EXCLUSIVE: Zevia CEO Talks Beverage Brand Differentiation, Distribution Strategy, And More

Paddy Spence is Chair and Chief Executive Officer of Zevia ZVIA, a certified B Corp beverage brand that manufactures zero calorie, zero sugar, and naturally sweetened drinks. Zevia first entered the public markets on July 22, 2021. 

Following Zevia’s Q1 earnings report on May 12, 2022, Spence took questions from retail investors via Public.com. Here’s an exclusive recap of the Town Hall event for Benzinga readers.

What were some of the top takeaways from Zevia’s Q1 earnings report?

Paddy Spence: Having been a public company for less than a year, we continue to transform the Zevia business. In Q1, we continued to increase net sales growth, added talented new leaders with consumer packaged goods and beverage experience to the company, expanded distribution, and continued our innovation pipeline. Going forward, we will continue to focus on growth, while improving unit economics through a combination of price realization, optimized promotional spend and continued cost optimization initiatives.

What is Zevia’s strategy for future growth?

PS: Zevia's net sales growth has come from a combination of velocity — higher dollar sales for each point of distribution — and new distribution. In Q1 of 2022, 51% of our growth was driven by velocity, as we expanded the number of consumers buying Zevia in each store through a combination of improved shelf placement, marketing in the store as well as advertising outside the store, and improved promotional effectiveness. During Q1, 49% of our growth came from new distribution, as we expanded in both existing retail channels such as Food and Mass Merchandisers, and entered a new channel, Warehouse Club.

What is Zevia’s distribution strategy?

PS: ​​Zevia's distribution strategy started with retail channels focused on "at home" consumption, specifically Natural products stores, conventional Supermarkets, Drug Stores and Mass Merchandisers (like Walmart and Target), and ecommerce sites like Amazon.com. We've achieved success in those channels, with significant distribution upside still remaining, and in 2022 began expanding into Warehouse Club chains like Sam's Club and Costco. In the future, we anticipate expanding into "immediate consumption" channels such as convenience stores and foodservice (restaurants, hospitals, educational institutions, etc.), and ultimately the global market outside of the U.S. and Canada.

How have supply chain challenges impacted Zevia?

PS: We've been fortunate in that we have maintained continuity of supply and strong in-stock and fulfillment levels for our customers. We have experienced cost headwinds, particularly on aluminum cans and freight, which impact margins. While the aluminum and freight markets have receded somewhat from the price spikes we saw in Q1, we are being conservative and not expecting further declines. Instead, we are mitigating them through pricing actions, optimizing promotional spending, and various cost optimization initiatives.

How has the natural and organic products industry evolved, and where is it going?

PS: More than ever, consumers today are seeking ways to take control of their own health through what they put into their bodies. That, along with the increased availability of health and product information on the Internet, has resulted in more and more people finding solutions to the health issues they're seeking to address, which has led to continued rapid growth for natural and organic products.

How does Zevia differentiate in a crowded space? 

PS: We have some unique sources of competitive advantage, starting with our focus and authenticity. Being completely focused on zero sugar beverages with simple, plant-based ingredients and never having sold a plastic bottle in our history, we "stand for something" and have created strong consumer trust and loyalty.

What is Zevia’s mission?

PS: Zevia's core mission is to impact global public health by helping consumers reduce their sugar. More than 80% of US adults are seeking to reduce their sugar intake, and that's because of the range of health impacts from sugar. These include the long-established links to obesity, diabetes and heart disease, as well as emerging studies linking sugar consumption to other diseases including Alzheimer's and cancer.

What's your plan on reaching all demographics with this product—not only affluent consumers, but also working class people?

PS: Affordability is a key focus for Zevia, as we believe better-for-you options should be accessible to people of all income levels. We track our affordability on a price per ounce basis versus all non-alcoholic beverages, and today, Zevia is at the 35th percentile. That means that across still and sparkling water, soda, energy drinks, mixers and kids drinks, 65 percent of products are more expensive than Zevia. We are focused not only on affordable pricing, but also distributing our drinks in communities where we can impact health in a positive way by providing broader options. 

Public.com members can view the full Q&A in the app. Open To The Public Investing is a member of FINRA and SIPC. This content is not investment advice. Investing involves risk of loss.