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Reed's CEO: Mainstream supermarkets are embracing kombucha now

By Elaine Watson+

20-Nov-2014

Kombucha is typically made by fermenting tea with a mixture of live bacteria and yeast, so using brewed organic coffee as a base brings something new to the category, says Reed's
Kombucha is typically made by fermenting tea with a mixture of live bacteria and yeast, so using brewed organic coffee as a base brings something new to the category, says Reed's

While mainstream food retailers discovered kombucha later than their counterparts in the ‘natural’ channel, they are playing catch-up now, says natural soda maker Reed’s, which entered the market in 2012 with its Culture Club kombucha range and now claims to be the #2 player behind GT’s Kombucha. 

Speaking on the company’s third quarter earnings call, founder & CEO Chris Reed said he predicted Reed’s kombucha sales would grow 35-40% in fiscal 2014 - a figure that would have been higher had a change in packaging (a move into glass bottles) not caused some supply issues in late spring.

“Supermarkets around the country are noticing the high double-digit growth of kombucha and are all moving in and I guess rushing to get their own kombucha sets in,” he told analysts.

“We’ve had a lot of convenience stores looking at Kombucha too. So that's a whole new a stream of business that we are going to be part of it in the future.

 “Our growth is going so strong in mainstream because the mainstream supermarkets have more recently embraced the Kombucha phenomenon. So year-over-year, 2012 to 2013, it was 73% growth. And that got everybody's attention. So there is just a lot more interest in creating shelf space right now for Kombucha in mainstream.”

New Culture Club coffee kombucha set to hit shelves on December 1

Reed’s entered the market in 2012 with its Culture Club kombucha range and now claims to be the #2 player behind GT’s

Reed’s - which is best known for its Ginger Brew, Virgil’s Root Beer and other ‘craft’ sodas - has also secured “significant commitments” from customers interested in stocking his new coffee kombucha, said Reed.

Kombucha is typically made by fermenting tea with a mixture of live bacteria and yeast (which creates carbon dioxide, alcohol and acetic acid to create a fizzy, vinegary taste), so using brewed organic coffee as a base brought something novel to the category, he added.

“The first $5bn of kombucha category market sales have been traditionally fermented and grown using a tea base. Reed's newest innovation is grown and fermented in a coffee base. Sales will begin on December 1, and we already have significant commitments for this new product.

 “We are very excited about the launch…  We did bring it to a big trade show, Expo East, in September and the results were very, very strong… [so] we consider it will be significant for 2015.”

Chris Reed: 'Most kombuchas are fermented for 15-20 days; ours takes around 40 days. And they don’t all taste the same'

The craft soda revolution has begun

Reed’s, which posted a 22% increase in net revenue to $12.3m in the quarter ended September 30, expects revenue growth of 15-20% in fiscal 2014. Net income for the nine months ended September 30, 2014 was $461,000(compared with a loss of $863,000 over the same period last year).  

Reed added: “As sales of mainstream sodas continue their year-over-year drop, consumers are increasingly migrating to Reed's for a new alternative.

"A recent analysis of soda sales at one of our largest retail customers found that Reed's products, with their higher margins, are generating more gross profits per shelf placement than most of the soft drinks on their shelves.

“We are seeing increased interest from retailers in multiple sales channels who are reaching out to us to provide them with the next generation of soft drinks; the craft soda revolution has begun."

Convenience stores looking at more craft products

He added: “Recently we went to the National Convenience Store Show, and people were really looking for new options and they were willing to consider for their cold boxes something different than what they have been doing.

"I know it's very dominated by the big beverage companies and especially the energy drinks, but we picked up a significant amount of new business.”

Click HERE to read our recent interview with Chris Reed.

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