The agreement makes PepsiCo its preferred distribution partner globally.
PURCHASE, N.Y. — PepsiCo Inc. and Celsius Holdings Inc., maker of Celsius global fitness energy drink, signed a definitive agreement forging a long-term strategic distribution arrangement, effective Aug. 1.
The distribution agreement initially transitions Celsius' current U.S. distribution to PepsiCo's capabilities, the companies said. PepsiCo will also become the preferred distribution partner globally for Celsius.
PepsiCo will also make an investment in Celsius in support of its growth agenda and nominate a director to serve on Celsius' board.
The agreement includes both retail and foodservice channels, subject to certain exceptions.
"We are extremely pleased to partner with Celsius and excited about the opportunity for our two organizations to drive growth and innovation in the energy beverage category," said Kirk Tanner, CEO, PepsiCo Beverages North America. "The Celsius brand's growing momentum coupled with the strength of PepsiCo's portfolio and go-to-market capabilities create a combination we believe will be very compelling and valuable to retailers and consumers. We are looking forward to seeing the impact these two outstanding organizations can make together to more fully capture energy occasions."
As part of the deal, PepsiCo will make a net cash investment of $550 million to Celsius in exchange for convertible preferred stock. Shares underlying the transaction were priced at $75 per share, or approximately 7.33 million shares, resulting in an estimated 8.5-percent ownership in Celsius on an as-converted basis, the company reported.
The preferred shares are entitled to a 5-percent annual dividend.
Based in Boca Raton, Fla., Celsius Holdings' master brand Celsius is a lifestyle energy drink that offers proprietary, functional, essential energy formulas clinically proven to offer significant health benefits to its users, according to the company.
"I would first like to thank our employees and partners who have helped facilitate our rapid growth. We believe the opportunity to partner with a global best-in-class distributor provides Celsius with significant near-term additional shelf space in both existing retailers as well as new expansion within the independent retailers that represent a significant portion of the U.S. convenience and gas channel where approximately 70 percent of energy drinks are sold," said Celsius President, Chairman and CEO John Fieldly.
"It also provides a strategic partnership that is expected to accelerate growth for both companies globally," Fieldly continued. "In addition, this partnership will drive efficiencies allowing our teams to consolidate sales, marketing, and distribution efforts with associated cost benefits, which we expect to recognize once the initial transition is completed. We look forward to partnering with PepsiCo and maximizing the opportunities we see ahead for Celsius and our shareholders."
The news comes several months after Goldman Sachs' Beverage Bytessurvey found that despite an increase in total beverage sales, with projections for 8 percent growth in 2022, inflation pressures were driving softer unit growth in some stores, as Convenience Store News reported.
Purchase-based PepsiCo generated more than $79 billion in net revenue in 2021, driven by a complementary beverage and convenient foods portfolio that includes Lay's, Doritos, Cheetos, Gatorade, Pepsi-Cola, Mountain Dew, Quaker, and SodaStream.