KonaRed, based in Koloa, HI, bases its products on the branded CoffeeBerry coffee fruit ingredient. This is a polyphenol and antioxidant rich ingredient taken from the pulp of the coffee fruit which at one time was a waste product in coffee manufacture.
Patent settlement helped pave way for growth
The company ended a long and damaging intellectual property battle with VDF Futureceuticals, based in Momence, IL. VDF FC holds three patents on coffee fruit ingredients, all granted in 2010. KonaRed had challenged these as invalid, and had some partial legal success along the way in defending its position that it was not infringing on the patents. Eventually KonaRed settled with VDF FC, entering into a licensing agreement in early 2014 rather than trying to prevail in a damaging court fight.
“Almost exactly conjunction with signing the license agreement was the signing of an agreement with Splash Beverages,” CEO Shaun Roberts told NutraIngredients-USA. “They are the people that were behind the distribtuion of Red Bull and Bolthouse Farms. They are our master distributor in the United States.”
The agreement has allowed KonaRed to rapidly increase distribution of its products, which include several beverages lines, a whole food powder and sachets. Roberts said the company is nearing nationwide distribution.
“An example of the work done to increase sales is the entry of our nutritional supplement products into select Whole Foods Markets. Another example is the achievement of gaining placement of our beverages at 978 Kroger family of stores throughout the U.S., including Kroger, Food4Less, Ralphs and Fred Meyer, and other nationally recognized brands. Kroger is one of the world's largest grocery retailers with close to $100 billion in sales in 2013,” Roberts said.
Like many development stage companies, KonaRed is spending more than it is taking in. First the good news: The company’s overall revenue (which includes ingredient sales, retail product deliveries and ‘delivery fees’) rose 39% to $1.3 million in the year ended Dec. 31, 2014 from $0.9 million the year previously. Sales of consumer products plus a category the company calls ‘delivery revenues’ rose to $1 million, an 80% year-over-year increase compared to $0.6 million in 2013.
The bad news is that the company spent a disproportionately greater amount to achieve that broader distribution. The cost of goods sold in 2014 rose by 144% compared to a year earlier (perhaps reflecting royalty payments to VDF FC, although these were not broken out in the financial statement) and advertising and marketing expenditures rose by 576%. Overall, KonaRed reported a net loss of $4.6 million in 2014, or 6 cents a share, compared to a loss of $3.9 million in 2013, which was also 6 cents a share on fewer shares.
“Our first full year as a public company ended strongly and we are pleased with what we've accomplished thus far,” Roberts said.