On the first day of August, PepsiCo announced a new partnership with Celsius Holdings. The investment announcement mentions a long-term distribution deal to the tune of $550 million.
This move certainly makes sense as energy drinks are among the fastest-growing products in the non-alcoholic beverages sector. As a matter of fact, in the first quarter of 2022, alone, US revenue for Celsius skyrocketed 217 percent, to $123.5 million.
This is particularly impressive since the company has only been around since 2005. Still more impressive, perhaps, since Celsius has chosen to target a specific consumer base. Selling both carbonated and non-carbonated beverages, Celsisus has focused on those consumers who are not only younger but also more health-conscious and active.
With growth like that it also makes sense that Celsius would want to look at expanding their shelf space at places they already occupy and also expand into more outlets. As Celsius CEO John Fieldy explains, “We believe the opportunity to partner with a global best-in-class distributor provides Celsius with significant near-term additional shelf space in both existing retailers as well as new expansion within the independent retailers that represent a significant portion of the US convenience and gas channel where approximately 70 percent of energy drinks are sold.”
The good news for Celsius (and its investor base) is that Pepsi’s investment will represent only a minority stake of about 8.5 percent. Now, this does include the opportunity for the soft drink giant to nominate a director to serve on the board at Celsius.
Fieldy goes on to say, “In addition, this partnership will drive efficiencies allowing our teams to consolidate sales, marketing, and distribution efforts with associated cost benefits, which we expect to recognize once the initial transition is completed.”
