Healthy Energy Drinks? Celsius Holdings Building Out the Space

Key Points

• Celsius Holdings has been trying to build out the healthy energy drink category with its line of functional energy drink products.
• The company acquired female-focused nutritional supplement and energy drink company Alani Nu for $1.8 billion in cash and stock.
• The acquisition is expected to be accretive and establishes Celsius’ footprint in the nutritional supplements segment.

Energy drinks have faced a lot of backlash for health concerns ranging from having too much sugar to too much caffeine. They aren’t viewed as healthy beverages.

However, Celsius Holdings Inc. NASDAQ: CELH aspires to change that perception by building a whole new category of healthy energy drinks in the consumer staples sector.

While competitors like Monster Energy Co. NASDAQ: MNST promote with high adrenaline branding like "Unleash the Beast," Celsius takes a more subdued and refined approach, calling itself a functional energy drink “Created to Inspire People to Live Fit.”

Polar Opposite Approaches to the Energy Drink Market

While once viewed as a direct competitor to Monster Energy, Celsius has taken a different route regarding image and branding. The contrast has become clearer than ever. Rather than smelling like chemicals, their drinks are all natural with zero calories, zero sugar, caffeine-free, and thermogenic fat-burning properties.

Celsius even performed clinical studies to obtain scientific data backing the thermogenic nature of its drinks. They brand them healthy, gluten-free, monster brands, refreshing, light, revitalizing, fruit-forward vitamin-filled beverages with high-quality ingredients.

Monster and Celsius appear to sell at similar price points at convenience stores, around $2 to $3 a can. However, Monster's flagship energy drinks come in 16 Fl oz (473 ml) cans while Celsius sells in 12 Fl oz (355 ml) cans, underscoring quality over quantity. At $0.14 versus 0.21 per ounce, Celsius also implies a higher unit margin.

Celsius Expands the Healthy Drink Category With Alani Nu Acquisition

Through the years, Monster has launched many brands that have adopted its loud, adrenaline-soaked, action-packed image, such as High Throttle, Reign, NOS, Bang, Predator, and Burn.

Celsius has made its move to expand the healthy energy drink category with its recent purchase of Alani Nu, which sells premium wellness and nutrition-branded energy drinks, supplements and snacks. The brand targets women with a female-focused diet, weight management, and muscle building.

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A Women-Focused Nutritional Health and Nutrition Brand

Alani Nu was founded in 2018 by fitness influencer Katy Hearn and her husband, Haydn Schnieder. Its fitness drinks are sold in health food shops, grocers, and retailers like Kroger Inc. NYSE: KR, Walmart Inc. NYSE: WMT, and Target Co. NYSE: TGT.

Celsius Reported Improving Q4 2024 Results

Celsius stocks had been bleeding towards 52-week lows at $21.10 before rebounding into its fourth-quarter 2024 earnings report. The company announced an earnings per shares (EPS) loss of 11 cents missing consensus estimates by 21 cents.

Revenues fell 4.4% year-over-year (YoY) to $332.2 million, beating consensus estimates by $5.18 million. Celsius' retail sales increased 22% YoY, and category market share rose 160 bps to 11.8% YoY in 2024.

The company reported record sales of $1.36 billion, up 3% YoY for 2024. Gross margin expanded 220 bps YoY to 50.2%. They grew their market share by 160 bps to 11.8% and total points distribution by 37% in 2024.

While these results were pacifying, the shares took a jolt on their acquisition announcement of Alani Nu.

The Alani Nu Acquisition Jolted the Stock

The $1.8 billion acquisition of Alani Nu expands Celsius's healthy energy drink brands and expands its footprint in the nutritional supplement segment. The market applauded the move, surging CELH shares by 27% on the announcement. Celsius noted that the acquisition would be accretive and create a leading, better-for-you, functional lifestyle platform that combines two growing, scaled energy brands with clear category tailwinds.

Celsius CEO John Fieldly noted that Alani Nu fits its consumer profile of Gen-Z and Millennials and stands out for its authentic, bright and playful flavors with a unique community of consumers. The brand combines functional benefits with a fun and approachable personality, which makes wellness accessible and aspirational.

Fieldly commented, “With the addition of Alani Nu, the combined Celsius platform delivers pro forma $2 billion in sales in 2024 across a differentiated energy portfolio that is firmly aligned with the ongoing consumer shifts towards premium functional beverage options that cater to health and wellness and active lifestyles.”