FIZZ National Beverage Corp.

Management Discussion

• Net sales for fiscal year ended April 27, 2019 (“Fiscal 2019”) increased 3.9% to $1,014 million compared to $975.7 million for fiscal year ended April 28, 2018 (“Fiscal 2018”). Adjusted for private label carbonated soft drinks no longer produced,  net sales increased 6.2% . The increase in sales resulted primarily from a 5.0% increase in branded case volume and a higher average selling price. Power+ Brands volume increased 8.9%; branded carbonated soft drinks volume declined 3.0%.
• Net sales for Fiscal 2018 increased 18.0% to $975.7 million compared to $826.9 million for the fiscal year ended April 29, 2017 (“Fiscal 2017”). The increase in sales resulted primarily from a 19.8% increase in branded case volume and, to a lesser extent, a higher average selling price. Power+ Brands volume increased 38.9%; branded carbonated soft drinks volume declined 6.2%. The Company concluded production of lower-margin, private-label carbonated soft drinks in the third quarter of Fiscal 2018, allowing greater focus on brand equity appreciation.
• Gross profit for Fiscal 2019 decreased 1.7% to $384.4 million compared to $391.1 million for Fiscal 2018. The decrease in gross profit is due to increased costs per case offset in part by volume growth in higher-margin Power+ Brands. Cost of sales per case increased 7.7% primarily due to higher aluminum and manufacturing costs.  Manufacturing costs were temporarily impacted by production disruptions as a result of capital projects designed to increase production capacity and efficiency.  Gross margin declined to 37.9%.