Reed’s, Inc. continued to make strides in its turnaround efforts during Q2 2024, showing a double-digit increase in net sales and further reduction in operating losses in Q2.
- Net sales in Q2 were up 19% year-over-year to $11.9 million.
- Gross profit grew 53% to $3.8 million and gross margin was up 720 basis points to 32.3%.
- Operating losses were around $700,000, down from $1.7 million in the prior year. However, selling, general and administrative expenses grew to $3.1 million compared with $2.6 million the year before.
In a statement earlier this week, Reed’s CEO Norman Snyder attributed the top line growth to “strong demand” for the brand’s drinks driven by “increased promotional activity and expanded product authorizations.” Meanwhile, the business made progress in reducing its short order shipment rates thanks to increased inventory.
“Our strategic initiatives are bearing fruit, setting the stage for further growth and improved profitability,” Snyder said in a statement. “With a strengthened inventory position, optimized cost structure, and continued demand for Reed’s products, we believe we are well-positioned to deliver on our goals in the back half of the year.”
Speaking to investors and analysts during an earnings call yesterday afternoon, Snyder highlighted the performance of individual portfolio products, including a 70% increase in sales for Reed’s ginger beer and 26% growth on its Virgil’s soda line in Q2. Sales of Reed’s ginger ale were flat in the quarter, but remained up 13% year-to-date.
Alcohol sales were flat in Q2, Snyder added, “but depletions in the category were up 16% over the same period.”
As part of its cost cutting initiative, Snyder reported that Reed’s efforts to renegotiate freight rates and new co-packing partnerships led to a 16% drop in its delivery handling expenses to $2.18 per case for the quarter, down from $3.05 per case in the same period in 2023. Delivery and handling costs are now around 12% of net sales, compared with 17% last year.
Selling and marketing expenses in Q2 were down 13%, he added.
Looking ahead, Reed’s is now looking to innovate around better-for-you and lower calorie drinks and is focusing on “leveraging fresh organic ginger” in upcoming products, Snyder said.
“Although we’re in the early stages of [the] development cycle, we’ve received positive feedback from several key retailers across different channels on our new product profiles,” Snyder said of the new better-for-you innovations. “We will offer this line to select customers and expect to launch in early 2025. We are excited to introduce these innovative products to the market and look forward to offering our customers an exciting new portfolio of beverages that will enable the Reed’s brand to expand into a high-growth category while allowing consumers to experience a natural plant-based functional refreshment.”
During Q2, the company also launched its Virgil’s handcrafted variety packs in Bay Area and Midwest Costco stores, with plans to roll out a ginger ale winter variety pack in the retailer in Q4. Reed’s also added new stores with Stop and Shop in the quarter and expanded its offerings in Walmart, Whole Foods and Cracker Barrel.