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August 1, 2022

PepsiCo buys stake in energy-drinks firm Celsius Holdings

Rockstar energy drinks owner PepsiCo will become the “preferred distribution partner” for Celsius worldwide.

By Dean Best

PepsiCo is to acquire a stake in US energy-drinks maker Celsius Holdings.

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The US drinks behemoth, which snapped up energy-drinks brand Rockstar in 2020, has struck a deal to buy 8.5% in Celsius.

In a joint statement issued today (1 August), the companies said PepsiCo will make a “net cash investment” worth US$550m for convertible preferred stock in the Florida-based business.

Alongside news of the investment, they announced a “long-term, strategic distribution arrangement”. Initially, PepsiCo will take on the US distribution of Celsius’ products. The Pepsi Max maker is to become “the preferred distribution partner globally for Celsius”.

“The Celsius brand’s growing momentum coupled with the strength of PepsiCo’s portfolio and go-to-market capabilities create a combination we believe will be very compelling and valuable to retailers and consumers,” Kirk Tanner, the CEO of PepsiCo’s beverage business in North America, said.

As part of the deal, PepsiCo will nominate a director to sit on the Celsius board.

John Fieldly, Celsius’ president, chairman and CEO, said: “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% of energy drinks are sold. It also provides a strategic partnership that is expected to accelerate growth for both companies globally.”

He added: “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 recognise once the initial transition is completed.”

Celsius Holdings EBITDA on the rise

In 2021, Celsius generated revenue of $104.3m, almost treble the $35.7m it booked in 2020. Domestic revenue stood at $95.9m. The company’s net income reached $3.9m in 2021, down from $8.5m a year earlier.

While income from operations was $7.9m in 2020, a year later that metric swung to a $4.1m loss, as the cost of sales, selling and marketing, as well as general and administrative costs, rose.

Celsius provided an EBITDA figure of $33.6m for 2021, more than double the $16m reported for 2020.

The deal with PepsiCo saw shares priced at $75 per share, or approximately 7.33 million shares, which equates to an estimated stake in Celsius of 8.5% “on an as-converted basis”. The preferred shares are entitled to a 5% annual dividend.

PepsiCo’s deal with Celsius comes a matter of weeks after the end of the a deal that had seen the US giant handle the distribution of energy-drink brand Bang Energy.

Why M&A moves suggest a healthy future for soft drinks

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Understand the impact of decreasing sugar consumption on the F&B market

Growing consumer concern regarding health and wellbeing has increased the focus on reducing sugar consumption. This has driven food and beverage manufacturers, alongside governments, to take measures to meet this challenge. In addition, the pandemic heightened the focus on self-care, including implementing healthy eating to support the immune system. Now more than ever, consumers are paying attention to the amount of sugar and calories in the products they purchase. Access GlobalData’s new whitepaper, The Sugar Reduction Challenge – Past, Present and Future Outlooks within Beverages, to better understand the recent trends in sugar demand, how manufacturers and governments have responded to the challenge, and what solutions are available to the industry. The white paper covers:
  • The key factors behind the recent trends in sugar consumption
  • What is driving consumer choices when shopping for food and beverages?
  • How companies and governments are stepping up their efforts to meet consumers’ expectations
  • The outlook for sugar demand
  • Which ingredients stand to benefit from these future developments?
Enter your details here to receive the free whitepaper.
by GlobalData
Enter your details here to receive your free Whitepaper.

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