REED - Reed's Inc

[Palantir]

This girl is on fiiiiiiiiire.

 

I should have bought more, instead I cut my position in half earlier this year.

 

Lesson learned: Patiently hold regardless of how much volatility pains you.

 

[compoundinglife]

This girl is on fiiiiiiiiire.

 

I should have bought more, instead I cut my position in half earlier this year.

 

Lesson learned: Patiently hold regardless of how much volatility pains you.

 

I was going to say something to this effect earlier when you said it had too much volatility for you IRA but I decided not to. Best lessons are the ones you learn yourself.

 

I ended up buying at 5.72 then bought more at 4.40. So far so good. I disagree with Parsad about the Jones soda analogy mostly based on my feel for the product space. I was mainly worried about execution.

 

Still waiting for it to show up in my local co-op and whole foods so I can sample the goods.

 

Volatility is fact of life especially with small cap and thinly traded issues. 

[Palantir]

^Yep, you are right on all counts. Regarding sampling, see Trader Joes, they have their ginger soda. The local supermarket may have Virgils Sodas. Never seen Kombucha yet though.

[krazeenyc]

This girl is on fiiiiiiiiire.

 

I should have bought more, instead I cut my position in half earlier this year.

 

Lesson learned: Patiently hold regardless of how much volatility pains you.

 

I was going to say something to this effect earlier when you said it had too much volatility for you IRA but I decided not to. Best lessons are the ones you learn yourself.

 

I ended up buying at 5.72 then bought more at 4.40. So far so good. I disagree with Parsad about the Jones soda analogy mostly based on my feel for the product space. I was mainly worried about execution.

 

Still waiting for it to show up in my local co-op and whole foods so I can sample the goods.

 

Volatility is fact of life especially with small cap and thinly traded issues.

 

I love the product (at least the sodas).  The growth on the Kombucha side is great. But...

 

What is your sell strategy on REED? I would think any investor in REED is looking for REED to be acquired (based on a sales multiple).  I worry that the complicated production/low gross margins on their speciality sodas my be an issue regarding a potential acquisition. Kombucha is also a pretty controversial product. Can REED thrive or even survive over the longer term without being acquired?

[compoundinglife]

^Yep, you are right on all counts. Regarding sampling, see Trader Joes, they have their ginger soda. The local supermarket may have Virgils Sodas. Never seen Kombucha yet though.

 

The sampling comment was in reference to their Kombucha, I first had their ginger beer around 20 years ago when I was a hippy teenager working in a health food store. I will check out the local TJs this weekend.

[compoundinglife]

This girl is on fiiiiiiiiire.

 

I should have bought more, instead I cut my position in half earlier this year.

 

Lesson learned: Patiently hold regardless of how much volatility pains you.

 

I was going to say something to this effect earlier when you said it had too much volatility for you IRA but I decided not to. Best lessons are the ones you learn yourself.

 

I ended up buying at 5.72 then bought more at 4.40. So far so good. I disagree with Parsad about the Jones soda analogy mostly based on my feel for the product space. I was mainly worried about execution.

 

Still waiting for it to show up in my local co-op and whole foods so I can sample the goods.

 

Volatility is fact of life especially with small cap and thinly traded issues.

 

I love the product (at least the sodas).  The growth on the Kombucha side is great. But...

 

What is your sell strategy on REED? I would think any investor in REED is looking for REED to be acquired (based on a sales multiple).  I worry that the complicated production/low gross margins on their speciality sodas my be an issue regarding a potential acquisition. Kombucha is also a pretty controversial product. Can REED thrive or even survive over the longer term without being acquired?

 

I am thinking they get acquired by someone like Hains or Honest Tea (Coke), both companies tried to get in and had to back out. The survival question is a good one and part of the reason why I kept this to a small position is the risk that things don't work out. I am not too worried about the controversial aspect of Kombucha. It is a new challenge for regulation due to the fermentation but I don't think it will be banned. Plus controversy brings attention to the market for these products.

[Palantir]

Why do you feel they need to be acquired? I don't think they're a great acquisition target right now, they're not profitable, their market is nascent, their products are pricey and their ingredients are expensive.

 

Personally, I'm not looking for them to sell the operation (but they might), I think with more scale we could see profitability (famous last words?).

[krazeenyc]

Why do you feel they need to be acquired? I don't think they're a great acquisition target right now, they're not profitable, their market is nascent, their products are pricey and their ingredients are expensive.

 

Personally, I'm not looking for them to sell the operation (but they might), I think with more scale we could see profitability (famous last words?).

 

It's really hard for a smallish beverage company to achieve the scale necessary to be very profitable. If you look at REED's own investor presentation materials they go through a bunch of companies that were acquired by the big boys and the valuations at which they were acquired. (I think management is looking to be acquired at the right price -- at least that seems to almost always be the case in the beverage industry).

 

Can you find me some nice consistently profitable nicely growing independent beverage companies sub $500 million or sub $1 billion? (I'm not say there are not I just don't personally know of any).

[compoundinglife]

Why do you feel they need to be acquired? I don't think they're a great acquisition target right now, they're not profitable, their market is nascent, their products are pricey and their ingredients are expensive.

 

Personally, I'm not looking for them to sell the operation (but they might), I think with more scale we could see profitability (famous last words?).

 

It has been a while since I reviewed the investor material and listened to the CCs but I got the impression back then that they are looking to get bought. Reed has been doing this for a long time and I think he sees the Kombucha opportunity as a way for him to finally cash out and also have the brand bearing his name live on. 

[compoundinglife]

Why do you feel they need to be acquired? I don't think they're a great acquisition target right now, they're not profitable, their market is nascent, their products are pricey and their ingredients are expensive.

 

Personally, I'm not looking for them to sell the operation (but they might), I think with more scale we could see profitability (famous last words?).

 

It's really hard for a smallish beverage company to achieve the scale necessary to be very profitable. If you look at REED's own investor presentation materials they go through a bunch of companies that were acquired by the big boys and the valuations at which they were acquired. (I think management is looking to be acquired at the right price -- at least that seems to almost always be the case in the beverage industry).

 

Can you find me some nice consistently profitable nicely growing independent beverage companies sub $500 million or sub $1 billion? (I'm not say there are not I just don't personally know of any).

 

Exactly. I seem to remember them lining up their revenue projections with the multiple of sales paid for companies like Honest Tea.

[Palantir]

Yes I agree that management would be willing to sell at a good price. I just don't think they're a very attractive acquisition target...

[Palantir]

Ouch.