If history is any indication, Alkaline88® is on a path toward acquisition.
Record sales, increased market share, CBD-infused beverages and products, and tremendous stock value give this company a leg up on the competition.
Stay Hydrated My Friends
Less than 60 days after calling off the acquisition of the Mark Wahlberg and Sean “Puffy” Combs-backed AQUAhydrate, Alkaline posted its highest gross sales figures to date, $6.2 million in March.
This number not only blows away the company’s previous record of $3.8 million in a month, it doubled its sales output from the previous year when it did $3 million. Alkaline is also top 10 in market share for premium water.
And that’s all just water. Alkaline made waves in February, releasing a new CBD brand called A88CBD™. Current products are topical only, but ingestibles are set to launch this April to a much-anticipated audience. Ingestible CBD tends to sell much better than topical products, so it wouldn’t be much of a surprise to see this business segment explode out the gate.
Bottom Line: Alkaline is crushing it, and CBD sales haven’t even ramped up yet. More on that later.
Alkaline Should Be a Popular Target for Global Beverage
In the beverage industry, it’s difficult for big brands to strengthen their hold on the market without adjusting to consumer tastes. Hence, acquisitions have become a big focus for some of the largest companies in the niche.
Coca-Cola owns Dasani, Smartwater, which it acquired in 2007 for $4 billion, Powerade, Vitaminwater, Odwalla, and Honest Tea. It also acquired low-sugar carbonated beverage Moxie in 2018.
Coca-Cola’s track record for acquisitions goes far beyond recent news as well. It acquired Minute Maid way back in 1960. In 1982, it even acquired the movie studio Columbia Pictures for $692 million before flipping it to Sony for $3 billion in 1989.
And Nestle, who saw sales from Nestle Waters dip in 2019, is reportedly shifting its focus toward acquisitions of small-to mid-sized acquisitions in 2020.
Core Water, which was acquired in 2018 by Keurig Dr. Pepper, was cited as the buyer’s foray into the premium water space.
The most important of these acquisitions for this discussion is the Core Water component. When acquired, the water company was doing roughly $80-90 million in sales. It was purchased for $560 million, but a $200 million tax credit came with it. Keurig Dr. Pepper also owned a 30% stake already.
This is a huge multiple. If Alkaline was to sell right now for 3-4 times its top line revenue, the share price would be significant with where it currently stands.
The CBD Component
Speaking of consumer tastes, focus is shifting toward healthiness at an increasing rate, and with the stats we mentioned earlier, Alkaline88 makes sense as a potential target for multiple reasons.
Among them, the CBD side, since the innovative use of CBD-infused products has yet to penetrate the mainstream market under a big brand name.
CBD sales are just beginning for Alkaline. And with a strong brand name in the health space, it already has a leg up on the competition. Toss in CBD-infused water that its core audience is already familiar with, and you’ve got a recipe for success the big conglomerates are likely drooling at.
“For the most part, Global beverage and Pharmaceutical Companies continue to wait for the FDA to provide clear guidance before they appear to be willing to enter the CBD space,” said the AWC chairman Aaron Keay, “For our Company, this is a huge benefit. While we continue to grow our sales across all our water channels we are aggressively and methodically expanding our CBD platform and becoming a broader Lifestyle CPG Company, that just bottled water. With them remaining on the sidelines, we are able to do this with less completion and expand the trusted relationships with retailers and consumers at the same time.”
While other water brands had issues ramping up to meet demand during the pandemic, Alkaline didn’t. The fact that Alkaline had been able to accomplish such a massive month in sales without CBD or the resources of a Coca-Cola behind it makes you wonder what it would be able to do with both.
We may not need to wait too long to find out.
Low Price/Earnings Ratio
Alkaline is doing well, yes. But it’s not just that. The stock is undervalued when compared to competitors.
No matter how you slice it, WTER is trading at a deeply discounted multiple and deserves one that’s more in-line with its peer group.
WTER traded at a P/E ratio of -2.19 in 2019. This year, it’s projected for -1.84.
Interestingly, the stock seems to be grouped in with marijuana companies, which have all seen a massive valuation cut over the last year.
While there have been announcements, the company has not seen any sales from the CBD category until February of this year, signifying that it should likely be grouped in more closely with peers in the premium water category instead.
About The Alkaline Water Company Inc.
The Alkaline Water Company Inc. (NASDAQ and TSXV: WTER) is a producer of bottled alkaline water, flavored-infused waters, and CBD infused products sold under the brand names Alkaline88®, A88™, and A88CBD™, respectively. With its innovative, state-of-the-art proprietary electrolysis process, Alkaline88® delivers perfect 8.8 pH balanced alkaline drinking water with trace minerals and electrolytes. The Company recently announced a broad line of CBD infused products, which include ingestibles and topical products. For its ingestibles line, the A88™ Infused Beverage Division Inc. intends to produce CBD infused drinks, beverage shots, tinctures, capsules, and powder packs. For its topicals line, A88™ Infused Products Inc. produces salves, balms, lotions, essential oils, and bath-salt all made with lab-tested full-spectrum hemp. To purchase A88CBD™ products online, visit us at www.A88CBD.com.
The Alkaline Water Company Inc. is currently pursuing a national multi-channel, mass-market expansion strategy with a direct-to-warehouse model and co-packaging facilities that are strategically located 600 miles within 95% of the U.S. population. Founded in 2012, the Company is headquartered in Scottsdale, Arizona. To learn more about The Alkaline Water Company, please visit www.thealkalinewaterco.com or connect on Facebook, Twitter, Instagram, or LinkedIn.