Shares of Celsius (CELH +6.01%), the third-best-selling energy drink brand in the United States, have plummeted 16% in the past week as of 1:45 p.m. ET Thursday, according to data provided by S&P Global Market Intelligence.
Presenting at the Barclays Global Consumer Conference on Wednesday, Celsius admitted that orders from PepsiCo (its largest distributor) would be down by $100 million to $120 million in the third quarter compared to the same period last year. With sales to PepsiCo accounting for 59% of the company's revenue, the market remained worried over Celsius' slowing growth rates, leading to a stock price drop of 67% from its 2024 highs.
NASDAQ: CELH
Key Data Points
Celsius growth prospects: tired or wired?
In the two years before the company's partnership with PepsiCo was finalized in August 2022, Celsius delivered average sales growth of over 100%. Then PepsiCo took over as Celsius's distributor and loaded up on inventory throughout the first year of their partnership to ensure that it could meet consumers' demands.
However, Celsius's blistering sales growth rate had decelerated to 23% as of the last quarter. Amid this slowdown, PepsiCo had to rebalance its inventory, leading to the lower orders mentioned at the conference.
As alarming as PepsiCo's need to recalibrate its inventory seems, the Celsius brand itself continues to look resilient. According to data from Circana, the company's actual sales at stores (not to PepsiCo) have grown by 10% in Q3. This was 10 times the energy drink segment's overall growth rate, boosting Celsius' market share by 1 percentage point over the last year.
Beyond this resilience, Celsius plans to expand into Canada, Australia, New Zealand, the U.K., Ireland, and France. Should Celsius succeed in gaining a foothold in these new markets, its reasonable valuation of 32 times earnings could quickly be outgrown.
