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PepsiCo boosts stake in Celsius with $585 million deal

Celsius energy drinks at a store. MUST CREDIT: David Paul Morris/Bloomberg (David Paul Morris/Bloomberg)
By Matthew Monks and Crystal Tse Bloomberg

PepsiCo Inc. is increasing its stake in Celsius Holdings Inc. in a $585 million deal that will boost distribution of some of the energy-drink maker’s popular beverages.

PepsiCo is buying convertible preferred stock in Celsius that will boost its ownership to 11%, according to an announcement Friday, confirming a Bloomberg News report. As part of the transaction, Celsius will acquire PepsiCo’s Rockstar Energy brand in the U.S. and Canada.

Celsius’ recently acquired female-focused energy drink Alani Nu will move to the PepsiCo distribution in those two countries as well in a bid to accelerate its growth by increasing retail availability. The moves mean Celsius will be the strategic energy lead for PepsiCo in the U.S., managing the Celsius, Alani Nu and Rockstar Energy brands, while PepsiCo will lead distribution for the Celsius portfolio in that market.

“Celsius Holdings now becomes the strategic energy drink captain for Pepsi in the US,” Celsius Chief Executive Officer John Fieldly said in an interview.

Putting the fast-growing Alani Nu on PepsiCo’s distribution system means Celsius will no longer have to use 250 independent distributors, which should save money, improve efficiency and extend the brand’s reach, Celsius Chief Executive Officer John Fieldly said.

Adding Rockstar Brands to its portfolio rounds out its offerings to cover the entire swathe of the energy drinks market, he added.

“Celsius is going after healthy, better for you lifestyles. Alani Nu has a female-focused energy drink strategy. Rockstar is traditional energy,” he said. “This will now allow us to put the fastest cars on the track, as they say.”

PepsiCo initially paid $550 million in 2022 for an 8.5% interest in Celsius through a preferred stock deal. Under the latest agreement, it’s extended the conversion period for that initial holding to match the new investment and will get the right to nominate another director to Celsius’ board.

PepsiCo will continue to own the Rockstar Energy brand internationally.

Analysts and investors have speculated that the PepsiCo stake could be the precursor to a full takeover of Celsius. While Fieldly declined to address that speculation, he said there are precedents for these types of agreements in the beverage industry.

“This is an established model in the industry and it’s a natural step in the evolution of our relationship with PepsiCo that will allow us to better manage the energy drink category,” he said.

Founded in 2004, Celsius has grown swiftly thanks to the popularity of its vitamin-infused drinks that help burn calories. Its shares jumped earlier this month when second-quarter sales exceeded expectations, thanks to the addition of Alani Nu.

Celsius shares were little changed on Thursday, closing at $59.69 for a market value of about $15.4 billion.

PepsiCo’s portfolio of sports-related beverages include Gatorade, and CytoSport. With a range of other products like breakfast cereals and fruit juices, the company has been working to adapt to a trend toward healthier, less processed foods.

“Energy is an important growth category, and we believe this move with our partner Celsius creates a stronger multi-brand energy portfolio,” Ram Krishnan, CEO PepsiCo beverages US, said in the statement.