Reed's Inc. Presentation - Reeds, Inc.
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Reed’s Inc. Presentation
LEGAL Forward Looking Statements This presentation includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, in addition to historical information. All statements that are not statements of historical fact, including those that relate to matters such as our industry, business strategy, goals and expectations concerning our market position, future operations, margins, profitability, capital expenditures, liquidity, capital resources, future growth and other financial and operating information, are forward-looking statements. We may use the words “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “future,” “target” and similar terms and phrases to identify forward-looking statements in this presentation. The forward-looking statements contained in this presentation are based on management’s current expectations and are subject to uncertainty and changes in circumstances. We cannot assure you that future developments affecting us will be those that we have anticipated. Actual results may differ materially from these expectations due to changes in global, regional or local political, economic, business, competitive, market, regulatory and other factors, many of which are beyond our control. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, our actual results may vary in material respects from those projected in these forward-looking statements. For further information regarding risks and uncertainties associated with our business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of our filings with the SEC, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and our subsequent Quarterly Reports on Form 10-Q, copies of which may be obtained by visiting our website at http://reedsinc.com/. Any forward-looking statement made by us in this presentation speaks only as of the date of this presentation. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by any applicable securities laws.
COMPANY BUSINESS MODEL TRANSFORMATION NEARLY COMPLETE
Significant Value Creation and Volume Growth Upside Moving Forward
Brand leadership in on-trend and fast growing beverage categories
Ability to disrupt the multi-billion dollar “Ginger Beverage” category and the $80B CSD category
Clear and defensible product superiority with strong macro consumer tailwinds
New leadership in place – optimized board, new management team, all functions upgraded, Norwalk HQ
Business transformation nearly complete and will drive increased investment in sales & marketing
New strategic focus on core beverage brands, streamlined product line, cut 100 SKU’s
Q2 improved to 32% gross margins via new supplier relationships and upgraded operations
Moving to 100% outsourced production, asset light sales and marketing business model by year end
Will further improve margins 4-6 points, reduce working capital and capex investments
Final stages of documentation for re-fi - lower financing cost and debt service to re-direct for growth
Investing in sales and marketing initiatives to set the stage for accelerated growth
Brand refresh
Zeros and Cans
New Broker partnerships
COMPANY BUSINESS MODEL TRANSFORMATION NEARLY COMPLETE
Business Model Improvements Driven by Transformation
Post
2017 H1 2018 Transformation
Net Sales 11% Decline 3% Increase Positive
Core Brands -7% Core Brands +7% Growth
1 18% 30% 30% - 40%
Gross Margin
2 Negative Negative $1MM Cash flow
Cash Flow $3.4MM positive
$2.9MM Finalizing Legal
COMPANY BUSINESS MODEL TRANSFORMATION NEARLY COMPLETE
Transformation Will Fund Greater Investment in Sales & Brands
• Added marketing, sales and agency resources
And Drive Growth • Opening new retailer doors via investment in new broker
partners, slotting, shippers and in-store trade programs
• Alliance Sales & Marketing; Advantage Solutions
• Launched brand refresh on Virgil’s
• Packaging, website, social media platforms, etc.
• Refresh design work on Reed’s complete
• Currently extending to website, social media etc.
• Launched Virgil’s Zero Cans
New Leadership
Investment
in Sales & • Strong retail acceptance and velocities continue to build
Branding
• Start sell-in of Reed’s Zero’s and Cans next week
• Volume impact will start in Q1 2019
• Adding feet on the street, programs and licensed distributor
partners to expand presence in the on-premise channel
• Launching Young’s Market in CA
DISRUPTING CATEGORIES
2018 Beverage Industry Articles Confirm Reed’s Inc. Opportunity
Ginger provides value-added benefits to beverages 2018 Soft Drink Report: Carbonated soft drink
Clean-label association helps ingredient work in manufacturers adapt to formulation, engagement trends
alcohol, non-alcohol products Millennials, iGeneration could offer potential to category
The health-and-wellness movement is driving usage for the Alternative sweetener solutions could help the CSD market offset
spicy, zesty taste of ginger in functional beverages. declines in other segments of the category, analysts note.
“Ginger is showing up more and more in beverages, and it’s not going to lose “The most widelyAprilcited innovation sought by consumers is ‘healthy options,’ followed by
11, 2018
Jessica Jacobsen
April 23, 2018
momentum any time soon” ‘natural ingredients,’” the report states.
Barbara Harfmann
When it comes to consumer penetration, carbonated soft drinks (CSDs) still are a
Cultivated as a spice since ancient times, ginger has become well-known for behemoth within the U.S. beverage market. In its April 2017 report titled “Carbonated
“There itsare manyhealth
medicinal health benefits
benefits associated
and ability withhealth,
to boost bone ginger,” she continues.
strengthen the “….aiding
Soft Drinks – US,” Chicago-based Mintel notes that the category has a penetration of
with digestion and alleviating nausea, but it also has anti-inflammatory
immune system and aid in digestion, according to experts. Derived from the properties about 90 percent. Yet, with declining sales, analysts suggest that more innovation is
that can
rootprovide relief
of the ginger plantfor issues
Zingiber like muscle
officinale, ginger cansoreness and
be consumed arthritis pain. Other
fresh, According to Mintel’s
needed report, consumers
to help the are showing
mature beverage category. an interest in innovative products
powdered,
suggested dried,ofin ginger
benefits oil form or as a juice,
include giving the cholesterol,
lowering science-backedblood sugar and risk of within CSDs, particularly those that are positioned as healthier.
ingredient added versatility to impact consumers’ bodies and brains, experts
heart disease.”
say.
MAJOR CONSUMER TRENDS
Powerful Consumer Trends Driving Craft Beverage Growth
Consumer Trends That Will Drive Continued
On-Trend with Craft Soda Segment Accelerated Growth For Ginger Beer And Craft Sodas
Consumer Preferences Underdeveloped vs.
Mainstream • Authentic/Distinct Brands – Broad, cross-
Moving to generational appeal Boomers/Millennials gravitate to
Craft, Premium, Craft Can Help brands with founding authentic story, proprietary
Bold Flavors Revitalize CSD Declines processes, unique packaging.
*$111 Billion **$82 Billion • Affordable Indulgence – Consumers indulging
Retail Beer Sales Retail CSD Sales themselves with affordable everyday premium
refreshment beverages.
1%
23%
• Trading Up to Premium/Craft – Strong growth in the
craft soda and premium mixer segments. Consumers
77% looking for small batch, handcrafted, higher quality,
99% authentic bold flavors.
• Craft Soda Category Under Developed – Under-
penetrated segment relative to other super-premium
food/beverage categories such as craft beer, currently
less than 1% of CSD category.
*Brewers Association 2017 **Beverage Digest 2017
MAJOR CONSUMER TRENDS
Favorable Macro Consumer Trends Better-for-You/Healthier Products
• Natural/Organic products growing ~10% a year and 4X-5X faster than
mainstream counterparts.
• Consumers want clean labels with simple, natural ingredients without
artificial colors, ingredients and preservatives.
• Consumers are looking for beverages with function and ginger is a
superfood with several health benefits.
• Studies have show that ginger helps with digestion, may reduce
nausea, may fight the flu and common cold, may reduce muscle
pain and soreness, its anti-inflammatory effects can help with
osteoarthritis, may lower blood sugars and improve heart disease
risk factors, may significantly reduce menstrual pain, may lower
cholesterol levels, may improve brain function and protect against
Alzheimer's disease.
• Reduced Sugar – Consumers moving away from high sugar beverages
as well as artificially sweetened products for health reasons.
• Demand for Premium Mixed Drinks Growing – Premium alcohol and
cocktail consumption is growing as well as demand for bold new mixed
drinks such as the Moscow Mule grew 30% in on-premise sales in
2017*
*Source: Technomic research as cited on www.nightclub.com
DISRUPTING CATEGORIES
Vision – Become the Sam Adams of Craft CSD’s
Mission – Positively Disrupt the Ginger and Craft CSD Categories
Reed’s is the #1 Selling Ginger Beer in the US*
Virgil’s is the #1 Independent All-Natural Full Line Craft Soda**
Mainstream CSD Craft Specialty CSD
Total CSDs Up Ginger Ale Craft Specialty CSDs Craft Specialty Non Ginger Beer
Diet CSDs Up
Slightly Up Flat Sugar Growing Growing
1% 1% 11% 0% 21% 12%
-0.3
* Based on Spins MULO/Natural/Specialty sales latest 52 weeks ended 8/12/18
** Not Aligned with Coca-Cola or Dr. Pepper Snapple, SPINS sales 52 weeks ending 8/12/18
PRODUCT LEADERSHIP
Reed’s Inc. is Unsurpassed in Taste and Quality Natural Ingredients
Brewed from Fresh Organic Peruvian Ginger Made Only With Real, Natural Ingredients
Never Any Artificial Colors, Flavors or Preservatives
Gluten Free, GMO Free, Caffeine Free
Launch of Proprietary 2.0 Great Tasting Natural Sweetener BlendCATEGORY LEADERSHIP
Reed’s Inc. is a Market Leader in the Craft Specialty Category
Reed’s Inc. is the Top 4 player in emerging $500M Craft Specialty Segment
Reed’s Inc. has significant market share in a diversified category
*Reed's is the #1 Selling Ginger Beer
*Reed's is Top 5 Craft Specialty U.S. CSD Player Reed's Nestle Waters Zevia DPSG Coca-Cola
*US Retail Sales $47.3M $77.0M $63.2M $59.2M $21.1M
*$ Market Share (%) 11.0% 17.9% 14.7% 13.8% 4.9%
*Source: SPINS data (combined mulo/natural/specialty channels) 52w ending 8-12-18 with Reeds includes sales non-syndicated retailers in natural and specialtyCATEGORY LEADERSHIP
Reed’s is the Dollar Leader in the Fast Growing Ginger Beer Segment
Reed’s has been the #1 Ginger Beer in the US for decades
Estimated 30% dollar share (ginger beer segment represents 21% of total craft specialty category)
Brand dominance in natural/specialty with significant distribution upside across most channels
Best tasting, highest quality product that is all natural and made from fresh Peruvian ginger root
2/3 of consumers drink Reed’s straight up
*Reed's is the #1 Selling Ginger Beer
*Reed's is the #1 Selling Ginger Beer Reed's Goslings Fever Tree Bundaberg Cock n Bull
All Natural (No artificial colors, ingredients or preservatives) Yes No Yes No No
Made from Fresh Organic Ginger Root Yes No No No No
Made with Cane Sugar Yes No Yes Yes Yes
Made with High Fructose Corn Syrup No Yes No No No
Sweetened with Honey, Pineapple, Lemon & Lime Juices Yes No No No No
*US Retail Sales $27.9M $19.1M $12.9M $12.4M $8.2M
*Average % ACV (% distribution MULO/Natural measured channels) 26%/75% 39%/2% 25%/17% 10%/3% 13%/5%
*Avg Retail Price (12oz 4-pack equivalized) $5.27 $3.83 $10.28 $6.22 $4.84
*Source: SPINS data (combined mulo/natural/specialty channels) 52w ending 8-12-18 with Reeds includes sales non-syndicated retailers in natural and specialtyCATEGORY LEADERSHIP
Virgil’s is the Leading All-Natural, Independent, Full Line Craft Soda
Virgil’s is the #3 player in craft soda, significant volume upside in Zero Sugar
Brand dominance in natural/specialty with significant distribution upside across most channels
Great tasting, highest quality handcrafted product line available in bottles and cans
Revolutionary taste breakthru in new 2.0 natural sweetener system will drive share growth
*Virgil's is the #1 Selling "All-Natural" Craft Soda
*Virgil's is the #1 selling "All-Natural" Craft Soda
*Virgil's is the #3 "All-Natural" Craft Soda Virgil's Zevia IBC Stewarts Hansens
All Natural (No artificial colors, ingredients or preservatives) Yes Yes No No No
Made w/Cane Sugar Yes No No No Yes
Made with High Fructose Corn Syrup No No Yes Yes No
GMO Free Yes Yes No No Yes
Natural Flavors Only Yes Yes No No Yes
*US Retail Sales $18.4M $62.6M $36.8M $17.7M $13.8M
*Average % ACV (% distribution MULO/Natural measured channels) 19%/70% 28%/91% 58%/0% 18%/1% 6%/52%
*Avg Retail Price (12oz 4-pack equivalized) $5.26 $2.91 $2.97 $3.48 $2.39
*Source: SPINS data (combined mulo/natural/specialty channels) 52w ending 8-12-18 with Reeds includes sales non-syndicated retailers in natural and specialtyREED’S PACKAGE REFRESH – REED’S SINGLES AND NEW ZERO SUGAR
ACKAG
14REED’S REFRESH – REED’S 4-PACKS
15REED’S REFRESH – REED’S 3D AND ZEROS
16NEW REED’S EXTRA AND ZERO EXTRA IN CAN SINGLES
17NEW REED’S 4-PACK CANS 3D
18NEW REED’S 4-PACK CANS
19VIRGIL’S SINGLE BOTTLES HANDCRAFTED
20VIRGIL’S 4-PACK BOTTLES HANDCRAFTED
21VIRGIL’S SINGLE AND 4-PACK ZERO ROOT BEER
22NEW - 6 FLAVORS OF VIRGIL’S ZERO SUGAR IN CANS
FLAVOR MIX BY BRAND, 2017
NEW 2.0 Proprietary All Natural Sweetener System • All Natural • NO preservatives
• Gluten Free • NO HFCS
• Kosher • NO Sodium Benzoate
ZERO Calories • ZERO Sugar • ZERO Guilt • NO Caffeine
• NO artificial dyes, colors,
or ingredients
• NO Aspartame/Sucralose
NO Flavor Compromise
23 23AVAILABLE IN 4 AND 6 PACKS
2018/19 MARKETING & BRAND GROWTH
24SUCCESSFUL LAUNCH OF NEW ZERO SUGARS
100% Retailer & Distributor Acceptance Rate to Date on Virgil’s Zero Sugar
Secured National Launch Commitments from Target and Kroger
Processing orders from UNFI and Kehe – Natural/Specialty Channel
Natural Specialty Mainstream2018 MARKETING & BRAND GROWTH
REFRESHED WEBSITE AND SOCIAL MEDIA PLATFORMS
www.virgils.com I
NVIRGIL’S MANIFESTO Mainstream soda is full of high fructose corn syrup, artificial colors, flavors and preservatives. Diet sodas are sweetened with chemicals like aspartame, sucralose, Ace K. What if there was an option that rose above? Something that tastes great but is all-natural. All-natural Zero products that remove the guilt but leave the taste. Today we demand more from our simple pleasures, our coffee, our beer, our ice cream; it’s time we demanded more from our soda. Virgil’s - Above Soda. 27
The idea that informs everything we do
Elevate Virgil’s
over Mainstream
Soda
Introduce
Educate
Send to Store
2829
Take your BBQ
up a notch.
Find a Virgil’s near
Maps 112 East Broadway
you.
30Video
Above Soda social post
Copy:
They fake it good
We make it good
31Video
Above Soda social posts
Copy:
Chemicals aren’t
refreshing
All-natural is.
32Video
Above Soda social post
Copy:
Zero calories
Zero taste
Makes Zero sense
33VIRGIL’S PR
#VIRGILSGENIUS INFLUENCER CAMPAIGN
- Official Virgil’s Spokesperson announced August 6th
- All other self selected ambassadors will drive content onlineVIRGIL’S PR AUSTIN ROGERS - 12 TIME JEOPARDY WINNER
2018 MARKETING & BRAND GROWTH
2018 Virgil’s 360 Campaign
Drive Awareness, Trial, Engagement
NEW!
ZERO SUGAR AUSTIN ROGERS
INFLUENCERS
COMSUMER ENGAGEMENT
Digital Media (Highfield) SOCIAL
•
ABOVE SODA
• Social Contests
• #vigils Genius
SALES MATERIALS
• Shippers
RETAIL/ ECOMMERCE ACTIVATION • Sell Sheets
• Retail Couponing
• Sampling
• Amazon
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