PepsiCo Inc. is deepening its investment in Celsius Holdings Inc. with a $585 million transaction designed to expand the distribution and strategic reach of the fast-growing energy drink company, Bloomberg reported, citing sources familiar with the matter.
The move underscores PepsiCo’s continued push into the lucrative functional beverage market and comes amid growing consumer demand for healthier, performance-driven drinks.
Details of the transaction
According to the report, PepsiCo will acquire convertible preferred stock in Celsius, raising its ownership stake to 11%.
The deal extends the conversion period for PepsiCo’s initial 2022 investment, when it purchased an 8.5% stake for $550 million.
As part of the latest agreement, PepsiCo will also gain the right to nominate an additional director to Celsius’ board, further cementing its influence within the company.
In a parallel development, Celsius will acquire PepsiCo’s Rockstar Energy brand in the United States and Canada.
PepsiCo will continue to retain ownership of Rockstar internationally, ensuring that the brand remains part of its global energy beverage portfolio.
The transaction is expected to be announced as soon as Friday, the report said.
Strategic energy partnership
The deal significantly reshapes the relationship between the two companies.
Under the agreement, Celsius will become the strategic energy lead for PepsiCo in the US, overseeing three major energy brands: Celsius, Alani Nu, and Rockstar Energy.
PepsiCo, meanwhile, will take the lead on the distribution of Celsius’ portfolio across the US, leveraging its extensive retail and supply chain network to broaden market reach.
Celsius’ Alani Nu, a female-focused energy drink acquired earlier this year, will now shift into PepsiCo’s distribution system in the US and Canada.
The move is aimed at accelerating Alani Nu’s retail presence and growth trajectory by tapping into PepsiCo’s established channels.
By integrating Celsius’ offerings into its own distribution framework, PepsiCo is positioning itself more firmly in the expanding energy drink segment.
The collaboration enhances PepsiCo’s beverage portfolio, which already includes well-known sports and performance brands such as Gatorade and CytoSport.
Market impact and growth outlook
Celsius, founded in 2004, has experienced rapid growth in recent years, driven by consumer enthusiasm for its vitamin-infused drinks marketed as calorie-burning and performance-enhancing.
The company’s sales momentum continued in the second quarter, with results surpassing Wall Street expectations following the integration of Alani Nu.
Celsius shares closed at $59.69 on Thursday, leaving the company with a market capitalisation of about $15.4 billion.
The stock has gained significantly in recent years as investors bet on the company’s ability to capture a growing share of the energy drink market.
For PepsiCo, the move reflects its broader strategy of adapting to shifting consumer preferences, with greater emphasis on healthier, less processed products.
While PepsiCo’s portfolio spans from breakfast cereals to juices, its investment in Celsius highlights the increasing importance of functional beverages in its growth agenda.
The deal positions both companies to benefit: Celsius gains access to PepsiCo’s vast distribution capabilities, while PepsiCo strengthens its foothold in one of the fastest-growing categories of the beverage industry.
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