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Friday, Aug 12, 2022

Zevia Goes Public to Fund ‘Disruptive’ Soda

 Zevia, the Encino-based beverage company, debuted on the New York Stock Exchange under the ticker ZVIA in July, raising nearly $140 million of its $200 million goal. 

The natural beverage company was founded in 2007 before being acquired by chief executive Paddy Spence in 2010. Since then, the brand’s drink offerings have expanded to include six product lines and 37 flavors that are distributed across the U.S. and Canada. Also, Zevia has partnered with Walt Disney Co. to become the only soda in North America featuring the Burbank movie studio’s Mickey & Friends characters.

All Zevia products, including its sodas, energy drinks, teas, kids’ beverages, mixers and sparkling waters are sweetened with stevia, a plant-based sugar substitute, and have zero calories. They are also gluten-free, vegan, kosher and certified by the Non-GMO Project, a nonprofit which aims to label and offer alternatives to lab-modified organisms in food. 

The company has some hurdles to overcome to achieve profitability, according to its filings with the Securities and Exchange Commission, most recently reporting a net loss of $49.8 million or -75 cents per share, in its third-quarter results on Nov. 12., including a $45.7 million non-cash equity-based compensation expense. While net revenues remain in the red, this year’s net sales grew to $39 million, a 22 percent increase versus the third quarter of 2020.

The July IPO was the first time Spence has taken a company public, a move he hoped would help the brand continue disrupting soda sales in the United States.

CEO forgoes salary

“The average American, even today, still drinks almost 40 gallons of soda per year. So that really is the definition of a disruptive opportunity,” Spence told the Business Journal shortly after the IPO. “And if you ask soda lovers, ‘What do you love about the product?’ It’s really clear – bubbles, sweetness, enjoyment and amazing nostalgia. … What do they not love and maybe not even trust? It’s the ingredients. It’s caramel color, which California tells us is linked to cancer. It’s either high-fructose corn syrup or artificial sweeteners made in a lab. It’s GMOs. It’s artificial preservatives, artificial flavors. So there are so many ingredients in conventional soda that people just don’t feel good about, even though they love the bubbles, sweetness and enjoyment. And really, that’s the definition of our disruptive opportunity. It’s just everybody drinks soda and it’s the product that we hate to love.”

The company originally set out to raise at least $200 million in the IPO, expecting a $13 to $15 per share price range, but ultimately debuted at $14 on July 22. The 10.7 million shares raised $139.7 million, with approximately $25.5 million of the net proceeds used to purchase Class B units from Zevia LLC’s unitholders, including members of the company’s senior management. Another $23.7 million of the net proceeds were used to pay the cash consideration to certain institutional investors. The remaining proceeds of $90.1 million were retained by the company.

The stock price has fallen by nearly 50 percent in the ensuing months. Shares of Zevia (ZVIA) reached a peak of $16.12 by Sept. 7, but have largely trended downward on the New York Stock Exchange since the end of summer. Shares closed on Dec. 1 at $7.30. 

As of Aug. 1, Spence told shareholders he will forgo his $306,820 annual salary and 100 percent target bonus and move to $1 of cash compensation. The move, according to the statement, reflects his confidence in Zevia’s future, and his commitment to allocating financial resources to drive shareholder value.

“Our team is executing well against core strategic priorities around channel expansion, innovation and supply chain efficiency,” Spence said in a statement. “We continue scaling our business aggressively to meet the growing demand for Zevia products and mitigation efforts are helping address cost pressures broadly affecting our industry. We believe our growth algorithm is firmly on track and we are making significant progress on ESG (environmental, social and governance) initiatives aimed at improving global public health by reducing sugar intake as well as replacing single-use plastics with sustainable alternatives.” 


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