Why Zevia Could Be a High-ROI CPG Growth Trade - A Risk-Managed Long

Hook / Thesis

Zevia is a small but meaningful player in the fast-growing zero-calorie / naturally sweetened beverage niche. The last several quarters show a brand that still commands healthy gross margins - roughly in the mid-to-high 40% range - while trimming inventory and turning operating cash flow positive in the most recent quarter. The market has punished the stock to multi-year lows; that creates an asymmetric opportunity for a disciplined long if the company keeps executing.

In short: buy a measured position in ZVIA on signs the company sustains revenue and cash-flow improvement. The upside comes from multiple ways the business can re-rate - margin stabilization, broader retail distribution, and functional beverage tailwinds - while the downside is limited by a conservative balance sheet and negligible long-term debt.

What the business does and why it matters

Zevia PBC makes zero-calorie, naturally sweetened beverages across categories - soda, energy drinks, tea, sparkling water, mixers and kid-focused drinks - distributed across mainstream and natural retailers and e-commerce. The company sits squarely in the functional / wellness beverage trend, which investors are paying attention to. That trend is relevant because consumers are increasingly trading up from commodity diet sodas to premium, better-for-you alternatives, and Zevia is positioned to capture share because it is Non-GMO Project Verified and zero sugar.

Why the market should care now: Zevia shows the core things investors prize in CPG growth stories - strong gross margins, improving cash conversion and a clean capital structure - but the share price is near a clearing level that discounts a worst-case outcome. That combination can deliver outsized returns if execution normalizes.

What the numbers say (recent operating and balance-sheet trends)

Pick the most recent quarter (fiscal Q3 ended 09/30/2025, filed 11/05/2025):

• Revenue: $40.84 million in Q3 2025, up from $36.37 million in Q3 2024 - roughly a +12% year-over-year increase (09/30/2025 filing).
• Gross profit / margin: $18.62 million gross profit in Q3 2025, implying a gross margin near 45.6%. Historically the company ran closer to 48-50% in earlier quarters, so this is still a premium margin profile for non-alcohol beverages.
• Profitability: Operating loss in Q3 2025 was $2.87 million and net loss was $2.85 million. Losses persist but are modest relative to revenue scale and have shown improvement versus prior-period swings (earlier quarters had larger operating losses).
• Cash flow improvement: Most important operationally, Zevia reported positive net cash flow from operating activities of $116,000 in Q3 2025 after negative operating cash flow in prior quarters. Positive operating cash flow, even small, marks a change in cash conversion dynamics.
• Working capital / inventory: Inventory has trended down - Q3 2025 inventory was $14.13 million versus higher levels in earlier reporting periods, indicating leaner inventory and fewer tied-up dollars in the supply chain.
• Balance sheet: Current assets of $54.51 million vs current liabilities of $23.97 million in Q3 2025. Liabilities are modest and long-term liabilities are negligible (noncurrent liabilities $245k). Equity sits around $35.80 million. That is a conservative balance-sheet picture for a small CPG brand.

Bottom line on the numbers: the company generates premium gross margins for the category, is cutting inventory and (critically) achieved positive operating cash flow last reported quarter. Those metrics matter more than headline net loss for small consumer brands because they indicate improving unit economics and fewer working-capital drains.

Valuation framing - what we know and what we don’t

The dataset does not include a market capitalization number. The recent intraday/previous-day price prints show the stock trading around $1.85 on 01/09/2026 (previous day close ~ $1.85). Historically the shares traded multiples higher earlier in the prior 12-24 months. Absent a provided market cap, valuation should be framed qualitatively:

• Zevia trades at depressed absolute prices despite decent unit economics. For an investor who believes the company can stabilize margins and sustain revenue growth, the current multiple implicitly prices in a deterioration of the franchise rather than a stabilization or rebound.
• Comparables in the dataset aren't helpful (peer list contains many unrelated tickers). So the valuation case is a bottoms-up one: if Zevia converts to consistent positive operating cash flow and starts producing quarter-to-quarter revenue growth above low-double-digits, the stock should re-rate from 'distressed small-cap' to a growth-margin specialty beverage multiple.

Trade idea (actionable)

Trade direction: Long. Time horizon: Swing / short position buildup — 3 to 12 months. Risk level: Medium-high (small-cap volatility & execution risk).

Position sizing note: limit any initial entry to a small pilot position (2-4% of portfolio) and add on clear evidence of sustained improvement (next two quarterly reports showing sequential margin and operating cash flow gains).

Catalysts that would drive the trade

• Sustained sequential improvement in operating cash flow and a second consecutive quarter of positive OCF (validation of cash conversion).
• Quarterly revenue growth above ~10-15% with stable or improving gross margins (shows demand and pricing power).
• Announcements of expanded national distribution or new major retail wins that materially expand shelf presence.
• Analyst coverage re-initiation or favorable note if management demonstrates consistent execution.
• Industry tailwinds for functional / wellness beverages — consumer trends remain favorable, improving category multiples.

Risks and counterarguments

At least four meaningful risks to the thesis:

• Competition and promotional pressure: Big beverage incumbents and aggressive private-label players could force discounts, compressing either volume or gross margin.
• Execution / distribution risk: Small CPGs often fail to translate trial into repeat purchases at scale. If Zevia cannot convert retail trials into repeat velocity, revenue growth could stall.
• Profitability & dilution risk: The company has posted net losses in several quarters; if management needs to raise capital to fund growth or working capital, shareholder dilution could depress the stock.
• Illiquidity and volatility: Small-cap beverage names can gap on headlines; stop losses may be less effective in thin markets and the share price could remain range-bound for long periods.
• Sensitivity to commodity/packaging cost swings: Input cost inflation or freight disruptions could compress gross margins quickly if management cannot pass through increases.

Counterargument: The stock is cheap for a reason - repeated losses and prior execution mis-steps. That could be structural: consumer tastes shift, or distribution economics prove worse than they appear. If management cannot convert its product positioning into sustainable retail velocity, the balance sheet will not save investors from more downside.

What would change my mind

• I would upgrade conviction if subsequent quarterly reports show two consecutive quarters of positive operating income and operating cash flow materially above break-even (demonstrable unit-economics inflection).
• I would reduce conviction if gross margins deteriorate below ~40% on a sustained basis, or if inventory starts to re-accumulate indicating demand weakness.
• I would become bearish if the company files for dilutive financing or if management signals material write-downs or a pivot away from core categories.

Final thoughts

Zevia gives the profile of a recoverable CPG growth stock: differentiated product, robust gross margins (mid-to-high 40s), improving operating cash flow and a clean balance sheet with minimal long-term liabilities. The market has assigned a low price that discounts a failed turnaround rather than a stabilization. That creates an asymmetric risk-reward for a carefully sized long with a tight stop and objective targets.

This is not a buy-and-forget situation. Execution matters - sequential operating cash-flow improvement, stable margins and inventory discipline are the scoreboard to watch. Place a small pilot, monitor the next two quarters for cash-flow and margin signals, and add only on verified progress.

Disclosure: This write-up is for informational purposes and is not personalized financial advice. Position sizing, risk tolerance and tax considerations need to be evaluated by each investor.

Key filings referenced: fiscal Q3 2025 (period ending 09/30/2025, filing 11/05/2025); prior quarterly results through 2024-2025 cycle.