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Edited Transcript of REED earnings conference call or presentation 14-May-19 8:30pm GMT

Q1 2019 Reed's Inc Earnings Call

LOS ANGELES May 18, 2019 (Thomson StreetEvents) -- Edited Transcript of Reed's Inc earnings conference call or presentation Tuesday, May 14, 2019 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Iris Snyder

Reed's, Inc. - CFO

* Neal Cohane

Reed's, Inc. - SVP of Sales

* Valentin M. Stalowir

Reed's, Inc. - CEO & Director

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Conference Call Participants

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* Aaron Thomas Grey

Alliance Global Partners, Research Division - Analyst

* Christopher Walter Krueger

Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst

* David Brian Bain

Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst

* Lianxiu Duan

R.F. Lafferty & Co., Inc., Research Division - Equity Research Analyst

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Presentation

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Operator [1]

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Good afternoon, and welcome to Reed's first quarter 2019 earnings conference call for the period ending on March 31, 2019. My name is Jessie, and I will be your conference call operator today.

Today's call is limited to one hour, and we'll have prepared remarks from Val Stalowir, Chief -- Reed's Chief Executive Officer; and Iris Snyder, Reed's Chief Financial Officer. Following management's remarks, they will take your questions.

Before we begin today's call, I have a safe harbor statement to read to our listeners. I would like to remind our listeners that during this call, management's remarks may contain forward-looking statements and that management may make additional forward-looking statements in response to your questions. Forward-looking statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or other -- excuse me, or achievements to be materially different from those anticipated by such statements. These factors include, but are not limited to, the company's ability to manage growth, manage debt and meet development goals, reduction in demand for our products, dependence on third-party manufacturers and distributors, changes in the competitive environment, access to capital and other information detailed from our -- time to time in our filings with the United States Securities and Exchange Commission. Although we believe that the expectations reflected in forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. In addition, any projections as to the company's future performance represent management's estimates as of today, May 14, 2019. We assume no obligation to update these projections in the future as market conditions change.

Additionally, please note, non-GAAP financial measures referenced during this call are reconciled to their comparable GAAP financial measures in the press release and supplemental materials filed with the SEC and as posted on our website at investor.reedsinc.com. Non-GAAP financial information is not meant as substitute for GAAP results but is included solely for informational and comparative purposes. We present modified EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance.

I will now turn the call over to Mr. Stalowir. Please go ahead, sir.

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Valentin M. Stalowir, Reed's, Inc. - CEO & Director [2]

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Thank you, and good afternoon, everyone. It is my pleasure to speak with you today to discuss our first quarter 2019 performance and update you on our continued progress.

As you'll recall, we completed the final key step in our transformation at the end of 2018, completing our transition to an asset-light sales and marketing organization. We began to see the benefits of our transition in the first quarter, with improved gross margins of 30% compared to 28%, both for the first quarter of last year and the fourth quarter of 2018.

Additionally, our core brand growth sales growth is accelerating, up 15% in the quarter. And Virgil's posted an impressive 46% volume growth during Q1, reflecting the launch and continued sales momentum of the Zero Sugar line. Yet this growth is coming prior to the benefit of increases in sales and marketing investments and the launch of innovation on the Reed's brand, which have just now begun.

Our organizational focus is now completely zeroed in on building our brands, executing on our innovation plans, opening incremental retail outlets and accelerating sales growth. We have demonstrated with the acceleration of Virgil's that our innovation and sales efforts can drive incremental growth, and we are now executing our Reed's innovation and marketing plans. We have the capital, the team and support partnerships in place to successfully execute these plans.

Last Friday, our efforts to date and a look at what is to come was on full display in Times Square. To celebrate our listing on NASDAQ Friday, our team was on hand to ring the closing bell. It was an exciting time inside the NASDAQ site, but the real excitement was happening outside. Times Square was lit up with Reed's ads, launching our 360-degree marketing campaign, introducing the tagline READY FOR REAL GINGER? As we noted the last time we spoke, our campaign includes digital, outdoor, print and radio advertising, social media programs, in-store displays, coupon programs, sampling events and enhanced PR. The program is focused on key -- the 5 key markets: New York City; Boston; Seattle; Los Angeles; and San Diego.

The bold They Fooled Your Mom campaign centers on busting the ongoing myth that consumers should turn to mainstream ginger ale to soothe upset stomachs. 88% of moms would currently give their children or family members ginger ale to soothe stomachs. Ginger is a superfood with many health benefits, including reduced nausea and inflammation, digestive health, but you actually need to have a material amount of ginger to be able to enjoy the benefits. There is no material amount of real, fresh ginger in today's leading ginger ales. Reed's line of ginger beers, on the other hand, use fresh, organic ginger from Peru and lots of it.

It is our mission to make sure that ginger ale consumers everywhere know that there is no material amount of ginger in the big ginger ale brands and that if they want a great-tasting ginger beverage that has real, fresh ginger, their first choice should be Reed's.

We believe the first quarter accelerated core brand growth is only the beginning. We just launched our marketing programs for both Reed's and Virgil's, began shipping our Reed's line in cans and our Reed's Zero Sugar in cans and bottles over the last few weeks. At the end of the second quarter, we'll be launching our pilot test of our first ready-to-drink Reed's Mules and Reed's Wellness Ginger Beer with Hemp Extract. Both products are on trend in large and fast-growing, higher-margin categories, and we've developed great-tasting products with excellent category function.

As I noted in the fourth quarter call, the initial test includes the Pacific Northwest and Southern California for the Reed's Mule and an initial test in the Pacific Northwest for our Ginger Beer with Hemp Extract.

Additionally, our daily Wellness Ginger Shots with added function are in the final stages of product formulation, and we look to launch the line later in the year.

Distribution continues to grow across our core brands. You can now find our Reed's and Virgil's offerings on shelves in the largest retailer in the world in a new craft specialty set. The initial distribution included almost 1,100 Walmart stores. This month, we are also shipping our Reed's and Virgil's 12 packs to 2 Costco regions. Further successes include the distribution of our core new product offerings at retail chains, including Gelson's, Bashas', Lawson's, Harmon's and Ingles.

We also continue to gain authorization of our innovation offerings into our natural distribution network with KeHE distributors, picking up all of our new Zero Sugar Virgil's, Reed's Zero Sugar line and new Reed's cans.

We continue to upgrade our distributor network and fill in void geographies and are currently in contract talks with several new mainstream beer and nonalcoholic DSD distributors in the following regions: Southeast; Midwest; South Central; Canada; and some international markets.

We also continue to replace competing ginger beer offerings in on-premise locations with Reed's across the Greater Chicago, Southern California, Northern California, Pacific Northwest markets. Our on-premise channel efforts are ramping up and delivered more than 500 new restaurant, bar and nightclub doors year-to-date.

As I noted, Friday was an exciting day for the entire Reed's family as we began trading on NASDAQ. This accomplishment is a reflection of the enhancements to our capital structure and business model. We're also appreciative of the rising investor interest and support, reflecting confidence in our brands and business plan. Since our last conference call just 7 weeks ago, the number of analysts publishing research on our stock has doubled to 4. We have a compelling investor story to tell, and with these recent developments, we are confident we'll be able to increase the company's visibility and expand our investor reach.

We remain committed to driving shareholder value and establishing long-term relationships with all of our investors. We are confident in our plans and are pushing hard to build our brands. Thank you for joining us on this endeavor.

Now let me turn the call over to Iris to run through the first quarter results. Iris?

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Iris Snyder, Reed's, Inc. - CFO [3]

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Thank you very much, Val, and good afternoon, everyone. As Val mentioned, we are starting to benefit from our asset-light sales and marketing business model and continue to position the company to accelerate growth in 2019.

Let me run through the financial results. First quarter net sales increased 2% to $8.4 million compared with $8.3 million in the prior year, while core brand gross sales increased 15% compared to the prior year. The strong performance of our core brands includes 14% volume growth and a 1% increase in price per case. The volume growth was driven by 46% growth of the Virgil brand, including continued momentum of the Virgil Zero Sugar offering. As anticipated, the core brand growth was partially offset by lower sales of exited and noncore products, including the sale of the private label business in conjunction with the plant sale at the end of 2018.

For the first quarter, gross profit increased 9%, and gross margin as a percent of net sales increased 185 basis points over the prior year to 30%. The year-over-year improvement in gross margin was primarily driven by price restructuring, SKU rationalization and the reduction of idle plant costs as a result of the plant sale.

Delivering and handling cost increased 8% to $1 million largely driven by volume increases. The 65 basis points increase as a percentage of net sales during the quarter compared to the prior year reflects a prebuild of innovation inventory and the positioning of that inventory to appropriate distribution centers to prepare for the sales launch of new products in the second quarter.

Selling and marketing costs increased 99% to $2 million during the quarter. The 1,165 basis points increase as a percentage of net sales versus prior year reflects the investment in sales and marketing infrastructure and growth initiatives. These increases in sales and marketing were expected and are consistent with our strategy to refresh the brand, launch new products and packaging into the market, open new retail outlets and channels and lay the groundwork to reaccelerate growth of the core brand.

General and administrative expenses increased 65% to $2.4 million in the first quarter compared to $1.4 million in the prior year period. The year-over-year increase was largely driven by noncash performance-based equity awards and bonus accruals, along with final transition costs relating to our plant sale.

The first quarter operating loss increased to $2.9 million from $1.1 million in the prior year.

Interest and other expense decreased to $0.4 million in the first quarter compared to $0.5 million last year.

Net loss is $3.3 million or $0.11 per share in the first quarter of 2019. This is compared to $1.6 million or $0.06 per share in the same period last year.

Moving to the balance sheet and cash flows. We ended the first quarter of 2019 with $2.7 million in cash and $2.6 million in revolving line of credit, with $6.8 million of availability.

As previously announced, on February 20, we completed an underwritten public offering of 7.7 million shares of common stock, including 1 million shares sold pursuant to the overallotment at a public offering price of $2.10 per share. The net proceeds to the company from this offering were approximately $14.9 million. The proceeds were utilized to reduce our borrowings on our credit facility and provide significant capital availability to execute our growth plans for 2019 and beyond.

During the first quarter of 2019, we used cash in operating activities of $8.8 million compared to $4.6 million in the prior year period. The increase in cash used primarily relates to significant investments in inventory in preparation for product launches in the second quarter of 2019 as well as an increase in investments in sales and marketing we have already discussed.

Turning to guidance. We are confident in the outlook for 2019 and are reiterating the guidance we initially provided in the prospectus supplement filed on February 14. We expect to generate net sales in the range of $42 million to $44 million for the full year 2019 and anticipate year-over-year core brand growth of 20% to 30%.

Note that in association with our sale of our Los Angeles plant, we also sold our private label business. While we will receive a small royalty associated with these private label sales in the future, reported net sales growth will reflect the elimination of approximately $6 million of private label and discontinued brand revenue in 2018. Additionally, we anticipate a gross margin between 28% to 32% for the first half of 2019 and a gross margin of 32% or greater for the second half of 2019.

As our guidance reflects, we are confident in the growth opportunities that lie ahead in 2019 and the potential for incremental growth. We remain excited about the potential to drive incremental sales and margin mix improvement via our upcoming pilots of Reed's Ready to Drink Mules and Wellness Ginger Beer with Hemp Extract, but we have not included these positive impacts in a material way in our 2019 guidance.

Now let me turn the call back to the operator to begin the question-and-answer session. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of David Bain with Roth Capital Partners.

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David Brian Bain, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [2]

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Great. Nice quarter. I was hoping -- in your prepared remarks, you mentioned the initial Walmart order of over 800 stores. I just want to confirm that order impacts 2Q. And the initial order, I felt, is much stronger than we anticipated. Was that expected in your internal plan?

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Valentin M. Stalowir, Reed's, Inc. - CEO & Director [3]

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On the Walmart?

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David Brian Bain, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [4]

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Yes.

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Valentin M. Stalowir, Reed's, Inc. - CEO & Director [5]

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Yes, that was more than we expected.

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David Brian Bain, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [6]

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Okay. And that impacts 2Q, correct?

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Valentin M. Stalowir, Reed's, Inc. - CEO & Director [7]

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Yes.

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David Brian Bain, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [8]

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Okay. And then hoping to get a little bit more color around the acceleration at Virgil's in terms of the quarter-over-quarter kind of growth rate results on a year-over-year basis, if that makes sense. I understand zero sugar is leading the way, but could you speak to any acceleration in terms of potential increase in sales for new brokers, channels, pull-through data you're now able to use? Or is this just a true combination of everything ahead of marketing impact?

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Valentin M. Stalowir, Reed's, Inc. - CEO & Director [9]

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Yes. It's -- the news is working on both the full and the zeros. Yes, most of the incremental growth is coming from the zeros, but the baseline was up -- what was the base -- the glass piece up?

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Iris Snyder, Reed's, Inc. - CFO [10]

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Was up double digits as well.

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Valentin M. Stalowir, Reed's, Inc. - CEO & Director [11]

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Yes. That was up double digits as well. So it's a combination of new doors as well as cycling now not only the current base of doors that we had before, but the new doors that we've added. It -- the marketing piece really has not been -- the investment there really hasn't been significant to date, so it really is the pull-through increasing the IRI data on the velocities continue to show continued increases of velocity from month to month. And so from that perspective, it's kind of working across multiple opportunities.

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David Brian Bain, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [12]

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Okay. Great. And just last one, if I could. Just wondering if you could speak to category growth in craft soda, perhaps even diet craft or sugar-free and ginger beer as well. And then speak to anything new from competitors in terms of pricing or extensions or new entrants that your sales have been seeing in the field, just broad-based. That would be helpful.

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Valentin M. Stalowir, Reed's, Inc. - CEO & Director [13]

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Yes. In terms of IRI, the category, I don't have the figures in front of me, but the category on craft continues to grow low double -- low single digits. The zero naturals are growing healthy double digits. There's not a lot of movement in pricing. Pricing in both the ginger beer and the craft soda space is kind of holding pretty steady without a lot of major changes. Some of the brands like Fever-Tree and Bundaberg continue to invest significantly in new distribution doors. So that we've definitely seen impacted in the category. But from a pricing standpoint, not a lot of movement.

In terms of the ginger beer category, that's still growing at high single digits. And then ginger ale, as we've pointed out, has been really taking advantage of this perception that it's actually a healthier beverage because it has ginger in it. When we did a 1,000-consumer survey, over 60% of consumers were saying that ginger ale is healthier than mainstream soda and that because of having real ginger in it. So that ginger ale is still up significantly. That's multiples over where the soda category is, which is about flat.

And I think soda would even be down without the innovation that Coke has brought to the category with Diet Coke and some of the extensions. So from that perspective, both categories are healthy, more so on the zero sugar, on the craft soda side and ginger in general. Anything with ginger is doing well.

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Operator [14]

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Our next question comes from the line of Roger Duan with R.F. Lafferty & Co.

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Lianxiu Duan, R.F. Lafferty & Co., Inc., Research Division - Equity Research Analyst [15]

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Just first of all, a quick question. How much of the $1 million increase in the G&A was related to the plant sale?

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Iris Snyder, Reed's, Inc. - CFO [16]

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There was a onetime final charges of $220,000.

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Lianxiu Duan, R.F. Lafferty & Co., Inc., Research Division - Equity Research Analyst [17]

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Okay. $220,000. Great.

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Iris Snyder, Reed's, Inc. - CFO [18]

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Yes. And then we sent you -- so equity -- stock option equity incremental was $330,000 and then bonus accruals was about $100,000. So those 3 pieces are about 70% of the increase of the G&A year-on-year.

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Lianxiu Duan, R.F. Lafferty & Co., Inc., Research Division - Equity Research Analyst [19]

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All right. Okay. So my first question is going to be on Reed's Zero in cans. From the orders and maybe some discussions with distributors, can you give us a sense on whether Reed's Zero in cans will have a stronger launch compared to Virgil's? Obviously, Virgil's has been growing impressively. I'm just trying to get a sense of the growth trajectory here for the Reed's Zero in cans.

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Valentin M. Stalowir, Reed's, Inc. - CEO & Director [20]

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Yes. It's too early to say. We had a lot of time on the Virgil's Zero Sugar launch. We started selling that in probably end of '17, beginning of '18. And then we launched the whole platform in -- at -- in the end of May. So we had a lot of -- just given the cycle time, we had a lot of preorders. And so from a comparison standpoint, I think that Virgil's probably had a stronger launch in terms of new customers that we were able to land because it was really new news to Virgil's coming out in cans and the 6 flavors.

On Reed's, we have a similar sort of launch in terms of cans and zeros, but it's a little too early to tell exactly what trajectory Reed's will be on versus Virgil's. We've just started taking orders now. There's a lot of sort of prep work. And then you've got to wait until the actual POs come in. And so far, we're pretty happy with what we're starting to see in May. But really, May is really the first official month that we've started shipping any Zero Reed's-related bottles or cans.

So I think we need a couple more months of those POs and the actual doors that we've secured and the POs coming in to be able to say what trajectory Reed's is going to be following versus Virgil's.

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Lianxiu Duan, R.F. Lafferty & Co., Inc., Research Division - Equity Research Analyst [21]

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Okay. Great. Okay, I know -- also, I know it's super early. You guys just launched your marketing campaign, but is there any data points surrounding that, that you can share with us at this point? Or is it too early also?

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Valentin M. Stalowir, Reed's, Inc. - CEO & Director [22]

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Yes, that's -- it's way too early. Kind of officially launched last Friday, so, yes, 4 days is not enough. Yes, well, we've done a pre and a post. So we've already done the pre in terms of national and the top -- heavy up in the top 5 markets to measure awareness, purchase intent, liking, favorabilities, criteria of all the sort of ginger beer competitors and Reed's. And so we're going to be measuring after we've run this campaign for several months. We'll be able to actually measure how this has moved. And there are other ways in terms of digital feedback and engagement, so we will be measuring that. But we're going to definitely need another month or 2 to really be able to measure the impact of our launch of the campaign.

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Lianxiu Duan, R.F. Lafferty & Co., Inc., Research Division - Equity Research Analyst [23]

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Okay. Understood. Okay, my last question. Can you maybe talk a little bit more about your expansion in the drug channel? Are you -- do you guys have any plans to sign on additional channel brokers to target that segment?

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Valentin M. Stalowir, Reed's, Inc. - CEO & Director [24]

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Neal, do you want to handle that?

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Neal Cohane, Reed's, Inc. - SVP of Sales [25]

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Yes. We're actively calling the big 3, we'll call them, drug chains. I don't want to give any leading information, but we've had some good discussions with one of the biggest. And we're talking to them about a couple of different programs with these guys. So there's more to come on that. We're hoping to hear something sooner than later. But they're very interested in what we're doing.

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Operator [26]

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(Operator Instructions) Our next question comes from the line of Chris Krueger with Lake Street Capital Markets.

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Christopher Walter Krueger, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [27]

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Most of my questions have been answered, but can you repeat how many SKUs are at Walmart and how many are at Costco?

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Valentin M. Stalowir, Reed's, Inc. - CEO & Director [28]

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Yes. So at Walmart, we have 7 SKUs. We have the Extra and the Zero Extra. Then we have the Root Beer and the Black Cherry Full Sugar Virgil's. And then we have 3 of the Zero in cans.

And then at Costco, Costco is actually an interesting mix. We've got Reed's in 12-ounce cans, Reed's Extra. We have Virgil's Full Sugar Root Beer. We have roadshows now in multiple regions that are launching on both the Reed's and Virgil's. So we're actually getting interest on both sides of the brands.

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Christopher Walter Krueger, Lake Street Capital Markets, LLC, Research Division - Senior Research Analyst [29]

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Good. And then I know it's pretty early right now, but looking ahead to next year in product development and potential product launches next year, is that kind of tracking to plan right now? Do you expect to have an even bigger year next year on the new products?

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Valentin M. Stalowir, Reed's, Inc. - CEO & Director [30]

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I think we did 5 years' worth of product development in '18. And it's really a matter of executing against what we've developed. I mean we've got -- the Zero Sugars on Virgil's is still growing and expanding into -- we're probably in 6,000 to 7,000, maybe 8,000 doors, and we're -- we've got a footprint of 35. So we have more work to do on the Virgil's can -- Zero cans as well as starting to communicate with consumers there. So that work still, there's a lot of opportunity and work that needs to be done.

Reed's is -- the innovation is -- on the core has just started this month. And so the new can line is going into new channels. The Zero Sugar is going hopefully everywhere in both bottles and cans. That's going to require a lot of focus and effort and support over the next 12 months to 18 months to really take full advantage of the opportunity there. And then we've -- we're launching 3 new categories this year, 1 in the flavored malt beverage with the Ready to Drink Mule. That's a pilot, but obviously, if that does well, we plan to expand that at the end of this year, into next year. So that'll take focus and support. The Hemp, we've gotten rave reviews from distributors and now from retailers. So that is a pilot, but again, that has a lot of upside and is an incremental functional category. And then later in this year, we'll be launching the shot business with daily ginger dose plus other functions. I mean that is plenty, I think, of innovation to really -- we're going to have to focus and communicate and execute from the sales force standpoint and invest in POS and consumer pull support to really fully take advantage of these new opportunities.

So 2020, I just don't see, let's say, new category entries at this point. I think all of these are significant categories. Each could be tens of millions of dollars, if not more, if properly supported moving forward. So from that perspective, I think the focus really is execution, execution as opposed to new news. I mean we've got a lot of new news where we're currently executing against. And I think that, yes, new products will play a significant role in driving incremental growth and, hopefully, improved margin mix in 2020. And I'd say the majority of the growth is going to come from what you know now is in the market and is entering the market.

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Operator [31]

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Our next question comes from the line of Aaron Grey with Alliance Global Partners.

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Aaron Thomas Grey, Alliance Global Partners, Research Division - Analyst [32]

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So just digging a little bit deeper on hemp. While I appreciate it's still early days, just any color you can provide in terms of what initial markets you might look to enter it in. And then some color in terms of what retailers you might look to work because, while I know you might need to pass some discretion there, just given the regulatory gray area there on the ingestibles, any color there will be helpful.

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Valentin M. Stalowir, Reed's, Inc. - CEO & Director [33]

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Yes. This is an emerging category with a lot of moving parts. We're really, I think, waiting to see what the new FDA commissioner comes out and give -- gives guardrails or guidance on. But in the meantime, we know that CBD and hemp are now federally legal. And we are starting -- the only way to learn to swim is to jump in the water and start swimming. And so from that perspective, we are discussing with distributors, those who are willing to take it on now and, like you said, let's say, forward-looking retailers who probably are smaller in scale, but more, let's say, aggressive in terms of trying to move innovation into their stores.

And so there's not much insight I can give you, except that this is a pretty fluid category. We've got great products that have gotten very good feedback, and we're starting to seed those now. And we're just going to have to wait and see what the reaction is from regulators, whether they're state regulation or FDA, and see what the consumer and retailer reaction is with our offering. So that's why we haven't put a lot of volume in 2019 against this effort because of a lot of the uncertainties. And I would just say that once the FDA starts actually making a commitment in terms of their view of their role and what they'd like to see happen in this category, that's going to tell us a lot, because, currently, if -- we have a -- sort of a cutting-edge legal firm that watches this, and I get daily updates on activity and rules and regulations and legal actions. And 2 or 3 are saying there's support on it. A couple more kind of slide back. I mean it really is, from day to day, it is still a moving target where there -- it seems more doors are opening in certain regions and then some are closing in other regions. So it really is -- it's going to be week-to-week, month-to-month in terms of how this category develops.

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Operator [34]

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It appears we have no additional questions at this time, so I'd like to turn the floor back over to management for any additional or concluding comments.

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Valentin M. Stalowir, Reed's, Inc. - CEO & Director [35]

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Thank you for your continued support and for participating on today's call. 2019 is off to a solid start, and we hope you've had a chance to see our bold new marketing campaign. Our mission is to materially disrupt the multibillion-dollar mainstream soft drink and ginger ale categories with our superior product and package offerings and compelling consumer communication efforts, which are now starting to roll out. We are well positioned to drive significant revenue growth and shareholder value this year. And I look forward to updating you on our progress.

Thanks again, and have a great day.

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Operator [36]

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Ladies and gentlemen, this does conclude today's teleconference. Again, we thank you for your participation, and you may disconnect your lines at this time.