Key Points:
- PepsiCo is increasing its ownership stake in Celsius Holdings as part of a $585 million deal to strengthen its presence in the energy drink category.
- PepsiCo will acquire convertible preferred stock in Celsius, raising its ownership stake to 11% from the initial 8.5% it acquired in 2022 for $550 million.
- As part of the deal, PepsiCo will integrate Alani Nu, Celsius’ energy drink brand, into its distribution system in the U.S. and Canada, while Celsius will acquire the Rockstar Energy drink brand from PepsiCo in the same regions.
Insights:
With the energy drink market worth $23 billion and still growing, the deal expands Celsius’ presence in the category and positions it as a leading player within PepsiCo’s portfolio, according to Celsius CEO John Fieldly.
Fieldly mentioned that the deal will allow Celsius to have more than a 20% share in the energy drinks segment, catering to a wider range of customers with a portfolio approach.
By leveraging PepsiCo’s distribution system, Celsius aims to enhance efficiency, cut costs, and extend the reach of Alani Nu, which was recently acquired for $1.8 billion.
In addition, the acquisition of the Rockstar brand will diversify Celsius’ portfolio, attracting consumers who prefer traditional energy drink flavors, complementing its existing brands catering to health-conscious consumers.
PepsiCo CEO Ram Krishnan described the deal as a win-win situation, leveraging each company’s strengths in brand-building and operational excellence.
PepsiCo’s increased stake in Celsius follows its $3.85 billion acquisition of Rockstar in 2020 and subsequent investment in Celsius, aligning with its focus on the energy drinks market.
The expanded partnership is expected to provide a strategic advantage for both companies, allowing PepsiCo to concentrate on other beverage brands while Celsius benefits from PepsiCo’s distribution network and expertise.
The restructured deal streamlines the partnership, clarifying the roles of each company and consolidating all energy brands under one roof for better coordination and growth opportunities.