Strong Financial Results Precede Alkaline Water’s Move Into CBD Beverages
August 21st, 2019
App, Exclusive, News, Top Story
The United States’ federal government, through passage of the Farm Bill in late 2018, in essence removed hemp from its list of dangerous drugs. Since then, states have been formulating regulations for the cultivation, processing, and sales of hemp-derived products, the bulk of which contain cannabidiol, or CBD. Canada is expected to legalize hemp- and cannabis-derived products in the fall of 2019. These legal developments have jump started an already hot sector, with CBD making its way into products ranging from skin creams to beverages.
BDS Analytics recently released a report covering the US CBD market, predicting sales to surge from $1.9 billion in 2018 to $20 billion in 2024. That is a heck of a lot of growth, and companies are naturally popping up out of the woodwork or completely altering business plans in the hopes of taking advantage. As in most new, high growth industries, there will be failures along the way. Companies with established operations, product formulation experience, and extensive existing distribution networks may have a leg up over the coming years as the burgeoning market takes shape.
The Alkaline Water Company Inc. (NASDAQ: WTER) (TSXV: WTER) fits that description to a T. The company has been experiencing tremendous growth in the bottled water sector, building up an impressive distribution footprint across the US with its flagship, PH-balanced water products. Revenues have been steadily increasing quarter over quarter, and last quarter was no different. That performance precedes Alkaline Water’s introduction, already underway, of a variety of enhanced and flavored water products, including CBD-infused water.
Alkaline Water’s fiscal year wraps up at the end of March each year, so the company is currently in its Q2 2020. Fiscal year 2019 was an unqualified success, representing the fifth straight year of 50%+ annual revenue growth. In fact, 2019 revenues jumped 62% over the year prior. From the end of FY 2014 through the end of FY 2019, annual revenues increased more than 5,700%, representing a compound annual growth rate of about 176%. Alkaline Water started in bulk sizes sold in grocery stores, more recently expanding its product lines to single-serve and its distribution into convenience stores. These developments, along with a commitment to constant expansion of distribution networks, has fueled the company’s growth.
Last week, Alkaline Water announced results for its Q1 2020. Total revenue topped $10 million, up almost 30% from the year prior. If sales stopped growing the company would be on track to bank about $40 million in sales during the year, representing about a 25% increase from the $32.2 million reported in 2019. The company, however, anticipates continued growth and is offering guidance in the range of $46 to $50 million. Alkaline Water currently trades with a market cap of about $67 million.
New Products, Including Hemp CBD
Bottled water has grown its market share in the US every year since 1977 (except for the recession years of 2008-9), and in 2016 became the highest volume beverage category in the country. Growth has been fueled by a more health-conscious population, leading to the success of products like Alkaline Water’s line of PH-balanced Alkaline88® products. The company is capitalizing on the success of its core Alkaline88® by introducing a variety of flavored and functional waters through its A88 Infused Beverage Division.
Alkaline Water introduced its first flavored products in May at a major convention for chain grocers, garnering kudos and orders from attendees immediately. There wasn’t enough time between the rollout and the end of the quarter to significantly impact revenues, but the company is very pleased with the reaction of consumers and buyers alike.
“The WAFC convention served as an important showcase for our new infused line of products, including our flavored hemp-extract water and flavored Alkaline88® water. We received an exceptional response from industry delegates attending the convention and secured commitments for initial orders of over 13 truckloads of our new flavor infused water in less than a week after the convention. Virtually everyone loved our taste profiles and flavors,” stated Richard A. Wright President and CEO of The Alkaline Water Company.
The company’s revenue guidance for the current FY 2020 anticipates flavored waters contributing about $3 to $4 million in sales over the last three quarters as the effort gets off the ground. Growth of the flavored water offerings should benefit from the company’s aggressive expansion into smaller serving sizes and convenience store chains. Revenue projections do not include the planned introduction of hemp-derived CBD water, to be marketed under the Soothe brand. Alkaline Water is closely watching and responding to all regulatory developments within the FDA and in each individual U.S. state, and plans to launch its Soothe brand accordingly.
Alkaline Water recently announced the introduction of canned products, a first for the company and a major expansion of its product line. Some of the new and anticipated products are pictured above, and the company expects them to hit shelves in Q1 of calendar year 2020.
Alkaline Water is fully entrenched in one explosive growth market – bottled water. With plans to leverage its extensive distribution network for the introduction of flavored and functional waters, including CBD-infused water, the company is diving headlong into another explosive growth market. Last year, Keurig Dr. Pepper acquired CORE Nutrition for about $525 million due to its success in the premium bottled water category, highlighting the value of strong performance in the growing sector. It is perhaps only a matter of time and regulatory certainty before multinational beverage companies dive into the CBD beverage market. Alkaline Water has plans to be well-established by that time. Suffice to say these are interesting times indeed for the company.
For more information, keep watching this page and visit: http://thealkalinewaterco.com/
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