US – American food and beverage giant, PepsiCo, is going for an 8.5% stake in US energy-drinks maker Celsius Holdings, to strengthen its strategic distribution arrangement in the US for energy drinks.
In a joint statement, the companies said PepsiCo will make a “net cash investment” worth US$550million for convertible preferred stock in the Florida-based business.
In addition, the deal will enable PepsiCo to have a long-term US distributor of the energy drinks brands through a strategic distribution arrangement.
Initially, PepsiCo said it will take on the US distribution of Celsius’ products including distribution in retail and foodservice channels, and also become “the preferred distribution partner globally for Celsius”.
As part of the deal, PepsiCo will nominate a director to sit on the Celsius Holdings board.
Kirk Tanner, the CEO of PepsiCo’s beverage business in North America, said the Celsius brand’s growing momentum couples well with the strength of PepsiCo’s portfolio on the market.
He added the energy drink maker will be a lucrative agent for the beverage giants’ go-to-market capabilities enabling it to create a combination that is compelling and valuable to retailers and consumers.
John Fieldly, Celsius’ president, chairman, and CEO said: “We believe the opportunity to partner with a global best-in-class distributor provides Celsius with significant near-term additional shelf space.”
It also offers an opportunity for new expansion within the independent retailers that represent a significant portion of the US convenience and gas channel where approximately 70% of energy drinks are sold.”
The partnership also provides a strategic partnership that is expected to accelerate growth for both companies globally, he continued.
In addition, Fieldly noted that this partnership will drive efficiencies allowing Celsius’s teams to consolidate sales, marketing, and distribution efforts with associated cost benefits, which are expected to recognize once the initial transition is completed.
The deal with PepsiCo saw shares priced at $75 per share, or approximately 7.33 million shares, which equates to an estimated stake in Celsius of 8.5% “on an as-converted basis”.
This is also a reflection of Celsius’s impressive market performance, considering that in 2021, Celsius generated revenue of US$104.3million, almost treble the US$35.7million it booked in 2020.
Domestic revenue stood at US$95.9million while the company’s net income reached US$3.9million in 2021 from US$8.5million a year earlier.
However, income from operations swung to a US$4.1million loss from US$7.9million in 2020 due to a rise in the cost of sales, selling, and marketing, as well as general and administrative costs.
PepsiCo’s deal with Celsius comes a few weeks after the end of a deal that had seen the US giant handle the distribution of energy-drink brand Bang Energy.
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