Hill Street Beverage Company Inc (CVE:BEER) (OCTMKTS:HSEEF) CEO Terry Donnelly said the company strengthened its brand and distribution network over the last two years, which resulted in an increase in sell through to retail during the fiscal first quarter of 2020.
In a statement accompanying the Canadian company’s latest numbers, Donnelly said: "Hill Street has made major strides in building both our brand and distribution for our alcohol-free products over the past two years, and the increase in sell through to retail is an excellent indicator of our progress.”
The 14-year-old company is expanding its business model to include the production and sale of potentially lucrative cannabis-infused beverages.
“The company has continued to move forward with our plans to enter the Cannabis 2.0 market in spite of the headwinds of the capital markets, major missteps made by billion dollar cannabis companies, and the overall downturn in the sector, with excellent preparation and analysis for the launch of infused cannabis beverages in 2020," said Donnelly.
Hill Street's planned acquisition of OneLeaf Cannabis was mutually terminated on September 30.
“Acquisition cost, higher than expected capital expenditures to bring the facility online and lack of clarity from Health Canada concerning the timing of One Leaf's licence grant contributed to the mutual decision,” said the company.
Hill Street makes alcohol-free beer and wine as well as adult-format beverages. The company offers red, white, sparkling, and rose wines under the Vin (Zero) and Vintense brands. It sells beer under the Hill Street Craft, Designated Draft and MADD virgin craft brand names.
"Our team has taken these challenges in stride, and continues to punch above their weight, with excellent response from retailers for our holiday gift pack and trade promotion for the coming season," said Donnelly.
Here are the main highlights for the fiscal first quarter 2020 ended September 30, 2019:
• Distributor sell-in to retail customers was +5% compared to the same period a year earlier;
• Gross Margin on Revenues of $513,766 improved from 27% to 35% compared to the same period year earlier due to product mix and a positive foreign exchange;
• The company posted a net loss of $1.5 million compared to a net loss of $1.2 million in fiscal first quarter 2018, driven by several one-time expenses associated with entering the cannabis vertical; and
• End of quarter cash position of $204,000, no debt, and positive working capital of $0.6 million.
"I'm delighted to see more retail accounts in more regions embrace the promotion. This beautiful designed mix-pack of red, white and sparkling brut is the perfect compliment for entertaining this holiday season," said Doug Taylor, chief commercial officer at Hill Street Beverage.
The company said it has begun “negotiations with several co-packing partners” across Canada to produce its cannabis-infused products, including its award-winning alcohol-free wine and beer.
On November 12, the company announced its first co-packing agreement with Peak Processing Solutions, a Canadian cannabis co-packing and white label product manufacturing firm.
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