DENVER, Aug. 15, 2016 (GLOBE NEWSWIRE) -- The Pulse Beverage Corporation (“Pulse”) (OTCQX:PLSB), makers of Natural Cabana® Lemonades/Limeades and Coconut Waters, and PULSE® Heart & Body Health functional beverages, today provided its Q2 Report and Outlook for remainder of 2016.
Business Highlights for Q2-2016 to Date:
During the first half of 2016 Pulse made a strategic decision to move from a direct store delivery distribution system (“DSD”) to a hybrid system of 75 of its strongest Class “A” DSDs and 20 wholesalers, concentrating placements into high volume cold box sets. Pulse eliminated a number of weaker, non-performing DSDs in certain geographical areas in order to move its distribution to a warehouse direct to wholesaler system. This decision was made to reduce overhead associated with the effort to manage a direct store delivery distribution system. Pulse rationalized the number and placement of salespeople in the field. The overall effect was a reduction of $118,000 in overhead during Q2-2016. The decrease in net sales and gross profit during Q2-2016 was planned in order to grow sales from a more profitable fixed overhead base. During Q2-2016 Pulse reduced freight-out and costly promotional programs which increased gross profit and contribution margins. Although Pulse expected sales to decline, as discussed above, our net revenue declined over and above our expectations due to timing of new store sets and deliveries to these stores. Pulse expects this timing difference to reverse during Q3-2016.
During Q2-2016 Pulse introduced its Lemonade/Limeade formula in a 16.9oz glass bottle package under a control brand label called “Citrus tree”. This new product is being sold on a warehouse direct basis. Pulse also introduced a smaller 11.2oz six-pack coconut water which some big box retailers find easier to sell. These two new lines should increase net sales during the remainder of 2016. Pulse is still in the process of repackaging its flagship product, PULSE® Heart & Body Health functional beverages, into a more attractive package and plans to introduce this brand into the Southern California marketplace.
As a percentage of net sales, contribution margin (gross profit less freight-out and other variable expenses) increased to 23% during Q2-2016. Contribution margin has steadily increased quarter over quarter as it moves to its hybrid distribution system. During Q2-2016 Pulse’s net loss from operations, compared to Q2-2015, decreased by $43,000 to $335,000 due to a reduction of $118,000 of overhead offset by reduced gross profit of $75,000.
During Q2-2016 Pulse’s working capital was bolstered by an additional $350,000 advance from its lender, TCA
Due to changes in food laws in Mexico during the process of shipping product from Asia, Pulse spent Q2-2016 overlaying the existing label with a new information label. This delayed the next reorder in Mexico until Q3-2016. The relabeling was completed and, starting in July 2016, Pulse’s Mexico distributor began distribution of Natural Cabana® Coconut Water.
During February, 2016 Pulse started its own Southern California distributorship to distribute its brands to existing accounts in Southern California while it searched for a suitable independent large distributorship in the area to replace its former distributor. Pulse made this strategic decision in order to maintain existing regional retail accounts in the area. On May 31, 2016 Pulse discontinued this temporary operation and moved its ongoing business to a large independent distributor.
Bob Yates, Chief Executive Officer, said, “Our effort over the last few months in moving to a hybrid distribution system has allowed us to reduce our overhead costs which will move us towards profitability sooner. There comes a time in every beverage company that a profit needs to be generated and that time for Pulse is now. The full effect of our overhead reductions will be in the second half of 2016. We continue to be pleased with the overwhelming success of our new coconut water. We have a new product offering in development which should add to our growth and success towards the end of 2016. We are confident in the marketing strategies and the delivery/execution of our new strategic growth plan for the next twelve months. We look forward to communicating with our shareholders as these growth plans unfold during the remainder of 2016.”
About The Pulse Beverage Corporation
The Pulse Beverage Corporation is an emerging beverage company that offers beverage brands that are great tasting, good-for-you, refreshing, low-calorie natural drinks. Pulse’s line of beverages provides consumers with high-quality, healthy alternatives at a reasonable price.
For more information, please visit: www.pulsebeverage.com or email info@pulsebeverage.com.
Follow Pulse Beverage on Twitter at https://twitter.com/drinkpulsebev.
Become a Pulse Beverage Facebook Fan at https://www.facebook.com/PulseBeverageCorporation.
Forward-Looking Statements http://ir.pulsebeverage.com/forward-looking-statements