Celsius Stock Is Spiking After PepsiCo Increases Stake

PepsiCo now has an 11% ownership stake in the energy-drink maker. (David Paul Morris/Bloomberg)

PepsiCo is increasing its stake in energy-drink maker Celsius Holdings as part of an agreement to expand their strategic partnership. Celsius stock jumped on the news.

PepsiCo is Celsius’ major distributor in the U.S. market. In the Friday announcement, the soda and snack giant bought $585 million in newly issued convertible 5% preferred Celsius stock, giving it an 11% ownership stake in the company. PepsiCo will also nominate an additional director for Celsius’ board, further aligning the two companies strategically for the long-term.

As part of the deal, Celsius has acquired PepsiCo’s Rockstar Energy brand in the U.S. and Canada. Celsius’ newly acquired brand Alani Nu will also move into the PepsiCo distribution system in the U.S. and Canada. This could help the brand increase its retail availability, including in restaurants and other growth channels.

Celsius stock jumped 4.7% in Friday trading, pushing the year to date gain to 130%. Shares of PepsiCo were up narrowly.

PepsiCo first invested in Celsius in 2022 in a $550 million deal that brought Celsius’ drinks into the company’s sprawling distribution network. The agreement reached Friday will expand that collaboration and make Celsius the PepsiCo “strategic energy lead” in the U.S., the companies said.

“Together, we will reach more people, in more places, more often, with a total energy portfolio that offers options for every consumer and creates greater value for all our stakeholders,” said Celsius CEO John Fieldly.

Celsius’ offering of healthier, sugar-free energy drinks and its successful social media strategy targeting gym-goers have helped the brand quickly take market share from major rivals like Red Bull and Monster Beverage.

The stock rallied in the first half of 2024 on the back of strong growth, but started tumbling in the second half as PepsiCo reduced its orders to optimize inventory levels, which negatively impacted Celsius’ financial results.

But Pepsi’s move didn’t affect Celsius’ sales at the retail level, as consumers continue to demand healthier functional beverages. Celsius acquired co-packer Big Beverages as well as female-focused energy-drink brand Alani Nu.

Those strategic moves have paid off. In the latest quarter ended in June, Alani Nu’s retail sales surged 129% year over year to $301.2 million. That marks one of the fastest accelerations in the category and underscores the brand’s resonance with younger, more diverse consumers.

Revenue for the namesake Celsius energy drinks also increased 9% from a year ago in the latest quarter—after posting a year-over-year decline for three quarters in a row. Despite overall consumer softness, Celsius said its brands have outpaced competitors in dollar and volume sales gains.

The stock has staged a comeback since February amid relief for some of investors’ concerns.

Celsius was a Barron’s stock pick last September, when shares were trading at $32. We argued that the jitters were overblown—the stock has nearly doubled since then.

Write to Nate Wolf at nate.wolf@barrons.com