CELH 3.25.26

I'd maybe push back a bit on the LTO front. Alani is definitely known for LTOs; they do the quarterly LTO strategy, and it's rapidly moving. It'll be interesting to see how that fits in the DSD at Pepsi. But it's not just something Alani is good at; Celsius can do it, too. There's a different brand DNA, customer base, and marketing strategy for Alani than there is for arguably any other brand in the space. That's the perspective on the LTOs. I'm confident Pepsi can integrate those into their distribution system and handle that without any issues. You seem a bit less sanguine there, and I would appreciate a little more color if you would.

Why wouldn't Alani just keep doing LTOs? It's pretty integral to the business model as it currently stands, and even if it is the source of growth, why would they stop doing that?

Maybe I'll just chime in with something, taking one step back and then getting to specifically how we were thinking about this. Part of the allure of Celsius and Alani is that neither has competed for market share against Red Bull, Monster, or the incumbents in this space. They've brought consumers into energy drinks who have never engaged with energy drinks, and they've predominantly won share from either non-caffeine-oriented beverages or coffee, mostly from coffee, probably.

Women historically haven’t been big drinkers of energy drinks, but Alani way over-indexes, and Celsius meaningfully over-indexes to women drinkers of energy. Alani is more Gen Z, Celsius is more millennial. They have different customer bases. The LTO strategy aligns with what Alani's core customer base likes to engage with and appreciates.

From your perspective, I'd be curious to hear would you fear that these customers have won and have some affinity to leave the space entirely, or would you fear they're somewhat promiscuous and go to a different kind of energy drink? Where would they start hitting that stall point?

Are you thinking they'd leave for a new emergent energy drink, or they'd leave the energy drink category?

Right. Do they have strong regional presences and hold? They're way bigger in the Southeast. There's not a lot of shelf space in the Northeast, and there's still a ways to go out West. So there are regions where they might encounter resistance much sooner than others.

Energy is a tough category, right? There have been so many companies that have tried. There have been partnerships with big beverage companies and acquisitions, yet most of these brands stall at 2% to 3% of the industry share. What do you think enabled and empowered Alani to get to this point, poking at, but not quite at, 10% share yet? Do you think there's anything significant about achieving that kind of scale and what it means for the durability of a brand in this space? I think that question applies to both Alani and Celsius.

I think it comes down to how they've woven their brand with the identity of their customers. Celsius started in the fit, working, white-collar millennial world. That's evidenced by a much higher share of Amazon purchases than in-store purchases, where a certain kind of person just sets a recurring order, gets it delivered to their house, and it becomes part of their everyday identity and habit.

For Alani, the LTOs are a big part of it, along with social media influencers and the younger generation. Obviously, getting Kim Kardashian early helped a lot, but many brands that worked that way fizzled out much sooner. They've been able to build on top of that even without ongoing support from Kardashian. It's never the kind of thing where you can say exactly why or what it does, but they've tapped into some kind of zeitgeist. It's more flavors, it's tastier, and it's better for you, without sugar, compared to something like Red Bull.

Red Bull is closely associated with extreme sports and Red Bull vodkas, a strong association among a certain class of people. I think that's part of what Celsius was able to get with millennials, who just don't want Red Bull outside of their post-college life. It feels like, with the share they've been able to garner and maintain for as long as they have, right at the point where every other brand fizzled out at 3%, they have a different kind of resonance than others have achieved.

The shelf space from here will become increasingly difficult for competitors to secure. Celsius talks about shelf space coming from things like water, sparkling water, and maybe even a little bit of the packaged coffee beverages, versus Red Bull or Monster.

I'd jump in here and say I think it's both. Domestically, for the core Celsius consumer, you’re likely looking at this product expansion as a way to drive growth.

Looking at international sales, 40% of Monster's (MNST) sales are from abroad, while Celsius is at 5%. So there's a huge opportunity there. Granted, there are definitely structural headwinds in Europe. Germany has high listing fees, and the UK has pretty intense competition for shelf space, specifically in the areas where Celsius would generally position itself, like small boutique fitness gyms.

Yes, it's both, but it depends on the region. International is definitely something we're curious about as a growth factor. Domestically, the idea of expanding into protein shakes opens up several other avenues. The hiccup there is with Pepsi. As far as I understand, Celsius can't sell an electrolyte product because it would overlap with Pepsi's Gatorade. That's my perspective there.

They've obviously rolled out in several countries already. I think they're pretty big in Australia, but Europe varies. In terms of time to actually put rubber to pavement, which I think is ultimately what you're asking, in some cases, you have to reformulate the product. For example, what's legal to sell in Sweden is not legal in Germany from a caffeine content perspective.

From my research, and it's something I've been exploring and doing some expert calls on without getting a great answer yet, it seems like a reformulation could take anywhere from 18 to 36 months. That aligns with the timeline you just mentioned. Celsius is already six-plus months into this in some cases. We could start seeing rubber-to-pavement internationally within 12 months. You may have another piece of that question I missed.

If I could just add two pieces. They made a key hire in November of a former, long-time Pepsi executive to build out international. I think that gives you a sense of when and where they start prioritizing that. To clarify, they're not partnered with Pepsi internationally yet. They have an opportunity to choose their international partner and leverage their positioning. Pepsi is a strong candidate to be that partner, given the alignment in equity and board representation. I just wanted to make that clarifying point.

In terms of terminal size, it's really hard to say at this point. To your point, it's a very small percentage of the pie. We're not underwriting it for any meaningful growth at this point, just to be conservative. But it would be hard to say it's realistic for them to hit 40% of Monster's sales. I don't know if that's achievable with what we know right now. It depends on who they partner with. I'd say if they could get to half of that, it would be a big win. That's probably something I should put some more thought into. That's a good point.

They're partnered with Asahi (2502.T) for a couple of markets, so I think there are potentially others. They have a partnership with Suntory (2587.T), not Asahi. That's who they're using currently, and I think there's potential for expansion or a change-up there. Your intuition is right on Coke, but there's also the potential that they work with Pepsi, so that's TBD.

I'm curious to hear your thoughts on Rockstar. Management keeps saying they're going to bring Rockstar back to growth. Our perspective is that it has strategic value in blocking and tackling shelf space from the Ghosts and C4s for Alani and their core products. What's your perspective there? Do you think they could actually SKU-rationalize or revamp this brand into low single-digit growth, or is it just a big nothing burger they're talking up?

Why do you think they’re forced?

Yeah, there are a decent number of middle-level executives and even some higher-ups at Celsius who worked at Rockstar for a very long time. It seems like there's at least some appreciation and affinity for what it could have been.