Since its market debut in 2017, energy drink maker Celsius Holdings has been bubbling up explosive growth for investors. Celsius stock has rallied 59% so far this year after impressive growth in 2023.
The company positions its beverages as healthy energy drinks that are marketed toward younger consumers and fitness enthusiasts. Celsius heavily utilizes influencers and celebrities like Olympian Shaun White and YouTuber-turned-boxer Jake Paul to market their products via social media.
A 2022 partnership with PepsiCo helped Celsius expand its distribution channels and gain market share. The company already has an established global footprint, offering products in 10 countries and looking to enter more markets including Australia, New Zealand and the U.K.
But the company's turbocharged performance has set a high bar — leaving investors and Wall Street to wonder if Celsius' fast pace of growth is sustainable. IBD recently spoke to Celsius CEO John Fieldly about the trends in the energy drink market and growth drivers for CELH stock in the year ahead.
CELH Stock Rebounds After Q1 Earnings
Celsius reported a 108% jump in earnings to 27 cents per share in its first quarter results posted on May 7. Revenue for the energy drink maker leapt 37% to a first quarter record of $355.7 million. But those sales fell short of analyst expectations of $390.4 million.
The Boca Raton, Fla.-based company saw its gross margin increase to 51.2% from 43.8%.
"First quarter of 2024 we had great margins" Fieldly stated. He said potential headwinds that could impact cost of goods sold include increases in aluminum and freight prices.
"We're trying to find leverage as we continue to grow in scale, but we're going to have to see how it turns out over the next several quarters," Fieldly told IBD. "Further inflation potentially could be hitting some of these raw materials and input costs for us."
Shares fell as much as 4.7% in intraday trading on earnings. But CELH stock pared those losses and finished the week ending May 10 with a 9% gain. Celsius also retook its 10-week moving average that same week. Shares have continued to trend higher.
CELH shares are consolidating with a 99.62 entry. The energy drink maker ranks at the top of IBD's Beverages-Non-Alcoholic industry group and has a 96 Relative Strength score.
Megatrends Fueling Celsius Stock Growth
"We're really hitting on three of the fastest growing megatrends in food and beverage," Fieldly said of Celsius. Those megatrends include producing beverages with innovative and fresh flavors that provide wellness benefits on top of great taste.
"Celsius does more than just provide you energy," Fieldly continued. "It also offers you functional benefits on thermogenic properties and additional fat burning and calorie burning."
The third megatrend fueling growth in the energy drink market is fitness. "We were born in the fitness channel and now we're positioned for broad mass appeal," Fieldly said. "We're really the first brand in the energy category to break a ten share on a national level in the United States in over a decade."
Celsius is also bringing in new consumers to the energy drink category. Data from market research firm Mintel showed that retail sales of energy drinks and shots grew by 10% in the U.S. last year. And the U.S. energy drink market could grow to $30 billion by the end of the decade.
Fieldly says that Celsius is responsible for driving 47% of growth in the entire energy drink market in 2023.
"The category is growing and bringing new consumers in. And Celsius is one of those key drivers," Fieldly stated. "So that's the story for the retailer and why they need to contain and build their sets larger with Celsius."
Pepsi And Other Key Partnerships
Fieldly credits the partnership with PepsiCo for propelling CELH stock's explosive growth in recent years. In 2022, PepsiCo completed a deal, taking a $550 million stake in the upstart energy drink company.
"We couldn't compete at the highest level in the energy category without Pepsi," Fieldly said. "You can find a Celsius in just about any retailer now." He also added that Pepsi's national distribution network is "critical" in helping Celsius stock maintain an edge in the highly competitive energy drink market.
In Q1 earnings, the energy drink maker added an incentive program to its deal with Pepsi to encourage further promotion of the brand.
"It's really nothing out of the ordinary course of business," Fieldly told IBD of Celsius' incentive plan with Pepsi. "When you look at the international opportunity with Pepsi and Suntory, who we've partnered with in a variety of markets, that shows great potential and growth as we go forward. But we really want to be focused on North America and timing and sequencing properly. And with international, really focusing on a tactical approach and a profitable approach as we go forward."
On the marketing front, Celsius has inked partnership deals with Formula One team Ferrari and had a visible presence at this year's Coachella music festival.
The 'Huge' Growth Opportunity For CELH Stock
Fieldly says the biggest strategic priority in the year ahead is getting Celsius on more shelves.
"We see huge opportunities in the convenience channel," Fieldly stated. He added that about 70% of energy drinks are sold through that distribution network alone.
Fieldly noted that retailers are resetting shelves for spring, which he estimates will be complete by the end of June. Once the reset concludes, he expects Celsius to see the "largest" shelf space gains in company history. That reset has the potential to drive Celsius stock higher.
"[The] biggest strategic priority right now in '24 is closing the gap within convenience," Fieldly said. "This is the last frontier. … It's really the channel with the largest sales within the energy category so that's a really big opportunity for us."
