Energy drink consumption has long been driven by younger male consumers, so, not surprisingly, companies like Monster Beverage (MNST 0.19%) have marketed mainly to this demographic. However, Celsius Holdings (CELH +2.20%) has also been able to draw in female consumers through its marketing efforts, offering flavors such as Peach Vibe and Watermelon and a formula designed to boost the human body's metabolism. As a result, the company's customers are evenly split between males and females.
Why should this matter to investors? Because Celsius has been able to drive a whole new category of consumers to its energy drinks, which, in turn, is driving market share gains and exceptional revenue growth.
Let's check out why Celsius looks set to energize your portfolio.
NASDAQ: CELH
Key Data Points
A transformative deal with PepsiCo
Celsius' soaring popularity led the company to strike a distribution deal with PepsiCo (PEP 0.56%) in 2022, in which the soda and snack juggernaut also took an 8.5% stake in the energy drink maker. This was a transformative deal for Celsius, as PepsiCo took over its distribution in the U.S., helping to put Celsius' products into more stores.
While energy drinks are sold through grocery stores and mass merchant retailers, the convenience store channel is the biggest outlet for these products. Convenience stores tend to be more regional or local in nature, and with over 150,000 convenience stores in the U.S., getting into all these stores isn't easy. However, with PepsiCo having a huge presence in the channel with its soda and snack offerings, it has been able to get Celsius into most of these stores.
This is important because it puts Celsius energy drinks in front of consumers. Energy drinks are often spur-of-the-moment purchases, so if a consumer goes into a convenience store and doesn't find Celsius, there is a high likelihood they'll buy something else instead.
In the beverage industry, distribution is often measured by the percentage of all commodity volumes (ACV). This metric gives a sense of how well a product is being distributed in each particular market. The calculation is weighted by a retailer's sales, so a store selling $1 million a year in energy drinks is counted much more heavily than a store with only $1,000 in annual energy drink sales. At the end of 2023, Celsius' U.S. ACV was 98%, up from 44% in the convenience store channel at the end of 2021. This means that nearly every store that sells energy drinks now also carries Celsius.
In addition to helping Celsius get into more stores, the combination of a popular product and PepsiCo's distribution also allows the company to get additional cooler space as it introduces new products and flavors. The more products on the shelves, the more energy drinks the company can sell.
Image source: Getty Images.
Another big opportunity with international expansion
Given the company's success in the U.S., it is now starting to enter international markets as well. In January, it expanded its deal with PepsiCo for distribution into Canada. Meanwhile, it recently selected Suntory Beverage to be its distribution partner in the U.K., Ireland, and Northern Ireland, and Suntory Oceania to be its distribution partner in Australia and New Zealand.
In 2023, nearly 96% of Celsius' revenue came from North America. By comparison, 62% of Monster's 2023 revenue came from the U.S. This demonstrates the long runway of international growth that the company could have ahead of it.
Exceptional growth ahead
Celsius' stock isn't necessarily cheap, trading at over 84 times forward P/E and a nearly 2 times PEG ratio. It does face competition from established players like Monster and Red Bull, along with upstarts like the female-focused Alani NU. So, there are risks.
CELH PE Ratio (Forward) data by YCharts
However, while Celsius saw its revenue more than double last year to $1.3 billion, that is still small compared to the $7.1 billion in revenue that Monster generated in 2023.
With shelf space gains, new product and flavor introductions, and international expansion ahead, Celsius has a long growth runway. As such, the stock could be a long-term winner and help energize your portfolio.
