Zevia's Q4 2024: Contradictions Surrounding Walmart Expansion, Marketing Strategies, and Distribution Dynamics

These are the key contradictions discussed in Zevia PBC's latest 2024Q4 earnings call, specifically including: Walmart Distribution Impact on Household Penetration, Marketing Investment Strategy, Distribution Gains and Losses, and Walmart Expansion and Distribution Strategy:



Sales Growth and Distribution Expansion:
- Zevia reported net sales of $39.5 million for Q4 2024, up 4.4% compared to the previous year.
- The growth was primarily driven by expanding distribution at Walmart, with distribution increasing from 800 to 4,300 stores, leading to an 11.6% increase in cases sold.

Productivity Initiatives and Cost Savings:
- Zevia achieved a record high gross margin of 49.2% for Q4 2024, representing an 850 basis point increase compared to Q4 2023.
- The improvement was attributed to cycling of inventory write-downs, improved inventory management, and productivity initiatives, which also led to cost savings opportunities.

Marketing Investments and Brand Awareness:
- Marketing expenses increased to 41.7% of net sales in Q4 2024, compared to 36.6% in Q4 2023, primarily due to increased advertising investments for a successful holiday campaign.
- The increased marketing spend was aimed at building brand awareness and driving trial, particularly through a break from the artificial campaign, which resonated with consumers.

Product Innovation and Variety Packs:
- Zevia plans to expand its product innovation pipeline with new flavor launches and variety packs in 2025.
- The introduction of Strawberry Lemon Burst and retailer exclusives like Orange Creamsicle, alongside variety pack offerings, is expected to drive trial and expand the consumer base.

Distribution Strategy and Retailer Partnerships:
- Zevia's distribution expansion included a new Modern Soda set at Walmart and a better-for-you set at Albertsons, aiming to increase awareness and trial.
- The company's direct store delivery (DSD) initiative has shown promising results in the Pacific Northwest, with grocery outperforming other markets, indicating potential future growth.