Despite underperforming net sales expectations for Q3, zero sugar soda brand Zevia is projecting a return to growth in Q4 thanks to its expansion into 4,300 Walmart stores during the previous quarter – positioned as part of the mass channel chain’s new Modern Soda retail set – the company said in its latest earnings report on Wednesday.
Zevia reported net sales fell 16% by around $6.7 million year-over-year in Q3 to $36.4 million, which CEO Amy Taylor attributed during a call with investors and analysts to an expected reduction in distribution in the club channel and at one of the brand’s mass channel customers, as well as the company’s move to discontinue its mixers line in order to focus more fully on carbonated soft drinks.
Despite the hit to revenue, Taylor highlighted efforts made to lower losses during the quarter, noting that its adjusted EBITDA loss dropped to $1.5 million, down from $9.1 million in Q3 2023. Net loss for the business was $2.8 million.
Taylor now believes the future is brighter for the brand, noting strong sellthrough in “key strategic channels” like grocery during Q3. The company is now introducing new marketing campaigns which aim to reinforce an image of the brand as “a great tasting, zero sugar, clean label soda in a world awash with fake and artificial,” she said, as well as expanding its DSD network in the Pacific Northwest and extending its presence in Walmart nationwide, with an 8-can variety pack set to launch in the retailer this month.
A recent overhaul of the brand’s social content strategy, she added, helped drive a 55% quarter-over-quarter increase in online engagement with the brand between Q2 and Q3 this year, with a more than 500% increase in organic views.
“We believe that we are uniquely positioned to capitalize on the growing demand for healthier alternatives to traditional soda,” Taylor said. “We offer a distinctive blend of great taste, zero sugar, clean label products and exceptional values. And so to see this opportunity, we will execute a robust brand marketing strategy, expand our distribution and drive unparalleled product innovation.”
Zevia is also looking to flavor innovation to continue driving growth, as Taylor noted that “each new Zevia flavor continues to outperform the last,” with strong sales for its Creamy Root Beer, Vanilla Cola and Cran Raspberry flavor launches over the past year. The brand also had success with its limited time Salted Caramel ecommerce exclusive, she said, which is “tracking to sell out well ahead of expectations.”
“The emerging natural soda business is dynamic and we have faced channel-specific distribution challenges that have impacted our sales performance,” Taylor said. “With that recognition, we realigned our strategy with a focus on marketing, on portfolio strength and on quality sustainable distribution – highly encouraging early signs. We expect that our growth path will be gradual at first, as we build sustainable momentum and pave the path to strong profitability.”