Celsius Holdings Profile
Celsius Holdings, Inc. operates as a fast-growing company in the functional energy drink category in the U.S. and internationally. The company engages in the development, processing, marketing, sale, and distribution of functional energy drinks to a broad range of consumers. The company provides differentiated products that offer clinically proven and innovative formulas meant to positively impact the lives of its consumers. The company’s brand has also proven to be attractive to a broad range of customers, including fitness enthusiasts.
The company’s flagship asset, CELSIUS, is marketed as a fitness drink or supplement which, with exercise, is designed to accelerate metabolism and burn body fat while providing energy. This product line comes in two versions, a ready-to-drink form and an on-the-go powder form. During 2023, the company introduced a new CELSIUS Essentials line, available in 16-ounce cans. The company’s products are offered in major retail channels across the U.S., including conventional grocery, natural, convenience, fitness, mass market, vitamin specialty and e-commerce. Additionally, the company’s products are offered in certain Canadian, European, Middle Eastern and the Asia-Pacific markets.
During January 2024, the company broadened its international expansion through the following arrangements:
An expansion of the company’s existing relationship with Pepsi to serve as its exclusive distributor in Canada, expanding the area served under the Pepsi distribution agreement established in the U.S. in 2022. Sales in Canada under this arrangement began in December 2023; and
A new relationship with Suntory Beverage & Food to serve as its exclusive sales and distribution partner in the United Kingdom of Great Britain and Northern Ireland, the Channel Islands, the Isle of Man and the Republic of Ireland. Sales under this arrangement are expected to begin in the early second half of 2024.
Products
The company seeks to combine nutritional science with mainstream beverages. The company’s innovative approach involves the use of its proprietary MetaPlus formulation. Unlike many traditional energy drinks or sodas, CELSIUS products are free from aspartame and high fructose corn syrup and are very low in sodium.
The company’s product's formulation includes good-for-you ingredients and supplements, such as green tea (EGCG), ginger (from the root), calcium, chromium, B vitamins and vitamin C. The company uses sucralose, a sugar-derived sweetener, found in Splenda, to sweeten its products, making them low-calorie and an option suitable for consumers monitoring their sugar consumption.
The company introduced its first CELSIUS functional energy drinks to the marketplace in 2005.
The company offers three functional energy drink lines:
CELSIUS Originals and Vibe: The company’s initial 12 fluid ounce product line, offered in various flavors and carbonated and non-carbonated forms. The company tailors these beverages to meet a variety of consumer tastes and preferences.
CELSIUS ESSENTIALS: Introduced in 2023, this 16 fluid ounce line is formulated with aminos.
CELSIUS On-the-Go Powder: This line features the same ingredients contained in the company’s functional energy drinks in a convenient powder form.
CELSIUS ready-to drink products are packaged in a distinctive can that uses vivid colors and abstract patterns to create a strong on-shelf impact. The cans are sold in various packaging units and are designed to provide a clean, crisp and more modern look than its competitors' products. In addition to being sugar free, the company’s original U.S. ready-to-drink product line is non-GMO, kosher and vegan certified and soy and gluten free.
Distribution
Pepsi Distribution Agreement
On August 1, 2022, the company entered into a distribution agreement with Pepsi (the Distribution Agreement) relating to the sale and distribution of certain of its beverage products in existing channels and distribution methods in the U.S., excluding certain existing customer accounts, sales channels, Puerto Rico and the U.S. Virgin Islands. Under the Distribution Agreement, the company granted Pepsi the right to sell and distribute its existing beverage products in existing channels and distribution methods, as well as the right to sell and distribute future beverage products that are added from time to time as licensed products under the Distribution Agreement in defined territories. The Distribution Agreement is a master service agreement and can be cancelled without cause by either party in the 19th year of the term (i.e., 2041), the 29th year of the term (i.e., 2051) and in each 10th year thereafter (i.e., 2061, 2071, etc.) by providing twelve months’ written notice on August 1st of the year preceding the year of termination.
Domestic
In the U.S. and Canada, the company sells CELSIUS products across many retail segments, including supermarkets, convenience stores, drug stores, nutritional stores, food service providers and mass merchants. The company also sells to health clubs, gyms, the military and e-commerce websites. In the fourth quarter of 2023, it agreed to, along with Pepsi, expand its reach to Canada and began shipments to Pepsi Canada. Pepsi is its exclusive distributor in Canada under the Distribution Agreement.
The company distributes its products domestically through direct-store delivery (DSD), distributors and direct sales to retailers.
Additionally, the company’s products are sold online through e-commerce platforms such as Amazon, Instacart, and Walmart.com.
International
The company distributes its products in various foreign regions through regional and country-specific distribution partners.
The company markets its products in the Asia-Pacific market through local distributors in Hong Kong and a license agreement with Qifeng Food Technology (Beijing) Co., Ltd. (Qifeng). The company’s partnership with Qifeng began in 2018 with local production and preliminary distribution of CELSIUS products in China. In January 2019, the company restructured its China distribution strategy, entering into two separate agreements with Qifeng: a license agreement regarding the commercialization of CELSIUS products, and an economic agreement regarding the repayment of certain marketing investments made in China.
Under the license agreement, Qifeng was granted the exclusive license rights to manufacture, market and commercialize CELSIUS brand products in China. The company has recently expanded into the United Kingdom and Ireland. These strategic moves grow the company’s global presence and increases access to the CELSIUS energy drink brand in these regions. In the United Kingdom, the company expects sales to begin in the early second half of 2024.
The company’s international expansion strategy leverages its partnership with Pepsi, capitalizing on their extensive distribution network. The company utilizes this network and plans to continue doing so as it continues to prioritize its future growth.
Research and Development
Research and development costs are charged to selling, general and administrative expenses as incurred and consist primarily of consulting fees, raw material usage and test production of beverages. The company incurred expenses of approximately $1.7 million for the year ended December 31, 2023.
Customers
The company’s consumer base primarily consists of distributors, e-commerce retailers, and various brick-and-mortar outlets, such as grocery and convenience stores, club stores, and health-focused locations such as gyms and nutrition stores. While a significant portion of the company’s products are sold through third-party distributors, it also engages in direct sales to various consumer-facing retailers. To support and incentivize the distribution, sales and marketing of its products, the company relies on and provides various financial incentives.
In 2023, sales to Pepsi constituted 59.4% of the company’s total net revenue, and receivables from Pepsi represented 69.0% of its total receivables as of December 31, 2023.
Sales and Marketing
In its sales and marketing approach, the company prioritizes differentiation, ensuring its brands and products stand out visually and distinctively from other beverages on the shelves of retailers. The company continuously reviews and refreshes its products and packaging to maintain uniqueness and appeal. In addition to maximizing product visibility in stores, the company focuses on developing brand awareness through targeted marketing initiatives, such as sporting events, print, radio, and television advertising, alongside direct sponsorships and endorsements to promote its brands. Additionally, the company’s branded vehicles are deployed at events for product sampling and enhancing consumer engagement.
Seasonality
As is typical in the functional energy drink industry, product sales are seasonal, with the highest sales volumes occurring in the second and third calendar quarters (year ended December 31, 2023), which correspond to the warmer months of the year in the company’s major markets. Conversely, the first quarter often records the company’s lowest sales figures. Despite these seasonal variations, the company has historically maintained consistent quarter-over-quarter growth. Over the course of a full year, seasonal fluctuations have had no material impact on the company’s financial results.
Competition
The company’s direct competitors in the functional energy drink market include but are not limited to Monster Beverage Corporation; Red Bull GmbH; The Coca-Cola Company; PepsiCo Inc. (Pepsi); Keurig Dr Pepper Inc.; Nestlé S.A.; BlueTriton Brands; Starbucks Corporation; and Congo Brands.
Intellectual Property Rights
The company has registered the CELSIUS and MetaPlus trademarks, among others, with the U.S. Patent and Trademark Office, as well as a number of trademarks in other countries where its products are distributed and sold.
To protect the proprietary nature of its MetaPlus formulation and product formulas, the company employs measures such as confidentiality agreements with its contract packers and ingredient suppliers. The company actively pursues legal action against unauthorized use of its trademarks and copyrights.
Government Regulation
The production, distribution and sale of the company’s products in the U.S. are subject to numerous federal, state, and local statutes and regulations, including, without limitation the Federal Food, Drug and Cosmetic Act, the Federal Trade Commission Act, and the Occupational Safety and Health Act. Additionally, various environmental statutes and regulations apply to the production, transportation, sale, safety, advertising, labeling, packaging, and ingredients of its products. This includes adhering to data privacy and personal data protections laws and regulations, such as the California Consumer Privacy Act of 2018, in applicable jurisdictions. The company is also subject to various state laws, including California's Proposition 65, which requires that a specific warning appear on any product that contains a component listed by California as having been found to cause cancer or birth defects.
History
Celsius Holdings, Inc. was founded in 2004. The company was incorporated in the state of Nevada in 2005.
