Shares of Celsius Holdings (CELH 5.01%) jumped out of the gate on Monday, surging as much as 18.6%. As of 11:15 a.m. ET, the stock was still up 16.2%.
The catalyst that sent the maker of fitness and energy drinks higher was a major investment and strategic partnership with PepsiCo (PEP 0.24%).
Celsius and Pepsi announced a strategic distribution agreement in a press release on Monday. As part of the partnership, Celsius will transition its existing U.S. distribution to Pepsi, which will become its preferred global distribution partner.
Additionally, the consumer staples giant will invest $550 million in Celsius, paying $75 per share for 7.33 million shares of convertible preferred stock, which will represent a roughly 8.5% ownership in the company. The preferred shares will pay a 5% annual dividend.
The agreement is effective immediately and provides "Celsius with significant near-term additional shelf space in both existing retailers as well as new expansion within the independent retailers that represent a significant portion of the U.S. convenience and gas channel where approximately 70% of energy drinks are sold," said Celsius president and CEO John Fieldly.
The partnership with Pepsi is expected to drive additional efficiencies as Celsius consolidates some of it sales, marketing, and distribution efforts.
The tie-up with Pepsi will likely help Celsius take its growth to the next level. Last year, Celsius generated revenue of $314 million, up 140% year over year, after delivering 74% growth in 2020. Its robust growth continued in the first quarter of 2022, with revenue up 167% year over year, while Celsius also swung to a profit.
Even as many stocks have been dragged lower by the recent bear market, Celsius has bucked that trend, up 19% so far this year through the market close on Friday.
Given its impressive growth thus far, this partnership makes Celsius an even more compelling opportunity.