Dive Brief:
- PepsiCo is increasing its stake in Celsius Holdings as part of a $585 million deal that deepens the beverage giant’s presence in the popular energy drink category.
- PepsiCo is acquiring convertible preferred stock in Celsius, which will increase its ownership stake in the Florida-based company to 11%. PepsiCo first invested in Celsius in 2022, paying $550 million for an 8.5% stake.
- As part of the latest deal, PepsiCo will incorporate Alani Nu, Celsius’ recently acquired energy drink brand, into its distribution system in the U.S. and Canada. In addition, Celsius will acquire the Rockstar Energy drink brand from PepsiCo in the U.S. and Canada.
Dive Insight:
With growth in the $23 billion energy drink space showing no signs of slowing down, the transaction broadens Celsius' presence in the category and positions it as "the energy captain" within PepsiCo, Celsius CEO John Fieldly told Food Dive.
“This [deal] allows us to go to market with a portfolio approach to serve more customers,” Fieldly said, noting Celsius will now have more than a 20% share in the energy drinks segment.
While Celsius has seen strong early results from its recent $1.8 billion purchase of Alani Nu, the brand currently depends on a large network of independent distributors. By using PepsiCo’s distribution system, Celsius will increase efficiency, save money and further boost the reach of Alani Nu.
Celsius also said the addition of the male-focused Rockstar brand will further broaden its portfolio by attracting consumers who prefer classic energy drink flavors and formats. Currently, its namesake brand caters to consumers who value a healthy lifestyle, while Alani Nu goes primarily after female energy drinkers.
Fieldly estimated that half of the growth in the category is coming from traditional energy drink offerings like Rockstar.
Ram Krishnan, CEO of PepsiCo Beverages U.S., said in an interview that the deal is a "win-win" for both companies and taps into their respective strengths.
"They know how to build brands in an energy category,” Krishnan said. “Obviously, we take care of the operational and the distribution side of it.”
PepsiCo doubled down on energy drinks in a big way when it doled out $3.85 billion in 2020 for Rockstar. Just three years later, the company invested in and signed on as a distribution partner with Celsius, giving it a stake in the better-for-you drink manufacturer.
The expanded partnership announced Friday will not only give PepsiCo a bigger stake in Celsius but also provide its Rockstar brand with a home where it can thrive under a company that has a proven track record of innovating and growing energy drink brands.
PepsiCo continues to remain a big player in U.S. energy, but now does so through its Celsius stake. This transaction allows PepsiCo to focus on its other beverage brands where it has more expertise and opportunities for growth, including the recently acquired Poppi brand and the upcoming launch of Pepsi Prebiotic Cola.
“We wanted to make sure we can be focused and play with the intent to win in those spaces, versus just play,” Krishnan said. “This creates focused attention for both parties.”
The restructured deal also eliminates some of the awkwardness where Celsius and PepsiCo were partners when it came to distribution but had competing products on the market with Celsius and Rockstar, Krishnan added.
“What we wanted to do was … consolidate all of the energy brands into one place, and then have a clear role of what the Celsius company is going to do, and what PepsiCo is going to do,” he said.
