Reed’s, Inc. (REED) is “One to Watch”

Reed’s is an all-natural artisan beverage and confection company leveraging the freshest ingredients, natural sweeteners, and a penchant for ginger root to bring the world a wide variety of delicious, healthy products. From the kind of home-brewed ginger beverages made for ages in the Caribbean represented by their award-winning non-alcoholic Ginger Brews, to exceptional quality candies and ice creams, as well as an array of specialty drinks, Reed’s is serving up some of the best there is to offer and has gained a huge following among natural food consumers (a rapidly growing segment).

The company has put together an impressive lineup of specialty beverages like Virgil’s Root Beer (an all natural no caffeine or preservatives connoisseur root beer) and the Virgil’s natural soda line of drinks, as well as China Cola (a top seller in natural foods stores which is packed with Szechwan Peony Root, as well as cassia bark, cardamom, licorice, and orange peel), and even a proprietarily cultured, raw organic Culture Club Kombucha (or fermented tea), using the finest Oolong and Yerba Mate teas (probiotic nutrition together with beneficial enzymes and organic acids helps detoxify and revivify). Newer offerings like the champagne-quality Sonoma Line of 100% pure, sparkling juices made in a traditional fashion and the “Flying Cauldron” Butterscotch Beer, a wizard-themed brew, show that the company even has a product development mindset that can be likened to Ben & Jerry’s. Clearly the company is unafraid to pioneer new areas that fall within their purview, look profitable, and offer an opportunity to really engage the choice customers.

One of the things which has led to the company’s success amid a growing move towards natural and healthy foods, not just here in the U.S., but all over the world (with Asian markets being a strong, continuous trend driver), is the emphasis on the broad spectrum benefits of ginger which have been long recognized in the East. Ginger has long been known to have multiple health benefits, but research at the University of Minnesota’s Hormel Institute has even shown the potential of ginger as a chemopreventive and/or chemotherapeutic agent in combating cancer. The nausea treating benefits of ginger have been used to create Reed’s Nausea Relief, a powerful herbal tonic packed with natural Vitamin B6, also known for its anti-nausea effects. This kind of ingenious brewing by REED is also evident in Reed’s Natural Energy Elixir drink, which takes the company’s Extra Ginger Brew formula (with an extra 26 grams of fresh ginger root) to the next level, infusing it with camu camu and goji berry, green tea, and jiaogulan (a ginseng-like herb common in Asia), as well as natural L-Theanine and B vitamins.

The therapeutic ability of ginseng due to ginsenosides, the active ingredient, has shown widespread function in modulating multiple physiological activities and this fact, combined with the company’s strong move into stevia-based sweetener for their flagship, six-flavor, Reed’s Ginger Brew line and other beverages like Virgil’s (with the Virgil’s ZERO line that is every bit as good as the originals but without calories or fat), has placed the company ahead of the sector curve considerably (stevia is a zero-calorie, zero-carb herb from South America which has been used for centuries and is now gaining widespread industry attention). Ginseng has shown potential in modulating immune system function, and in use as an anti-inflammatory or anti-allergy preventative, with benefits against atherosclerosis, hypertension, and diabetes, as well as in helping the body de-stress because of how it eases the central nervous system.

Emerging health risks associated with high fructose corn syrup and synthetic sweeteners like aspartame (Monsanto), neotame (NutraSweet), and sucralose (Tate & Lyle), which have even recently garnered nationwide attention as actually having the potential to cause weight gain and disrupt the body’s natural metabolic cycle, spell huge future dynamics for REED, despite the stock’s already excellent movement for the year (up by 460% to $8.15 from Nov 7, 2011, touching pre-2008 highs). Strong sales of the premium soft drink Virgil’s line, which includes cream, orange cream, and black cherry cream sodas, in addition to the Dr. Better and Real Cola sodas, has shown profitability for REED in Q2 2012 and the company is moving to secure territory ahead of the massive shift towards the kinds of stevia and real cane sugar-based drinks increasingly demanded by consumers across the board. Reed’s Crystallized Ginger is a superb cane sugar (not white sugar) candy, custom-made in the South Pacific Islands and a perfect example of how management has logistically realized an important product vector in quality, health-conscious, artisan consumables, at the perfect time to coincide with mounting demand.

Much of this sector is about consumer loyalty anyways and getting people to come back for more. This natural emphasis on a high-quality product serves REED very well given the delivered product mix and target markets. Founder and CEO of the company, Chris Reed, is a visionary in many respects and has called the push to healthier beverages well ahead of the actual move, capturing tremendous market space, brand recognition, and investor upside. With big beverage sector players like Starbucks moving into stevia-based energy drinks and Monster Beverage Company continuing to move into and through stevia and stevia-derived inputs, REED is a smaller-scale play with much greater potential energy/momentum.

The company is not resting on its laurels either; they are pushing through to higher sales projections and making all the right distribution connections. The company announced last month that they gained authorization for deploying the Reed’s and Virgil’s brands in the hugely successful Williamsville, NY, supermarket chain, Tops Friendly Markets (153-location and growing). Also in October, the company secured a distribution deal with Livermore, CA-headquartered, Geyser Beverage Co., a fully-integrated direct store distributor (DSD) with over three decades of boots on the ground in the greater San Francisco Bay Area, which possesses a strong sales network in 15 greater Bay Area counties that delivers highly-personalized sales service.

Most recently, the company was able to secure another key distribution deal in Chicago, pulling hard on the company’s runaway sales in natural food stores all over the country to land this huge market channel. The distribution agreement with Central Beverage, another fully-integrated DSD, which has traction with some 3,500 customers in the eight-county Chicago Metro area, gives the popular Reed’s and Virgil’s offerings an inside track in one of the nation’s biggest markets. It is this steadfast commitment to landing target market-oriented venues, combined with the impressive flavor, quality, and health benefits of the product mix, that makes REED an exciting play, especially as more and more consumers turn away from junk food and start looking for real food. Reed’s Ginger Ice Cream is a great example of the company executing along this vector. One taste of this blend of raw cane sugar, cream, raw ginger puree, and milk (with some Reed’s Crystallized Ginger Candy mixed in to make it pop), is enough to convince even the most stubborn investor of the raw fundamentals here. These products are clearly going places and management isn’t squeamish about innovating.

To learn more about this well-defined operator, please visit www.ReedsInc.com

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