Splash Beverage Group, Inc. (NYSE American: SBEV) (“Splash” or the “Company”), a portfolio company of leading beverage brands, today issued a letter to shareholders from Robert Nistico, Chairman and CEO of Splash Beverage Group.
Dear Fellow Splash Beverage Group Shareholders,
As we prepare to release Q1 results in the next few weeks, I wanted to take a moment and provide a preview of Q1 and some color on the beverage industry and how it functions. I take for granted after 29 years in the space that some details may not be common knowledge, specifically how it impacts Splash.
Q1 Numbers (Preliminary)
- Total gross revenue was $6.1M vs. $4.1M up 47% over the same period last year
- Notably, beverage brands up 28% vs. last year
- Q-plash up 60% vs. last year
In addition to being a record quarter, these are meaningful numbers as the core beverage brands are gaining momentum.
Chain Execution
- One or more of our brands have been authorized in more than a dozen national and regional retail chains in the last 6 months
- We have significantly increased our selling universe adding retail chains with more than 24,000 store doors vs. last year
- Numbers come in from distribution and the chains slowly at first but the few early returns we have received indicated we are meeting or exceeding requirements to be on shelf
- Every chain is different but on average the grocery segment likes to see an average of 18 units (bottles, cans etc.) sold a week, the convenience segment a bit less at around 8 to 12 units weekly
We have invested time and resources over the last 18 months establishing a vertical distribution network that gives the chains confidence we can deliver product, directly, through broad-line distributors (such as Kehe, UNFI), or via our incredibly valuable “DSD” (direct store delivery) network with Budweiser, Miller/Coors, Kalil, etc. This foundation is critical to our success as we grow, develop and/or acquire brands.
In beverage you need a complete distribution network before the retail chains will authorize products … distributors are hesitant to sign you up until you have commitments from the chains, a classic catch 22. Brands are built in chains, rarely up and down the street. Fortunately, the distribution community trusts us and started signing distribution agreements in advance with Splash knowing we will deliver the chain business. This is where our excitement comes from each time we add a new distributor.
This process, however, moves at a pace set by each distributor and chain. The speed can be relatively quick, in 30 days or take up to 9 or 10 months. As a result, initial sales tend to be light while you’re waiting for the chains to authorize your brand(s) and send your distributors purchase orders. Additionally, 95% of retail chains use a “just in time” philosophy when writing purchase orders, meaning they only order what they need to fill the shelf each week.
Every brand goes through this process. They add to their selling universe and then stock shelves as the system dictates. In our case, we have added 24,000 store doors to our selling universe and will fill shelves over time as shelf schematics are reset, the buyer adds you to the advertising planner, etc. This builds over time and the second step is to negotiate display activity and that is where you see significant growth.
We also are gaining meaningful traction in the “on premise” segment (bar, restaurant, hotel). Covid decimated that segment and shut it down for 2 years and now making small gains again in the key segment.
This is the process to build brands and revenue. The behind-the-scenes work, and investment takes time. At RedBull it took 5 years to sell 375K cases … there are dozens of similar examples of other well-known brands. We believe we are exactly where we should be and positioned for continued growth with an enormous amount of runway in front of us.
We are building a business that is serving a large and growing market, offering unique and compelling products, while we remain laser focused on day-to-day execution and reaching profitability. We are always keeping an eye on the broader market and analyzing all the trends we see developing. We are committed to remaining flexible and agile so that we can respond to opportunities that present themselves. We would like to thank all our shareholders and supporters. We appreciate the confidence you have shown in us to date, and we look forward to earning your continued support.