channel.
In addition to the refresh, the brand will introduce a new recyclable cardboard overwrap for its most popular format, 6-packs. The redesigned cans will be distributed on a rolling basis during the peak beverage season of late spring and early summer. Only a handful of retail accounts will execute a hard switch as Taylor explained that Zevia has an “eye on the P&L and the planet,” and aims to reduce wasting any product during the changeover.
Alongside the new look will come new products: a Vanilla Soda, two energy SKUs and a new tea flavor to be formally announced later this year. Marketing spend is also set to rise. Taylor noted it will be an incremental evolution of the brand’s marketing budget rather than a total overhaul when compared to previous annual spend and did not specify its expected percent increase.
Zevia’s accelerated path toward profitability is a key focus for the year ahead, though margins need to be improved to reach that goal after full-year margin growth came in lower than expected. During Q4, the company saw its strongest gross margin profit of the year (44.3%); however, its full-year gross profit margin dropped from 46.3% (FY21) to 42.9% (FY22). This decrease was attributed to higher manufacturing costs and inflationary pressures, but was partially offset by Zevia’s August 2022 price increase.
Zevia CFO Denise Beckles said the team anticipates another price increase later on this year, but said that plan is not set in stone and will be determined as the economic climate continues to change. In conjunction with its pricing strategy, Zevia has implemented a range of supply chain management tactics as it looks to improve gross margins.
“We have a bunch of initiatives we’re running in the supply chain, where we expect to capture significant optimization,” said Beckles on a call with investors. “Those productivity savings and price are going to be two of the big drivers of helping us recover some of the margin that we had lost in the previous year.”