Zevia IPO: 5 things to know about zero-calorie beverage company before going public

Goldman Sachs & Co. LLC, BofA Securities and Morgan Stanley are the main underwriters in a consortium of six banks. The company is expected to use the proceeds from the IPO for working capital and other general corporate purposes.

Once the deal closes, Zevia, which started out as a Public Utility Company, will reorganize into a holding company through the UP-C process that will provide tax advantages to existing members of the business. Full-time employees have an interest in the company.

“At Zevia, every full-time team member has an equity interest in the company, is well paid and benefits, and is a key stakeholder in our mission,” Spence said in the letter. its CEO.

See: Krispy Kreme IPO: 5 things to know about the new public donut maker

Zevia is classified as an emerging growth company, which means it does not have to disclose the same information as larger public companies. A business remains an emerging growth company until it hits several milestones, including more than $1.07 billion in annual sales.

Founded in 2007, Zevia manufactures soft drinks, energy drinks, teas, children’s drinks, and mixers such as tonic water, ginger ale, and carbonated water that are distributed throughout the United States and Canada.

“All of our drinks are made with only a handful of plant-based ingredients that most consumers can easily pronounce,” the company said in the prospectus.

Cola accounted for 24% of the company’s sales in 2020. Cola’s competitors include Coca-Cola Co.
KO,
-1.71%

and PepsiCo Inc.
PEP,
-0.30%,
two of the biggest brands in the world.

Zevia presents data from Statista and Beverage Digest showing that per capita consumption of regular carbonated soda fell to 38.6 gallons in 2019 from 45.5 gallons in 2010.

On the other hand, the health and wellness beverage category achieves retail sales of $301 billion in 2020 and will grow at a CAGR of 2.8% from 2019 to 2025, according to Euromonitor data.

Zevia estimates that it has an 88% market share of natural sugar-free, sugar-free soft drinks by 2020. Zevia has six product lines and 37 flavors.

Zevia estimates the global liquid beverage market to be worth $771 billion.

Furthermore, Zevia drinks are suitable for people with diverse diets including dietary, vegan and gluten-free.

Paddy Spence has been the chief executive officer of Zevia since March 2021. Prior to that, he was the CEO and director on Zevia’s board while it operated as an LLC. He acquired the company in September 2010. He also founded SPINS, a market research firm for the natural products industry, and was the company’s CEO from 1995 to 2003.

Hank Margolis will be chief executive officer once Zevia goes public, and Bill Beech will be chief financial officer. Both have served in these respective roles for Zevia prior to the IPO.

Zevia places environmental, social and corporate governance (ESG) efforts, emphasizing partnerships with nutritionists and nutrition educators to provide educational material on the impact of consumption of sugary drinks. related to health problems such as obesity, diabetes and other diseases.

Spence started writing food magazines in 2001 and discovered how much sugar he was consuming despite his natural and organic diet and drinks. He and his wife decided to eliminate sugar from their diet.

“Today, we still use ‘sugar budgets’ to manage sugar consumption at home,” Spence wrote in the letter to the CEO in the prospectus.

Spence says there are “barriers” for others that prevent them from making healthier dietary choices.

“So, at Zevia, we pride ourselves on making beverages accessible to consumers at different income levels,” he said.

Zevia has also taken steps to eliminate waste and set standards for transparency.

“We have never sold a single plastic bottle, which we estimate has removed 15,000 tonnes of plastic bottles from the supply chain by selling only aluminum packaging since 2011. “Also, one One of our key ingredients, stevia, requires less agricultural water than sugar, to advance our sustainability mission.”

Also: Didi, the biggest IPO of the monster week, sees shares struggle a bit at launch

Here are five things to know about Zevia before it goes public:

Zevia loses money but revenue grows fast

Zevia made a profit of $19,000 in the first quarter of 2021, after a loss of $2.6 million in the first period of the year, but the company admits it’s actually not yet profitable.

“We have a history of losses and we may not be able to turn a profit,” it said in its IPO document.

The loss in 2020 is $6.1 million, wider than the $5.4 million loss announced in 2019. As a result, the company does not plan to pay an early dividend, meaning investors Investors will have to rely on the price of the stock to make a profit.

On the other hand, sales are on the upswing, climbing to $110 million in 2020, or nearly 240 million cans, from $7 million in 2010, a compound annual growth rate (CAGR) of 32%. . Zero-calorie beverages with plant-based sweeteners are a $150.6 million business in 2020, up from $90.8 million in 2018.

E-commerce accounted for 13% of sales in 2020. Data provided by retail intelligence platform Stackline shows Zevia as the best-selling carbonated soft drink brand on Amazon.com Inc.
AMZN,
-1.23%

in 2020.

Revenue in 2019 was $85.6 million.

Also: Torrid IPO: 5 things to know about the large-scale retailer as it reaches the mass market

Zevia has a ‘lightweight’ business model

Zevia does not manufacture its own products, but uses third-party logistics and manufacturing providers, which the company says are “designed to take advantage of reduced costs and costs, at a cost invest less than 1% of net sales every two years.”

The benefit is the ability to focus initiatives on ESG, sales and marketing while also providing financial flexibility, according to the company.

Do not miss: 5 most intriguing revelations in Robinhood’s long-awaited IPO filing sơ

Concerns that stevia is unsafe have surfaced in the past – and could rise again

Zevia’s marketing has focused on the company’s use of stevia and other plant-based sweeteners in their products. Questions about the safety or quality of these ingredients can hurt Zevia.

“For example, there have been previously unfounded and scientifically refuted claims that stevia can cause reproductive problems or require an allergy warning,” the prospectus said. “Similarly well-founded or well-founded claims in the future may cause customers or consumers to reduce the amount of our products they buy or stop purchasing our products altogether.”

Zevia has some supply chain risks

Zevia has only one supplier of stevia extract, which it highlights as a supply chain risk in its prospectus.

“Events that adversely affect our supplier of stevia extract and other raw materials may reduce our ability to obtain raw material inventories in the quantities we expect,” the company said. want.

“In the past, we have experienced disruptions in the supply of carbon dioxide and caffeine. While those disruptions are unlikely to have a significant impact, future disruptions could have a material negative impact on our business.”

The company said it is looking for alternative stevia extract suppliers.

Climate change could become a problem

Zevia relies on agricultural products, such as plant-based sweeteners, which can be affected by changing weather patterns and other effects of climate change.

“As a result of climate change, we may also experience reduced water availability, poorer water quality or less favorable water prices, which can adversely impact the performance of producers under Our third-party contracts, as well as the agribusinesses of our suppliers, rely on the availability and quality of water,” the prospectus said.

The Renaissance IPO ETF
IPOs,
+0.63%

down 5.5% year to date, while the S&P 500
SPX,
-1.88%

increased by nearly 13%.