PepsiCo’s Newest Energy Drink Investment Builds on Better-for-You Positioning
With annual revenues of $580 million as of September 30th, up 136% from the same period in 2021, CELSIUS is driving growth with its growth strategy template. The brand is profitable by industry standards, reporting 2021 gross margins at 43%.
There are a number of important contributors to the better-for-your energy drink’s growth strategy, including distribution, brand positioning and marketing.
CELSIUS Growth Strategy Template: Distribution
In the Insight to Action team’s late 2022 store visits to grocery, club and specialty nutrition retailers, the CELSIUS brand stood out for strong shelf presence. While we didn’t visit independent c-stores, we expect CELSIUS is also well represented there, given this year’s PepsiCo investment.
The brand recently identified nine distribution channels at 147,000 locations. These are:
- Convenience (e.g., QT, 7-Eleven, RaceTrac, Speedway, CircleK, Sunoco, Casey’s)
- Vitamin, specialty & drug (e.g., CVS, The Vitamin Shoppe, RiteAid, Smoothie King, GNS)
- Military (e.g., MCX, NEX, AAFES)
- Vending (e.g., Vistar, FirstClassVending, Canteen)
- Conventional grocery (e.g., Publix, Harris Teeter, Meijer, Kroger, Safeway, Ralph’s, HEB, Stop & Shop, Giant Eagle, HyVee)
- Fitness (e.g., Dick’s, Anytime Fitness, Equinox, LA Fitness, In-Shape, 24 Hour Fitness, Barry’s Bootcamp)
- eCommerce (e.g., Amazon, Walmart.com)
- Mass market and club (e.g., Target, Costco, Walmart, BJ’s, Sam’s Club)
- Natural channel (e.g., Fresh Market, Sprouts)
In August 2022, CELSIUS announced a long-term distribution agreement with PepsiCo and a $550 million PepsiCo investment in CELSIUS.
An important part of CELSIUS growth strategy template is distribution, and the PepsiCo agreement is expected to bring many benefits. CELSIUS President, Chairman and CEO John Fieldly said,
“We believe the opportunity to partner with a global best-in-class distributor (PepsiCo) 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% of energy drinks are sold. It also provides a strategic partnership that is expected to accelerate growth for both companies globally.”
Distribution expansion has been a consistent focus behind CELSIUS growth strategy long prior to the PepsiCo deal.
For instance, CELSIUS reported that distribution drove momentum in 2021, helping the brand achieve a:
“record growth year of over $300 million in revenue.”
Specific 2021 distribution growth strategy highlights included:
“expanded convenience store locations, club channel revenue and Amazon to record levels.”
Another distribution growth strategy example comes from the September 2020 conversion of:
“more than 1,100 Target store locations to its Direct Store Delivery (DSD) distribution network.”
CELSIUS Growth Strategy Template: Consumer Target, Tagline, Benefits and Reason to Believe
In addition to distribution strategy, Ad Age highlights “smart positioning” and “savvy e-commerce” as drivers of growth strategy success that allow CELSIUS to stand out from other energy drinks like Monster and Red Bull.
CELSIUS brand’s consumer target is “health-conscious consumers ages 25-44.”
CELSIUS reports that it is bringing more consumers into the energy drink category, rather than just stealing share, an attribute that retailers value highly. In 2021, CELSIUS was:
“driving 20% of our sales from male and female sales new to the energy drink category.”
In 2021, CELSIUS also reported specifically bringing 18-24 year old female energy drink consumers into the category, while maintaining the brand’s historical 50/50 male/female split.
The overall brand tagline is “Live Fit,” and the brand promises “Essential Energy” as seen in this recent TV advertisement with highly active snowboarders and skiers.
The brand’s primary benefit is “essential functional energy.” Support points include the proprietary Metaplus blend, 7 essential vitamins and additional benefits of “burns body fat and calories, accelerates metabolism” and “is themogenic.”
CELSIUS cites multiple published university clinical studies as reason to believe that the product has proven efficacy.
CELSIUS Growth Strategy Template: Product Strategy: Ingredients, Product Lines, Packaging
The CELSIUS brand promises a healthier source of energy, with “zero sugar, no preservatives, no aspartame, no high fructose corn syrup, no artificial flavors or colors.” In addition, the brand is non-GMO, Certified Kosher and Vegan, soy and gluten-free and contains low sodium.
According to a registered dietician, “CELSIUS is a healthier option than commercial energy drinks like Red Bull and Monster.” This doesn’t make it a “health food”, but rather a better choice.
The CELSIUS brand also incorporates five different product lines into its growth strategy template:
- CELSIUS Originals
- CELSIUS HEAT (“trainer-grade pre-workout)
- CELSIUS BCAA +ENERGY (recovery drink)
- CELSIUS On-the-Go (powder)
- CELSIUS Sweetened with Stevia
The brand’s “proprietary Metaplus blend” has ingredients that combine to boost the body’s metabolic rate, “resulting in a sustained calorie burn while promoting healthy energy.” These ingredients are green tea with EGCC (epigallocatechin gallate), guarana seed, ginger, chromium, Vitamin C and B vitamins.
Packaging expansion may provide another opportunity for CELSIUS. At present, the powder comes in a different packaging form than the ready-to-drink can. There may be other packaging sizes or forms that can provide growth opportunities long term.
CELSIUS Growth Strategy Template: Marketing Tactics
To date, CELSIUS has delivered strong results with its better-for-you growth strategy template. The brand has 447k Instagram followers and regularly receives thousands of reactions on each post. Here are two sample executions:
The brand also has a presence on Facebook (182k followers), Twitter (17.3k followers) and YouTube (one video in 2021 drew over a million views).
This success will inevitably draw competition from other brands that position themselves as BFY energy options. Some “clean” examples include:
- Zoa (pre workout)
- Kill Cliff Ignite
- Hiball Energy Seltzer
- All Phenoms Motivate
- Your Super Energy Bomb Mix
- G.O.A.T Fuel
- Nuun Energy
- Riff Energy + Immunity
- Elements of Balance Energy
CELSIUS will need to adjust its growth strategy template as other competitors seek to steal share with the new energy drink consumers the brand brought to market. This time next year, will it still dominate?