Celsius is luring consumers that don’t want ‘grandfather’s energy drink,’ CEO says

As the reaches of the pandemic infiltrated the CPG space in 2020, John Fieldly, CEO of Celsius Holdings, watched convenience stores, where the energy drink company was preparing for more shelf space, delay their spring product resets.

Supply chain logistics were deeply hampered. The fitness channel, a key avenue for sales, was largely shuttered, and gatherings such as tennis tournaments or marathons where people used to sample the product, were canceled. Fieldly quickly convened a series of task forces to help Celsius navigate through COVID-19.

But instead of floundering, the 16-year-old Celsius thrived.

The Florida-based beverage maker soon launched “Sweat with Celsius,” online classes on the company’s Instagram page that allowed it to reach many of its core clients. It partnered with Instacart, where Celsius was the lead sponsor for its online energy drink aisle, and worked with other retailers like Food Lion and Amazon to promote its products on their e-commerce platforms.  

Celsius also expanded its sales and marketing team to support the addition of regional direct-store delivery distribution partners to its network. That helped the company establish a national footprint in the fourth quarter for the first time in the company’s history. 

The pivot paid off. Last year was the best in the company’s history, with sales soaring 74% to $130.7 million. Celsius is on track to top that in 2021, with revenue of $115 million through June, an increase of 98% from $58 million during the same period a year earlier. To keep up with its torrid pace of growth, Celsius has doubled its staff, hiring executives from key competitors including Rockstar and Monster, and tripled its sales force.

“We’re just scratching the surface with Celsius,” said Fieldly. “With a 2% share in the category, [we’re] just seeing massive opportunities that lie ahead.”

The U.S. energy drink sector is one of the strongest performers in the nonalcoholic space. Retail sales of energy drinks totaled $10.43 billion in 2015 and are projected to nearly double to $19.15 billion in 2024, according to Mintel. The category rose 9.2% in 2020 alone, with Celsius a big contributor to the increase. 

The company, which was founded in 2005, has its products carried on Amazon and in more than 100,000 retail locations, including Target, Walmart, CVS and 7-Eleven, up 20,000 stores from the beginning of this year. The brick-and-mortar expansion, and thriving business online, was especially valuable during the pandemic when sales to gyms and fitness centers declined. These exercise channels have since rebounded, climbing more than 100% in the second quarter.

Anthony Campagna, director of research at ISS ESG, said the company’s “meteoric growth” is largely the result of improving fundamentals, including sales and profitability. Celsius’ stock has soared more than 300% in the last year. Campagna said management has “clearly positioned the product correctly to capture so much market share so quickly.” 

Fitness-oriented beverages are viewed as another way to expand the energy drink category. As consumers move away from drinks loaded with sugar and ingredients on the label they don’t recognize — a trend that has only accelerated during the pandemic — companies such as Celsius offering better-for-you products are among the biggest beneficiaries. 

Celsius, Monster Energy’s Reign and PepsiCo’s Rockstar are some of the brands adding more functional attributions, incorporating thermogenics into their drinks to increase a person’s metabolism to burn more fat and calories when they exercise. Rockstar also recently introduced Rockstar Unplugged, a functional beverage line that contains hemp seeds as a way to encourage relaxation and improve mood. 

Roughly half of U.S. consumers believe a healthy lifestyle has become more important over the past year, according to a 2021 AlixPartners Health and Wellness survey.

John Fieldly, CEO of Celsius Holdings

Permission granted by Celsius Holdings

 

This pandemic has left its mark on eating and drinking habits, according to the International Food Information Council, with one in three consumers saying they ate healthier in 2020. Beneo, a supplier of functional ingredients, estimated nearly 75% of consumers globally said they plan to eat and drink healthier as a result of COVID-19.

Evercore data provided by Celsius shows the company is not only attracting new users to the category but converting energy drinkers consuming other offerings to its own brand. At the same time, existing Celsius users are enjoying the beverage more often. The company also is finding its beverage is appealing more frequently to younger drinkers aged 18 to 24, increasing the brand’s appeal to retailers.

Together, these consumer categories have increased the company’s market share to 2% in 2021, according to Nielsen data provided by the company. Just two years ago, it was 0.2%.

“What we’re seeing is new consumers that are coming to the category don’t want their grandfather’s energy drink. They don’t want Red Bull. They don’t want Monster with all the sugars,” said Fieldly. “These brands that are more traditional energy are just not on trend today and not what the consumer wants, and it’s being reflected in the data.”

Celsius also is dabbling in protein bars, which Fieldly said is a natural pairing with its energy drinks. So far, the bars are only for sale on Amazon, but the hope is they will eventually make their way into retail stores. Despite the promise of food, Fieldly is careful not to divert his focus from where the real growth is: its core energy drink business.

“We do have something special here in Celsius and it’s appealing to a much broader audience than it has historically,” he said. “The opportunity we have … is massive.”

Source link