After years of constant supply disruption, craft soda maker Reed’s declared that its production is finally keeping up with demand in its Q1 2025 earnings report this morning.
In its first earnings since new CEO Cyril Wallace joined the company last month – following a two decade career at PepsiCo – Reed’s projected confidence moving forward as net sales grew 4.5% to $10 million in the quarter and supply hurdles appear to have stabilized.
“For the first time in years, production is keeping pace with sales, enabling us to proactively meet demand, rather than react to it,” Wallace said on a call with investors. “These fulfillment improvements have also been supported by better cross functional collaboration amongst [the] sales and operations teams, tighter forecasting and more deliberate planning.”
In Q1, Reed’s reported increased distribution with the launch of its four-SKU multifunctional soda line, made with fresh ginger, adaptogenic mushrooms and prebiotics. The line has achieved national distribution in Sprouts stores and is set to launch in Kroger, Giant Carlisle, Hannaford and Duane Reed stores.
“While we are excited about the early traction of our new functional soda line we are taking a thoughtful, measured approach to innovation,” he said. “One that prioritizes our deep heritage in better-for-you beverages with a strong brand credibility with our retail partners. We view functional beverages, including those formulated with probiotics, as a longer term growth driver.”
Wallace noted that “several initiatives are already underway” to market the product, but the company expects to ramp the line “gradually.”
Reed’s also grew its presence at Albertsons/Safeway stores for its Ginger Ale line with 1,100 new points of distribution in the retailer.
The company also began a national display program at Sprouts stores for the Reed’s and Virgil’s brands and introduced its Classic Mule products in Hawaii and California Costco stores.
Three new flavors of Virgil’s launched into Giant Carlisle accounts and at Trader Joe’s the company gained placements for its alcohol products, which Wallace said “reflects growing demand for our core and alcohol portfolios and will contribute meaningfully to topline growth in the quarters ahead.”
While net sales grew, so did expenses as operating losses rose to $1.7 million, up from $0.7 million in the period last year. Selling, general and administrative expenses increased to $3.5 million, up from $2.6 million.
Gross profit was flat at $3.4 million and gross margin fell to 33.9%, compared to 35.6% the year before. The company attributed the margin crunch to higher costs of goods sold as Reed’s expanded its operating capacity and inventory.
However, Wallace touted backend efficiencies expected to generate long term growth, including stronger relationships with co-packing partners, improved forecasting and lowered input pricing on key ingredients.
The ongoing shift from glass bottles to aluminum cans across its product lines has been one area where the company has managed to lower spending, he noted, and that transition “remains on track” and has been “well received by retailers and consumers.”
The company also has “minimal direct exposure to tariffs,” he added, although it will continue to “monitor closely” how ginger and packaging materials could be impacted. Much of Reed’s supply chain runs through Central America, he said.