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New Age Beverages Corporation (NASDAQ:NBEV)
Q3 2019 Earnings Call
Nov 14, 2019, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen thank you for standing by and welcome to the New Age Beverage Corp. Q3 2019 Earnings Call.

[Operator Instructions] I would now like to hand the conference over to Cody Slach to proceed with today's call. Sir you may begin.

Cody Slach -- Investor Relations

Good morning and thank you for joining New Age Beverage Corporation's Third Quarter 2019 Conference Call. I'm Cody Slach with Gateway the IR counsel for New Age. I'd like to welcome you all to the call today and thank you all for joining. On today's call we will have Brent Willis Chief Executive Officer of New Age; and Greg Gould Chief Financial Officer. I'd like to remind everyone this call may contain certain forward-looking statements reflecting management's current expectations regarding future results of operations economic performance financial condition and achievements of the company. Forward-looking statements specifically those concerning future performance are subject to certain risks and uncertainties. The transcript of today's call will be available on the company's website within the Investors section at newagebev.com.

I'd now like to turn the call over to CFO Greg Gould.

Gregory A. Gould -- Chief Financial Officer

Thank you Cody. For the third quarter 2019 we achieved net revenue of $69.8 million an increase of 427% versus the prior year third quarter of $13.2 million and a sequential 5.3% increase versus our second quarter 2019 which has always historically been our largest quarter. The company continues to expand it's top line and deliver transformative growth. Each quarter now delivers substantially more than what we did previously even compared to the full year of 2018. We know that scale in this section has a huge P&L gearing benefit. And the company's scale now of around $70 million a quarter versus $700000 a quarter which we did just over three years ago is a very different framework. It is actually 100x bigger representing more than a 10000% growth in the past three years which qualifies as a big difference.

Within our divisions the New Age direct store distribution group has delivered all year long and the third quarter was no exception. In the third quarter we added the BWR licensed brands into distribution for a part of the quarter and made the most notable progress in the Illy Ready-to-Drink Coffee brand that came into the company as one of our own brands with the acquisition of BWR. Our snacks distribution including our partnership with Grupo Bimbo the world's largest baking company continues to expand and now comprises almost 30% of our DSD Group's revenue. Morinda had its best quarter of the year. In the month of September for example Japan our largest market was up 15% versus prior year. China also had its best performance all year up 5% versus the same month in the prior year but more importantly up 92% versus August on sales of RMB 54 million which equals approximately USD 7.6 million for the month. Moving to the rest of the P&L. In gross profit the company delivered $40.3 million for the quarter ending September 30 2019 versus $1.7 million in the third quarter of the prior year an increase of 2272%. As a percentage of sales this equates to a 58% gross margin versus 13% in the prior year reflective of the mix shift in the business.

Total operating expenses were $43.3 million a reduction of $3.8 million and $1.3 million in expensive -- in expenses relative versus the first and second quarters of 2019 and up versus 2018 due to the increased SG&A associated with the significant change in scale of the business. Also included in this number is the change in fair value of Morinda earnout obligation of $6.2 million which was partially offset by the $3.3 million of noncash expenses. We had a net loss of $10.7 million in the quarter which was driven mostly by a tax item that caused an extra $6 million in tax expense during the quarter. And this was a $1 million improvement versus Q2 and a $7.2 million increase versus the prior year net loss of $3.5 million in the third quarter of 2018. Adjusted EBITDA for the third quarter of 2019 was $37000 versus a loss of $2.6 million in Q3 of the prior year. Reviewing the balance sheet as of September 30 2019 we had $68.4 million in cash and $47.4 million in working capital as compared to $42.5 million in cash and $40.9 million in working capital at December 31 2018. At the end of September we had $313.7 million in total assets compared to $286.9 million at the end of 2018 an increase of 8.5%. So in summary we are pleased to see continued strong growth in the business and strengthening of our platform. We are also pleased to have met or exceeded our guidance for the third quarter in a row a trend we expect to continue now that we have significantly more visibility on the business and are more in control of the levers that drive financial performance.

And with that I'll pass the call over to Brent.

Brent David Willis -- Chief Executive Officer and Director

Thank you Greg. On today's call I'd like to share some of our progress against our strategic plan share some of the executional details behind the numbers that Greg just reviewed and help you understand some of the real insight and insights within the company. On the execution side I am so proud of all of our team worldwide. All of the near 1000 associates inside the company and the more than 300000 dedicated customers and exclusive product consultants around the world. As Greg mentioned our company has really just only at -- just over three years old. And in that time we have increased our scale and grown about 10000% more than 100x from less than $700 [sic] $700000 a quarter in revenue to now $70 million a quarter. Now first off let me tell you that is actually not that easy to do. Of all the companies in the CPG industry there's maybe 1 that has done that and that is New Age.

There may be others I just don't know who they are. The other point that is actually not that easy to do is to integrate businesses capture cost and revenue synergies build organizational capabilities and strength drive organic growth build components of competitive advantage and to do so while keeping a clean and strong balance sheet and pristine cap structure. It's not that easy and made even more challenging when you're growing 100x your scale in just over three years. So let's now dive into some of the execution insights behind this quarter's performance. In our DSD division our team especially all the merchandisers had another outstanding quarter. This team who kind of day-in day-out work the store set up displays drive our business store-by-store route-by-route individual customer-by-customer are really at the heart of the business. I personally learned the business that way both Kraft and the Coca-Cola company. And it's those folks that make some of the biggest difference for our company every day. And in the quarter within our DSD division they drove 18% organic growth. We keep adding brands and distribution breadth to the division.

And in the quarter added a number of snack brands and nonalcoholic beverages even throwing a bone to our friends at CELSIUS to put their brand into our distribution. I'm also proud of all of our team and markets around the world virtually every market area from Southeast Asia to Latin America to Eastern Europe drove double-digit and even in some cases triple-digit organic growth. I had the opportunity this quarter to participate in our first ever group meeting with our team in Budapest led by Ivan Polinski. He is doing an outstanding job there leading the Eastern European region. And in the quarter they delivered organic growth of more than 20%. Our 2 largest markets Japan and China had their best quarters of the year and are building momentum. In China for example in the month of September we had a $54 million -- or RMB 54 million a month which translates to around USD 7.6 million USD 7.7 million for the month and that was a bit more than 5% above prior year. And as Greg mentioned it was 91.6% above the prior month. So now post the Chinese government actions on the overall industry in the first part of the year we are regaining momentum. And in Japan New Age's largest market we've just continued to deliver there all year. Switching to the brand side. Olivier Sonnois joined the company in July as the leader of our North American business concurrent with the closing of the BWR acquisition. He has added tremendous value already as has I think the entire BWR organization that have now been 100% merged into New Age.

In this division we now have number one double the scale on our North American retail brands. Number two better systems and processes especially on the supply chain and customer management side. And number three brands as part of our portfolio that are globally recognized like Nestea Evian Volvic Eli ready-to-drink coffee and others. Olivier and his team are leveraging that increased scale and more relevant or at least more established brands to expand with all of our more than 100 DSD network partners across the U.S. and through the major natural channel distributors and key customers. So those are just some of the executional details around the world in our view basically moving in the right direction in each region of the world and in each division of the world and in each channel and we believe the quarter numbers show it.

The second subject we want to update investors on is progress versus our strategic initiatives. We've already talked about the core brands in North America and the team and the processes and scale and resources that we have added to accelerate these brands. We are in the right segments. And yes it takes time to build brands in traditional retail everybody knows this but they are doing it and doing it methodically and we see significant sensitivity to the upside in our 2020 business plan. The next major strategic initiative for the company is CBD. In the quarter we expanded to two new markets Hong Kong and in September Japan. This is a big deal. And so far so right on track I would say. Headline number 1 we're selling everything we can make. Headline number two we are selling it as fast as we can make it. And Headline number three is it's actually also not that easy in these international markets but it is worth it.

In Japan for example it took nine months to get through the Japanese Narcotics Board and other regulatory bodies there. But we believe we were the first major company we know off to get it approved and now we have just had approved in the last week beverages. Speaking of products I would say we are on the -- I'd say we're on the indifference curve from that product-type or product-format standpoint. We love the creams and topicals part of the business and now these are highly relevant product formats especially for millennials but we also love the impending Noni+CBD beverage launches and we love Marley beverages and we believe they all have outstanding potential. Investors and consumers are now finally starting to see Marley beverages in the United States as it rolls out nationally to both independents and key customers in states where it's allowed. At the end of last year I told all of our investors to treat CBD as an upside to the plan and to not put it in their models as I didn't believe that commercialization would be linear post the enacting of the farm bill.

It has not been. So now our partner Docklight a private Canadian company is doing this 100% on their own given New Age's position as a U.S. publicly traded company. They do all of the production all of the sales all of the marketing and all of the distribution of the Marley CBD-infused beverages in the U.S. And you won't intentionally see New Age's name anywhere on them. But let me be abundantly clear the terms of our 50-50 profit share with Docklight have not changed in the short-term in the U.S. for allowing them to use our brand and our designs we received an equivalent royalty with the same economics for both parties as initially envisioned. CBD in the U.S. however is not the strategy. We are in the process to launch in 7 to 8 other international markets that are all planned within the next 60 days. And this is New Age's strategy win internationally and gain first-mover advantage as the regulatory landscape unfolds in each market. Win internationally and gain first-mover advantage as the regulatory landscape unfolds in each market. That strategy is fundamentally different than every other player in the Canada space. And we really like where we are strategically positioned in the sector. Just in about four months in about 1.5 markets mostly by E-Commerce we have already eclipsed over $5 million in revs from our enhanced CBD line. The last strategic priority we want to touch on today is how we are evolving our business in Asia Pacific. We have already talked about our Japan growth.

What's behind it however what's driving it is really the evolution of our portfolio with the launch of Noni+Collagen the expansion of the TeMana Tahiti skin care line and now the most recent launch of enhanced CBD and enhanced hearing and enhanced cell defense all out of our Health Sciences division. Since the acquisition of the Health Science division patents Japan and Korea are the first major markets to see the conversion of those patents into commercialized products. The products and the science underpinning them have been incredibly well received by our sales force and customers and there are at least another 4 major markets slated for launch within the next 90 days. All 4 of those initiatives in Japan: CBD Health Sciences TeMana and Noni+Collagen are frankly totally new for a Japanese business that has basically seen nothing new for more than 10 years. This is what is driving the new excitement in Japan; this is attracting new independent consultants; it is attracting new younger consumers; and it is driving new growth our best growth in 10 years. China is the same and we are adopting the same portfolio expansion model there. It just takes a bit more time with all of the requirements in China including new company-type licenses product registrations testing customization and other hurdles to meet the needs of both Chinese government requirements and Chinese consumer differences versus the structure and consumers in the Japanese market.

They are different. We had great growth in China in the quarter and especially in September but honestly one month does not make a trend. We have an outstanding organization a great team there led by Kevin Ma. But we see tremendous upside there not just with the expansion of the portfolio but also with our channel expansion in E-Commerce especially with the growth of WeChat E-Commerce and Tmall from Alibaba that we think will kick off in earnest in the beginning of 2020. Look these major strategic growth drivers build on a solid base of what we think balances short-term performance delivery with doing what we have to do to build out our scale platform which is why we came here. And frankly against that scale platform we feel we are exactly on track to achieve.

So with that I'd like to short-term ask Greg to share his perspective on the upcoming quarter. Greg?

Gregory A. Gould -- Chief Financial Officer

Thanks Brent. As we close out the year we believe we will continue to build on the momentum that we have seen emerging across the world over the past few quarters. I mentioned at the outset of my comments that this was the third consecutive quarter that we have either met or exceeded guidance. As we move forward I want to make everybody aware of 2 catalysts in the fourth quarter. The first is the reality is that we still have plenty of moving parts as you might imagine with a company that is growing 10000% in the past three years. And the second caveat is the fourth quarter of atypical seasonal beverage business is on average 20% below that of what you do in the summer season. That being said we expect our fourth quarter to be in the $65 million to $70 million range as we did in Q2 and Q3 and again breakeven EBITDA on an adjusted basis as we continue to invest behind our key strategic initiatives that Brent has articulated. Closing out the year across all regions and business units we see a good cash position a good foundation for accelerated growth and the right team in place to deliver against our growth plans in the fourth quarter and in fiscal 2020. Brent back to you.

Brent David Willis -- Chief Executive Officer and Director

Thanks Greg. So things are going well operationally in the company but I'd like to close with sharing some insights from inside the company that investors never really get to see or hear about. Look long-term success given the competitive context in which New Age operates and from where we started is all about disruption. Disruption of existing revenue streams disruption of existing legacy leaders that drive those revenue streams and that disruption comes through implementation of a differentiated portfolio of brands using a differentiated brand-building approach. On the differentiated brand side all our brands have in common clean healthier uncompromising in either natural or organic points of difference.

That's differentiated. Our omnichannel route to market and brand-building approach we believe is right on trend with millennials and is also highly differentiated versus the approach of legacy leaders and we believe it's an approach -- or an approach that is significantly more profitable than just the traditional retail model. So executing our disruptive strategy is 1 key component of success going forward. But equally and maybe even more important is building our culture. We are right in the beginning of this. Our culture at New Age is one of a purpose-driven organization dedicated to inspiring and educating the planet to live healthy and operationally one that is metric-managed and performance-driven. We've done so many things in the quarter operationally and on our culture behind the scenes. We've been rolling out Oracle EBS worldwide. We've added new key leaders worldwide. We have fully integrated Morinda changed the Morinda organization name to New Age and changed to an integrated omnichannel approach organized around 3 global regional business units.

We do quarterly coaching on performance metrics quarterly global state-of-the-art -- our state of the company meetings and are building new levels of accountability throughout the company. We added almost 10000 new independent product consultants around the world in the quarter and installed our new Centurion Leader program. And we have launched our CBD topicals in 2 additional markets and expanded TeMana Tahiti launched Health Sciences products and expanded our highly successful Noni+Collagen product in key new geographies also. We added another company BWR integrated them and are now fully operational or they are now fully operational as the leaders of the New Age North American business unit. We expanded our E-Commerce business. And just after the quarter we added Julie Garlikov to our senior leadership team as the new Chief Marketing Officer. She brings depth of social digital E-Commerce capabilities as she implemented at Rodan and Fields and other major firms in addition to the overall consumer marketing discipline gained with some of the leading CPG companies in the world. We are so lucky and excited for her to join the team.

And with that I think we'll open it up to questions. Operator?

Questions and Answers:

Operator

[Operator Instructions] And our first question comes from Aaron Grey with Alliance Global. You may proceed

Aaron Thomas Grey -- Alliance Global Partners -- Analyst

First off I appreciate the guide on 4Q. Can you just dig a little bit deeper in terms of the underlying detail on the top line $65 million to $70 million. What does that embed specifically for Morinda and your trends improving for China? And then just quick housekeeper. Can you provide exactly what revenues were from Morinda in 3Q ahead of the Q coming up?

Gregory A. Gould -- Chief Financial Officer

Yes. Basically for -- well first let me start with where we came out with Morinda for the quarter. And with that Morinda did approximately $55 million. And the rest of them did $15 million for the quarter. Basically we see that to be about the same -- to be broken down about the same way going into the fourth quarter. We do see some continued strength in China. China's always talked to a call because as you know in October they had their 70th anniversary in the whole country took about a week off to celebrate that. But we think things will really jump back on pace here during the -- during November and December. And with Japan it's always a large driver but now since we've introduced our CBD products here in the very end of the third quarter we think we will continue to get very good pull-through there and things will continue to improve.

Aaron Thomas Grey -- Alliance Global Partners -- Analyst

Okay. Just so I'm understanding it correctly then. So it looks like from those September trends that kind of fell off a little bit in October what in China kind of due to taking the week off for the holiday as you mentioned. But kind of going forward how best to expect and I guess I'm talking about Morinda specifically that business relative to what we had seen when you first acquired the business about just a year ago today. Do you expect to kind of get back to that momentum that you had within China before you had these kind of regulatory hurdles that came to hit you about in the first quarter? I bet you still expect that as we look forward to 2020.

Brent David Willis -- Chief Executive Officer and Director

It's a great question Aaron it's Brent here. First off we've got the right team there so I feel very good about that. But the second thing two is just like we've done in Japan that is really reignited and driven the growth there this year we are expanding the portfolio and expanding the channels. Those things I believe over the next 12 to 18 months will really transform the business and put it on a different track. So those are 2 fundamental changes that take the business in China to a very different scale. In the short-term however the one data point we have is that China really recovered in Q3 overall and especially in the month of September. October you can't really glean anything from because it was an anomalous month given the birthday celebration. But overall like I said I think we got the right team revolving the business there. But from an expectation management standpoint and I think for 2020 we're thinking if we -- we're planning to get back to the levels that we were back in 2018.

So of our business plan for next year we have very realistic expectations not transformative growth expectations even though the potential is there given what we're doing with Tmall and Wechat E-Commerce overall and the portfolio expansion. Those things could have a great impact. But we see the return to normalcy in operating in the market. It's an important market for us even like Japan by far and away is our biggest market. But fortunately we have all of these other markets around the world that are really contributing. And if it weren't for China boy we would have hit it even more out of the park in Q3 and this year overall. But China and the impacts on the overall industry which weren't for us -- from our doing impacted us. But those things are now starting to come back and the base business is I would -- we would say normalized. But we're not here to have normalized base business we're looking to transform it and we're doing those things to transform it now.

Aaron Thomas Grey -- Alliance Global Partners -- Analyst

Okay great. And it's good to see momentum in Japan. With the CBD launch and the approval you received earlier a couple of months or a month or two ago. Can you talk about the advertising that you're able to do from what I've read I think there's election and some other competitors that have been able to do some marketing around CBD. So can you talk about number one what you have build there in terms of marketing in Japan for CBD? And then number two how many points of distribution do you plan to get to in terms of brick-and-mortar and made over year distribution strategy there outside of the Morinda distribution network?

Gregory A. Gould -- Chief Financial Officer

Yes. So in the short-term we are only focused on utilizing our network of independent product consultants. For that network is pretty awesome. It's 50000 people getting into consumers' homes every day. And if you think about CBD look one of the reasons we like this network and I'd like all of our investors to really understand this point of difference. Consumers ultimately will be able to go to the equivalent of a Walmart or a Walgreens and talk to a store associate there for 15 seconds about CBD and much a range of products. Or you can have a friend or somebody you know and somebody you trust in your home for an hour to educate you on what is a high-touch product and a high education requirement decision. So we think for CBD that this type of distribution system and this type of word-of-mouth education and type of selling is a way better way to build that particular business. And so we really like it. That doesn't mean we're not going to do traditional retail.

We are and will do traditional retail and are doing traditional retail in all product forms not just beverages in the United States with Marley but creams lotions topicals and maybe others as they become available to us. But right now we are selling it. We did what's called a limited time offering just with what we had and what we could make in Japan. And we're doing the full launch of our creams lotions and topicals. I think it's really end of November beginning of December. And as I mentioned we just got approval. In Japan it's really complicated. You got to go batch-by-batch from approval standpoint. It has to have 0% THC but we just got approval and we think we're the first ones there to be able to have nutritional supplements where beverage is something in the food supply. And so we're in production of that now. It may hit in December it will likely be very ended December beginning of January where we'll be first in with that kind of beverage product there too. And from an advertising standpoint the communication is all driven through our network. So we're not doing any other communication beyond that. But as -- because we were in this limited time offer just get it going just get it started with some of our key leaders there. But our communication plans are really ramping up for I would say Q1 which really represents the big more kind of official launch beyond what we did is what we call LTO a limited time offer within just the key leaders in Japan as a starting point.

Aaron Thomas Grey -- Alliance Global Partners -- Analyst

Okay great. And then last question then I'll jump back in the queue. I appreciate you guys mentioned getting back to EBITDA profitability for the second quarter in a row. But it looks like that was again contributed by a change in fair value on the earn-out. So kind of two questions. Number one can you confirm that that EBITDA positive of $37000 included that fair value adjustment of about $6 million? And number two how do we think about that kind of earn-out going forward? Any kind of EBITDA when you exclude that fair value?

Gregory A. Gould -- Chief Financial Officer

Yes. The EBITDA did include that $6 million. And going forward we are very focused to take the entire company on an EBITDA basis and operate very close to EBITDA breakeven. We do want to continue to invest in our brands going forward because they feel like that's going to be the best way to create shareholder value. So then we continue to focus on that. And we see that there are some things we can continue to do to improve our EBITDA moving forward. As you look at our overall operating expenses for the last couple of quarters we've been able to bring it down. And we continue to look at ways within the company to really control our expenses as we continue to try to drive the top line.

Aaron Thomas Grey -- Alliance Global Partners -- Analyst

Great, thanks. I'll jump back in the queue. Thanks.

Operator

And our next question comes from Rommel Dionisio. You may proceed

Rommel Tolentino Dionisio -- Compass Point Research -- Analyst

I wonder if you could just talk about some of the progress you made in cross-selling opportunities. I know this has been something you've worked on for quite some time. When you landed big accounts Walmart 7-Eleven last year and or maybe it was two years ago. Now I don't know just some of the progress you've made there as I know initially with some of these retails you got in there with 1 brand and how the success you've had with growing the portfolio within those key retailers?

Brent David Willis -- Chief Executive Officer and Director

I would say we're still in the early days of it. We are getting some total portfolio distribution benefits. But most of the total portfolio distribution benefits really come at the distributor level. A little bit less so at the retailer level where you get the cross-selling and total portfolio benefits. To take classic distribution which purchased -- it's a Chorus distribution house that purchased the Haralambos in Southern California for example. So they are now going to be an anchor distributor just like our own DSD distribution is for us in Colorado. Classic is now an anchor distributor for us. Our sales team Kyle and Jeff have done a superb job to build that relationship with this new distributor and they are taking the entire portfolio which is all of the historic New Age brands and all of the BWR brands because for them I mean it makes a lot of sense. It's a one-stop shop. It's one PO. It's one person to deal with not 10. And all of the brands are in the growing segments and they represent real points of difference.

So we're seeing most of the cross-selling opportunities as we really work with these it's really like 130 DSD partners across the country. We're seeing most of the synergy there. And we also see a lot of synergy with the Unified's and KeHE's because we now send probably 5 or 6 trucks to each one of their warehouses every single week full truckloads all those kinds of things versus the models that Unified can employ that really are injurious to profitability for smaller companies. So we see a huge amount of benefit there. And at the retailer level we're not seeing the benefit yet to be quite honest. I mean we're just too much in the early days with our initial brands and just getting the right shelf space transitioning from full authorization to full distribution. And we face those challenges with especially Walmart and 7-Eleven this year. Olivier and his team are doing a lot of work to -- to work with each one of the FAOCs in 7-Eleven especially Southern California to get the national authorization of Bucha for example on each one of the shelves but you got to work with the independent store owners and the independent franchisees and those kinds of things to really be able to get that out.

So it's still early days but what we're talking about here Rommel is small millions if you will in terms of the overall scheme of the company versus the revenue growth and the big millions that we're talking about in every other aspect of the company. So I hate to put it this way but what happens with Walmart or 7-Eleven or an individual accounts within North America is with the utmost of respect to these customers that I love de minimis in terms of the overall financials of the firm.

Rommel Tolentino Dionisio -- Compass Point Research -- Analyst

Very, helpful. Thank you

Operator

[Operator Instructions] And our next question comes from Mike Grondahl with Northland Securities. You may proceed

Michael John Grondahl -- Northland Capital Markets -- Analyst

I did a couple of questions digging in a little bit. BWR how much revenue did that contribute in the quarter?

Gregory A. Gould -- Chief Financial Officer

It contributed about just over $2 million.

Michael John Grondahl -- Northland Capital Markets -- Analyst

Got it. And at one point you thought on an annual basis that would be about $15 million. Is that still a reasonable number?

Gregory A. Gould -- Chief Financial Officer

I think yes they can build back up to that. I mean the first quarter there were some transitional things coming in. I think Olivier and his team have done a very good job and we are quickly having them absorb all of our brands so that we have one centralized point. And with that we should be able to bring down a lot of our costs especially dealing with some of the really large distributors such as...

Brent David Willis -- Chief Executive Officer and Director

Unified.

Gregory A. Gould -- Chief Financial Officer

Unified and KeHE. So those guys are doing a very good job but it's still very early. I mean we just closed on the deal here our way through this quarter. And I think they will continue to see really good things always one thing I'm concerned about is it's going into the fourth quarter. And historically most beverage companies have a little bit of a challenge during the fourth quarter especially once it gets sold.

Brent David Willis -- Chief Executive Officer and Director

So I'll just add to that Mike. You know more than anybody for a big reason we did the BWR acquisition was not really for the additional brands although we love those brands and we think they're fantastic. And were -- me especially I'm amazed that we've got the same licenses that the Coca-Cola company had on like Eli Coffee and Nestea. And it's just amazing that New Age now has those things. And we expect to do a better job than they did on those businesses. And we think they've got a lot of potential. But the reason we did the acquisition was to get the team and to get the organization and to get the systems and processes and the supply chain structure that they had with -- and when you're doing 5 truckload full truckloads a week with all of the right systems and can really be profitable and efficient with the natural channel distributors like Unified. And then -- but then now we've got a sales team of 20 25 people versus the sales team of 2 or 3 that we had before in North America. So it's the people it's the processes it's the systems and it's the incremental scale that we have that is really the right foundation from which to build. So we love what they're doing. And as Greg mentioned first quarter of integrating. But so far so good. And as you know in the sales cycle in North America. We won't know for a couple of months of how much Kroger nationally is going to take Walmart and Costco and all these major customers CBS Walgreens etc. We don't know what they're going to take in. We won't know for another month or two maybe even 3 in terms of the April-May resets that happen with all of these retailers. But we've made all the presentations to all the major key accounts. And within there we're really strengthening as I mentioned with all of the 130 DSD partners we have around the country that gets all of the independents. So I love what they're doing. But I think we should be patient in North America. But again as part of the overall revenue as you see as part of the company. I mean this really is a global company with exposure to growth in 60 countries around the world and lots of growth drivers. This is a long-term profitable sustainable growth driver but by far and away not the biggest growth driver of the firm.

Michael John Grondahl -- Northland Capital Markets -- Analyst

Got it. And then starting CBD in Hong Kong and in Japan it sounds like in September. What were CBD revenues in the quarter just so we can kind of begin to track that going forward?

Brent David Willis -- Chief Executive Officer and Director

About $5.1 million $5.2 million since launch. So that's a little bit above our expectation and that's for the enhanced brand overall. There's a little bit of Health Sciences products that we launched within the -- at the very end of the quarter in Japan and boy the market is really taking off on those in Japan too where we've got real differentiated products there too. So we look at the enhanced brand overall which is both CBD and some of the Health Sciences stuff. But $5 million is -- it's not a huge part of the business but it's still $5 million. So in really 1.5 markets in just a couple of months. So it's a good demarcation point. And given that the whole system is excited about what we have. And we think we've got a superior product in terms of safety trust for consumers and efficacy on the CBD side. So it really works. I use our CBD products every day. Our board members use it every day. And we just think it's fantastic and consumers really resonate around it.

Michael John Grondahl -- Northland Capital Markets -- Analyst

And if some of that $5 million E-Commerce-driven did you say in your prepared remarks?

Brent David Willis -- Chief Executive Officer and Director

It's mostly all E-Commerce subscriber sales. So we haven't launched yet in traditional retail in the quarter. And -- but a lot of it is subscriber and E-Commerce sales. And then some of the sales is in Japan through our 50000 -- an initial limited time offer sales through our network of 50000 independent product consultants. So it's a combination of both of those. But E-Commerce is going to be especially for that kind of product given the ease of shipping and the profitability of it is going to be a very big impact for us going forward as part of our 2020 plan.

Michael John Grondahl -- Northland Capital Markets -- Analyst

Got it. And then is that revenue related to CBD coming through the Morinda line?

Brent David Willis -- Chief Executive Officer and Director

It does all come through?

Gregory A. Gould -- Chief Financial Officer

Yes

Brent David Willis -- Chief Executive Officer and Director

And Mike to that question on Morinda. We really manage the business now on a region-by-region basis. So I think our shareholders know that we -- Deloitte became our auditors this quarter. They're outstanding. They're best in the world. So we have a big upgrade with Deloitte. We've got a big upgrade on all of our legal teams with Faegre Baker Daniels and Baker McKenzie. Big upgrades on insurance with Marshall. So these are all behind the scenes of getting to a very big scale company. And you need the right partners behind you. We think we now really have them on the auditing side on the finance side on the SOX side on the legal side on every aspect of the company that just kind of goes unnoticed.

And with Oracle EBS underpinning all of our visibility on the system too. So lots of things happening behind the scenes. It just makes us a quality company going forward and gives us the right foundation to really scale this business to where we're intending to get. And it's accelerating. We had a great quarter but we're not here frankly for quarter-to-quarter performance. We're here to crush it for the long-term. And long-term is really a couple of years from now. So we expect to keep delivering quarter-to-quarter but really we're on track to get to where we want to get.

Michael John Grondahl -- Northland Capital Markets -- Analyst

Got it. And then just last question. China grew 5% September month-over-month but just so we can understand a little bit better. What did it do quarter-over-quarter from last year?

Brent David Willis -- Chief Executive Officer and Director

It was down still a little bit quarter-over-quarter. It did start to come back more in line but still a lot of the restrictions were in place during July...

Gregory A. Gould -- Chief Financial Officer

And August.

Brent David Willis -- Chief Executive Officer and Director

Yes. And August as well. So basically with that being removed we see them getting back on track. But with these...

Gregory A. Gould -- Chief Financial Officer

It may still take some time.

Brent David Willis -- Chief Executive Officer and Director

And that's why I said one month doesn't make a trend. But like I said we've got 100 110 115 people across 10 different cities in China. A great core operation in Shanghai manufacturing in the West and Chongqing and a very dedicated team. But at the same time we want to evolve the portfolio evolve the channels especially Alibaba's Tmall and Wechat E-Commerce those kinds of things. But it's a good base of the business but we're not here to manage a base of a business we're here to really expand it. But 1 good month but for the quarter it was really our first unencumbered month that we were able to drive the business and they drew the first month above prior year all year long. So it was a good start in September especially good versus the previous month. And you just think we're at $7.6 million $7.7 million that means annually when you just continue that trend. It's right on track to where we have been historically.

Operator

Ladies and gentlemen this concludes our Q&A portion of today's call. I would now like to turn the call to Brent Willis CEO. Sir you may proceed.

Brent David Willis -- Chief Executive Officer and Director

Yes. Thank you operator and thanks to all of our investors. We really believe in what we're doing. We really believe in the progress we've made. We're very pleased with our best quarter ever. And we're balancing delivering in the short-term each quarter. There's a little bit of variability in unknowns in Q4 which is why we've guided to where we've guided for Q4 but 2020 is really shaping up nicely not just in terms of the business plans not just in terms of the growth drivers but in terms of the team and the systems and the organizational capabilities underpinning that that -- and those are really the key things that deliver superior sustainable profitable growth over time. With that thank you very much and I hope everybody has a great rest of the day and a good weekend coming up. Thanks everybody.

Gregory A. Gould -- Chief Financial Officer

Bye.

Operator

[Operator Closing Remarks]

Duration: 53 minutes

Call participants:

Cody Slach -- Investor Relations

Gregory A. Gould -- Chief Financial Officer

Brent David Willis -- Chief Executive Officer and Director

Aaron Thomas Grey -- Alliance Global Partners -- Analyst

Rommel Tolentino Dionisio -- Compass Point Research -- Analyst

Michael John Grondahl -- Northland Capital Markets -- Analyst

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