Entering text into the input field will update the search result below

Reed's: A 6 Point Inspection

William Bias profile picture
William Bias


  • Reed’s sells "natural premium carbonated soft drinks."
  • Reed’s is growing its top line at a respectable clip, but it still isn’t consistently profitable.
  • Reed’s is relying heavily on debt to finance operations and expansion.

It's important for long-term investors to develop a guide for doing their investment research. Over the years I have developed questions to guide me in my thinking when researching the publicly traded universe. Right now, let's talk about Reed's (NYSEMKT: OTCQX:REED).

1.) What does the company do?

When my wife and I were traveling the western part of the United States, we stopped at a restaurant and noticed something odd. The establishment served carbonated sodas that didn't come from the big three beverage companies, such as Coca-Cola (NYSE: KO), PepsiCo (NYSE: PEP), or Dr Pepper Snapple Group (NYSE: DPS). I ordered one of the specialty sodas. Always on the lookout for new investment ideas to research and write about, I started searching the bottle for a holding company I could recognize. I discovered the name Reed's. Reed's, in addition to specialty sodas such as Virgil's Rootbeer and Flying Cauldron Butterscotch Beer, sells candies such as Reed's Peanut Butter Ginger Chews and ice cream such as Reed's Chocolate Ginger Ice Cream. However, just because a company sells a cool product doesn't make it a good company. Investors need to check out a company's fundamentals.

Source: Reed's website

2.) What do the fundamentals look like?

Investors should also look for companies that grow revenue and free cash flow over the long-term and retain some of that cash for reinvestment back into the business and for economic hard times. Excellent revenue and free cash flow growth serve as catalysts for superior long-term gains.

Reed's does not stand on its own two feet. Reed's has done well on the top line front. Its revenue expanded 174% over the past five years. However, it is still unprofitable, and free cash flow is intermittent due to investments in its distribution infrastructure, product development and acquisitions, and sales cost (see charts below).

This article was written by

William Bias profile picture
I have been analyzing stocks since 1992 and a freelance writer since 2012.

Analyst’s Disclosure: The author is long DPS, KO, PEP. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (25)

Progress being made. Buy at this level for a 50% bump soon. Then hang on because more is coming.
redarrow5150 profile picture
Yeah right.
Not much rush huh
We're buying all we can in small lots but regularly. Big thing gonna happen soon and we will NOT be left in the dust. Write this down: double digits this year!
Well Amen to all comments. All good and reasonable. I am long, in and out of REED as well as most of the commentors. I wish there was some way of knowing the stores that buy from REED as "private label". This is true of not just REED but every stock company that I see as prviding private label never seems to disclose who they produce private label for; true of drug store products, pet food, etc. etc. and of course soda.

Today REED shot up 2% in a down market, so it seems that something is positive, but we will only speculate. Chris Reed is a relative of a relative of a relative of a relative of mine and so I will continue to support his insight on the company's future. I hope his Kombucha product works out, but am amazed how many new Kom products are now out there. Stay with the effort Chris. I was a hippie once as well, and have a brother named Virgil.
Sorry guys but I finally had to bailout on this stock. I sold all my shares Friday June 5, 2015, placed a limit order(not that it matters to you guys) but I wanted every nickel I could possibly get. The chart on this thing has to be one of the ugliest charts I've ever analyzed!! I can't understand everytime it gets a decent move upwards I swear it is as if it collapses within a day or two. I can not stomach holding this dog anymore, although I may jump back in. I got out at $6.26 which I was well pleased with since I considered this stock 'dead money'. There seems never to be enough volume on this as an active, interesting stock.
I had these shares for over 4 years and sold the other shares prior to Friday. Time to use the proceeds for other opportunities.
I still had a 54%+ gain overall, I really think this stock is too heavily shorted for my taste and there is not enough institutional interest in it. But things change, Reeds also had 2 major principles in the company quit not long ago within 6 months ago. I was unable to find out why that was.
In a way, I am somewhat sore having to abandon this company for I buy their products also but it was time to move on...but I might be back. I honestly have no clue as to when REED will be a GREAT investment.

Good Luck to All!
Read about Pepsi today in WSJ
Chris is not a dummy Pinhead12 a very good engineer that put together a pretty complex operation. His new hires should help him in moving forward. We're looking for double digits soon.
Matthew Utesch profile picture
Recent hires include upper-level execs from DPS and Pepsi. The last interview I saw with Chris Reed had him discussing the benefits of these hires and how they are implementing changes that will bring real bottom-line benefits. It seems that Chris may have finally seen the comments about him not being the kind of CEO the company needs when it comes to production.
Good, fair write-up. Those fair weather longs that dream about Target and Walmart, better focus on the disposable income of those shoppers, and how many of those shoppers wish to afford $1,50+ soda bottles. Interesting how infatuation can breed rosy glasses... REED is a nice buy at $3 as the old man gets close to selling it for probably $5-7 a share. The recipe's especially Virgil's are worth something.
Whole foods price 88 cents per bottle
Market DJ profile picture
Damn. It's $3.99-$4.99 (plus deposit) a four-pack at Fred Meyer (Kroger), and it is almost always sold out! Nice to know I can walk to WFM and get it cheaper :)

I like the product,new hires. I've been in and out of the stock for the last 3yrs. It has given me a new 2012BMW.535i In 2012 so I'll stick with Chris for the long term. There is nothing but money in for the patient invester. GO REESDS
James McRitchie profile picture
I guess I could have gotten one too, but I'd rather leave my money in the stock and push for it to grow further. Would do even better with a more involved board.
Couldn't of said it better myself! He's an old hippie not a businessman...
ddelong12 profile picture
You failed to mention the new management hires, the new relationship with Walmart and Target, the new co-packer that started producing last week and the annual cost savings of $3M with the completion of the plant improvements later this summer. Why?
rollo tomassi profile picture
And that knowledge is?
We jumped in a bit over 3 years ago and are sitting on about +70% gain. Have knowledge of something that surely will push REED up to double digits so we're staying long for at least a year. A double from the current level is the minimum whispered. New management hires big positive.
rollo tomassi profile picture
Nice write-up. I bought Reed a year ago after I tried their ginger beers and became quickly addicted.. I also noticed that the place where I shop can't keep the extra strong ginger beer in stock (they walk out of the store).
I think the recent new hires is some form of capitulation from the CEO that he needs better skilled players up front. The extra extra strong ginger beer is going to be the most awesome drink ever.. Long term, with 0.20/share earnings, it's a $10 stock.. Could take a few years to get there, with swings from $5 to $7 range though.
James McRitchie profile picture
As you note, Reed's has much going for it re natural product line, growth, founder stake in company. Where it has really fallen down over the years is in its corporate governance. Directors who hold no stock and who are paid a pittance for attending board meetings are signs that 'independent' directors aren't really independent... nor are they likely to be adding real value to the company.

I think Chris Reed shows signs of genius in many areas but even genius CEOs benefit from an independent board with diverse motivated directors. While it is often a positive when insiders own a third of the company, it can be a barrier to change if they don't see the need. I advised shareholders to withhold votes from the directors that don't own any shares and a majority of shares were actually voted at the last annual meeting against one of the directors. That's a HUGE feat, when you consider that insiders hold 33% and cast them in favor of the director who remains on the board.

Unfortunately, Reed's operates under plurality voting standards, so if no one is running against a director, they can get reelected with the vote of one share... even if ALL other shares are voted against them.

I'm still hanging in there, hoping Reed will see the light and agree to some basic corporate governance reforms, like majority voting for directors and proxy access. However, there is a risk that he never will. He may be satisfied with what appears to be a rubber-stamp board.

Steve Jobs did much better at Apple after being thrown out and returning. Will it take something that drastic for Reed's?
William Bias profile picture
Hi James,

Thanks for the input.

James McRitchie profile picture
Happy to work with shareowners of Reed's to create positive change. With the majority of shares being voted against a director last year, it is hard to imagine Chris Reed can keep ignoring the obvious. You don't need to be Carl Icahn or Nelson Peltz to make a difference.
redarrow5150 profile picture
Worst CEO in the beverage category is Chris Reed.
Market DJ profile picture
Good write up! I've been researching REED because I love their products. Regardless, I came to the same conclusions. Not worth owning just for hopes of a takeover, but I like the fact that the founder is still there.

One a further note, I think the Kombucha "craze" has peaked, so there is pressure on that product going forward regardless of the companies miscues with inventory.

William Bias profile picture
Thanks for reading Market DJ!

Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

About REED

SymbolLast Price% Chg
Market Cap
Yield (TTM)
Rev Growth (YoY)
Short Interest
Prev. Close
Compare to Peers

More on REED

Related Stocks

SymbolLast Price% Chg
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.