Zevia's Q1 2025 Earnings Call: Unpacking Contradictions in Tariff Impact, Marketing Strategies, and Gross Margin Sustainability

Tariff exposure and impact on gross margin, marketing investment and correlation with sales, tariff exposure and mitigation strategies, marketing effectiveness and investment, gross margin sustainability are the key contradictions discussed in Zevia PBC's latest 2025Q1 earnings call.



Strong Financial Performance and Productivity Initiative:
- Zevia PBC reported net sales of $38 million for Q1 2025, at the high end of its guidance range, with a record gross margin of over 50% and an improvement in adjusted EBITDA to negative $3.3 million from negative $5.5 million in the prior year.
- The growth was driven by productivity initiatives that delivered cost savings, enabling investments in brand building and innovation.

Marketing and Brand Awareness:
- The company's marketing efforts, including the "Get The Fake Outta Here" campaign featuring Jelly Roll, delivered 2.4 billion earned impressions, making it the most shared and engaging content in Zevia's history.
- This campaign and strategic brand positioning aim to enhance brand awareness and engagement with consumers, particularly in the face of uncertain macroeconomic conditions.

Product Innovation and Expansion:
- Zevia expanded its product innovation with more sugar-like taste experiences in new flavors like Strawberry Lemon Burst and exclusive offerings to Sprouts like Orange Creamsicle.
- The focus on taste and innovation is part of an effort to drive consumer preference and market penetration in the competitive better-for-you beverage category.

Distributional Growth and Market Penetration:
- The company secured new distribution agreements with Walgreens (nearly 8,000 stores) and expanded its presence at Albertsons and Walmart, contributing to an increase in household penetration.
- These expansions aim to reach a broader customer base and capitalize on the growing demand for healthier living and sugar-avoidance trends.

Productivity and Cost Management:
- The productivity initiative resulted in $15 million in annualized cost savings, which were reinvested in brand building and strategic growth pillars.
- Effective cost management enables Zevia to stay competitive amidst rising tariff costs and an uncertain macroeconomic environment.