PepsiCo acquires stake in energy drink maker Celsius for $550 million

Energy Drinks Celsius

Credit: Celsius Holdings

On Monday, PepsiCo announced a $550 million investment in energy drink maker Celsius Holdings in a long-term distribution deal with the smaller company.

Shares of Celsius rose 8% in morning trading on the news, pushing its market value to $6.7 billion.

Celsius is looking to gain more shelf space from existing retailers and expand more with independent stores such as gas stations. Pepsi will help with distribution starting Monday.

Pepsi’s investment in Celsius represents a minority stake in the company of approximately 8.5%. The food and beverage giant will also appoint a director to Celsius’ board of directors.

Celsius, founded in 2005, has reported a surge in energy drink sales during the pandemic. In the first quarter, the company’s US revenue rose 217% to $123.5 million.

The company positions its drinks as “healthy” energy drinks aimed at young consumers who lead an active lifestyle and play sports. Celsius drinks contain ingredients such as ginger and green tea and do not contain artificial preservatives or sugar. The company also claims that the drinks are thermogenic, meaning that drinking them can help boost your metabolism and burn calories.

For Pepsi, the deal helps cement ties to energy drinks. The category is one of the fastest growing beverage segments outside of alcohol, and Pepsi has doubled its energy consumption in recent years as consumption of carbonated drinks falls. In early 2020, it bought energy drink maker Rockstar for $3.85 billion in an effort to revitalize its sales. Celsius recently overtook this brand to become the fourth most popular energy drink in the US.

Pepsi had previously bet on another fast-growing upstart, Vital Pharmaceuticals’ Bang Energy, with an exclusive distribution deal. But the relationship quickly soured, leading to a legal battle that ended in favor of Pepsi. In June, the two companies parted ways earlier than expected. The breakup fueled speculation that Pepsi would be looking to acquire Monster Beverage or Celsius to increase its market share in the energy drink category.

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