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Sales by Jones Soda Co of Seattle grew strongly in the first quarter of 2008, as the offbeat US drinks maker continued its development from niche brand into a mainstream producer with national distribution. However, Jones posted a further loss for the quarter, as the company’s margin shrank and the costs of expansion ate up its increased revenue.
“We are disappointed in our bottom line results,” admitted CEO Stephen Jones. “That said, we believe the investments we are making in our business are helping drive increased demand for our products, as evidenced by the growth in case sales of finished goods shipped by us and National Beverage in the first quarter, compared to the same period a year ago.”
Jones’ case sales of finished goods in the DSD (direct store delivery) and DTR (direct to retail) channels rose 31% in the quarter, while case sales in the CSD (carbonated soft drink) channels almost trebled. Gross revenue increased 11.8% to $10.4 million, but net revenue was just 2.2% up at $9.4 million.
The company’s gross margin meanwhile fell to 20.4%, compared with 38.3% in the first quarter of 2007. The decline was partly due to a provision of roughly $514,000 for discontinued inventory related primarily to speciality packs and packaging costs. Excluding this cost, Jones’ gross margin was 25.91%.
Increased spending
Operating expenses rose 44% to $5.9 million, including increased costs for promotion, advertising, salaries, and legal and audit fees. Jones closed the quarter with a net loss of $3.85 million or $0.15 per share, compared to earnings of just over of $58,000 in the first quarter of 2007.
“We have recently increased our spending in key areas such as new market promotions, brand advertising and sales team infrastructure, in order to provide our organisation with the necessary resources to achieve our long term objectives,” Stephen Jones continued. “While these additional investments will negatively impact our near-term financial results, we believe they will result in a stronger, more effective company for the future.
“As we approach the key summer selling season, we believe that we are in a better position to drive higher sales volumes and capture key market share for our brand and portfolio of products.”
