10-K: Zevia PBC Reports Fiscal Year 2024 Results, Announces Productivity Initiative

Zevia PBC's 2024 results show a decrease in net sales but highlight a productivity initiative aimed at improving cost structure and brand investment.

Summary

• Zevia PBC reported net sales of $155.0 million for the year ended December 31, 2024, compared to $166.4 million in 2023.
• The company experienced a net loss of $23.8 million in 2024, an improvement from the $28.3 million loss in 2023.
• A multi-year Productivity Initiative was launched in the second quarter of 2024, expected to yield approximately $15.0 million in annualized benefits.
• The company estimates that consumers have avoided over 79,000 metric tons of sugar in their diets since 2011 by choosing Zevia.
• Zevia products finished 2024 with U.S. household penetration of 5%, while mainstream full and zero sugar category brand leaders had penetration of 40% 70%.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While there's a decrease in net sales, the Productivity Initiative and improved gross margin suggest potential for future growth and efficiency. The company's commitment to ESG and consumer health is also a positive factor.

Positives

• Gross margin improved to 46.4% in 2024 from 44.9% in 2023.
• Selling and marketing expenses decreased by 8.3% to $57.1 million due to supply chain efficiencies and the Productivity Initiative.
• The Productivity Initiative is expected to result in $15.0 million in annualized benefits.
• The company estimates that consumers have avoided over 79,000 metric tons of sugar in their diets since 2011 by choosing Zevia.
• The company estimates that they have saved over 30,000 metric tons of plastic and consumption of their products has resulted in the avoidance of over one billion plastic bottles since 2011.

Negatives

• Net sales decreased by 6.8% to $155.0 million in 2024, primarily due to lost distribution and strategic decisions to exit certain product categories.
• The company experienced a net loss of $23.8 million in 2024.
• The company expects distribution losses to impact net sales in the first half of 2025.
• The company increased spend on promotional activity at key accounts, returning back to historical promotion levels, in order to drive velocity, which we expect to continue in 2025.

Risks

• Intense competition in the beverage industry could impact Zevia's market position.
• Changes in consumer preferences and spending habits could affect demand for Zevia's products.
• Reliance on a limited number of third-party suppliers poses a risk to the supply chain.
• Disruptions in the supply chain or distribution channels could adversely affect the business.
• Extensive governmental regulation and enforcement could impact compliance and increase costs.
• Climate change and adverse weather conditions could affect the availability and pricing of raw materials.
• Failure to maintain compliance with the continued listing standards on the New York Stock Exchange (NYSE) could result in the delisting of our securities.

Future Outlook

The company expects the Productivity Initiative to result in approximately $15.0 million in annualized benefits and is focused on building distribution in key accounts and evolving its route-to-market.

Management Comments

• The Productivity Initiative is designed to focus on our most critical initiatives including driving growth and innovation in our highest margin carbonated better-for-you beverages, re-align our cost structure to support greater investments in the Zevia Brand and improve operational excellence while simplifying processes across the organization.

Industry Context

The report acknowledges the highly competitive nature of the beverage industry, with competition based on brand recognition, taste, quality, price, ingredients, availability, selection, convenience, corporate responsibility and sustainability.

Comparison to Industry Standards

• The document mentions competitors such as The Coca-Cola Company, Keurig Dr. Pepper, PepsiCo, Inc., National Beverage Corp., Monster Energy, and Red Bull.
• The document mentions smaller, regional and private label manufacturers.
• The document mentions prebiotic soda brands like Poppi and Olipop, and a variety of smaller, regional and private label manufacturers.
• The document states that Zero Sugar/Diet sodas were a $11.6 billion dollar segment, growing +12% across Grocery, Mass, Drug, Club, and Natural Channels in 2024 according to Spins/Circana data through December 29, 2024.
• The document states that Zevia products finished 2024 with U.S. household penetration of 5% compared to 40% 70% penetration, respectively, of more mainstream full and zero sugar category brand leaders with higher brand awareness and time in market over the same period.

Legal Proceedings

• The company is not subject to any material legal proceedings.

Stakeholder Impact

• Shareholders: The company's performance and strategic initiatives will impact shareholder value.
• Employees: The Productivity Initiative and workforce reduction will affect employees.
• Customers: The company's focus on better-for-you beverages and sustainability will impact customers.
• Suppliers: The company's supply chain management and relationships with suppliers are crucial for product availability and cost control.
• Creditors: The company's financial performance and compliance with debt covenants will impact creditors.

Next Steps

• Continue executing the multi-year Productivity Initiative.
• Focus on building distribution in key accounts and evolving the route-to-market.
• Continue innovation efforts, enhance existing products, and introduce additional flavors within existing categories, as well as entering into new categories.
• Balance reinvesting savings to help drive revenue growth with plans for achieving profitability.

Key Dates