Jones Soda: 7-Eleven Declines Drag on Q4, Full Year Revenue

Jones Soda reported revenue and gross profit declines during its Q4 and full year 2019 earnings report, released yesterday, driven by a 9% drop in its fountain business as the result of a decrease in the brand’s 7-Eleven store count.

The Seattle-based craft soda maker reported $11.5 million in full year revenue, down 6% from $12.6 million the year before. Gross profit as a percentage of sales fell from 21.8% in 2018 to 20.7% in 2019 and net losses grew to $2.8 million, up from $2.1 million the previous year. Total revenue for the fourth quarter was $2.2 million, down from $2.3 million year-over-year.

Sales of Jones’s fountain drinks fell 9% and Culp noted that part of the dip was due to limited release flavors launched in 2018 that were not renewed. Revenue from 7-Eleven declined 51%. However, sales of the company’s core bottled line grew 3% in 2019, driven primarily by the Canadian market. Speaking on a call with investors yesterday, Jones Soda controller Joe Culp said promotional allowances on the core line fell 25% from $382,000 in 2018 to $285,000.

Sales of Lemoncocco — a canned lemon and coconut flavored soft drink — fell 21%, which the company blamed on production issues. Though the line only accounts for 2% of Jones’s overall business, Culp said the company anticipates a return to growth in Q1 2020 results.

Jones CEO Jennifer Cue said during the call that the company anticipates its declines in 7-Eleven will continue to be an issue heading into the second quarter but that the brand is “working hard with the customer to reinvigorate the business in the second-half of this year.”

The year-end report comes several months after CBD portfolio company HeavenlyRx, Ltd. purchased a 25% stake in Jones through common stock. Cue noted that the investment has given Jones “an important infusion of strategic capital” to fuel expansion plans. As part of the partnership, the brand is currently developing a CBD-infused beverage which will launch pending guidance from the U.S. Food and Drug Administration (FDA).

“With this [investment], we were able to continue building out our sales and marketing leadership and teams, and we remain fully committed to investing in these areas to ensure they have the necessary resources to meet their goals,” Cue said. “Our entire team here at Jones did an excellent job addressing and responding to the issues we faced, and I firmly believe we are better company today than we were one year ago.”

Among the new hires are former Boxed Water sales director Joe Jankowski as VP of U.S. Sales and former Starbucks brand manager Maisie Antoniello as VP of marketing.

Looking forward, Cue announced that the company will launch its watermelon flavor, released last year in Canada, to its permanent U.S. bottled line this spring. The company has also added over 600 Cracker Barrel locations nationwide.

Cue also addressed the impact of the ongoing COVID-19 pandemic. She noted the majority of Jones’ business is in the grocery and convenience channels, which are currently unaffected by the shelter in place orders issued by multiple states, and that only 5% of the brand’s distribution is in food service accounts.

“Although early days, we believe that we have not experienced any significant impact to our sales or constraints to our supply chain at this time, and we are diligently monitoring the situation with all of our retail and distribution partners on a daily basis,” she said.

Jones Soda stock price was up 5% to $0.23 per share at the market close today.