Craft soda maker Reed’s reported another down quarterly earnings report as sales, margin and profit fell sharply amid lower inventory write-offs and volume declines.
- Net sales in Q2 were $9.5 million, lower than $11.9 million in Q2 2024.
- Gross margin slipped significantly to 8%, compared to 32% in the year-ago period.
- Net loss was $6 million, versus $3.2 million in the same quarter last year.
“We had some challenges in 2024 and this has been building,” said recently appointed CEO Cyril Wallace in response to an analyst question. “We had operational challenges, we lost placements, sets and stores. I think you’re seeing the continuation of that, being put in the penalty box so to speak. We’ve lost distribution and facings across some key retailers.”
Wallace conceded that when retail partnerships are lost, “you don’t just go back in,” but the beverage maker is making inroads with retailers to “earn its way back in.”
Part of Reed’s rebuild appears to be trying to catch the modern soda wave. In April, Reed’s announced the launch of its Soda Smarter line of low-sugar (5 grams), “multifunctional” carbonated soft drinks. The four varieties – Berry Bubbly, Strawberry Vanilla, Root Beer and Lemongrass Ginger – are formulated with functional mushrooms, prebiotic fiber, ginger and turmeric.
The brand is working through its first production run of inventory now and will be updating its formulation later this year, Wallace said in prepared remarks. “We view the functional space as [a] long-term opportunity, and we’ll continue to invest in the vertical as it grows.”
As the brand attempts to repair relationships with former retail partners and open up new distribution channels, Reed’s announced it had recently appointed Rachel Fox-Greenwood as VP of On-Premise Sales. Fox-Greenwood most recently served as U.S. sales director for adult non-alcoholic wine brand French Bloom and will focus on building Reed’s footprint in foodservice and convenience.
During Q2, $1.6 million of inventory was written off as Reed’s optimized and “rebalanced” its portfolio to “focus on high-demand, actively-supported SKUs” across distribution regions, Wallace said.
Margin was also impacted by trade spend related to new hires, elevated delivery and handling costs, and marketing campaigns.
While order volumes in the second quarter were “softer” than expected, Reed’s anticipates an uptick during the back half of the year with new rotations in Costco. Company leadership also announced that additional commitments from Safeway and Kroger had been secured thanks in part to Reed’s shipper and display programs.
Reed’s also relaunched its website as it seeks to drive a larger share of revenue from subscription-based DTC sales.