Drinking is a basic human need. At the same time, however, increasing hip beverages ensure that individuality is also in demand in this area. The pioneer in this field, Red Bull founder Dietrich Mateschitz, opened up a completely new product category in 1987 with the first energy drink. Since then, many companies such as Monster Beverage, Campbell Soup Company, PepsiCo, and, since 2004, Celsius Holding have jumped on the trend.
The fact that the "Who's Who" of the beverage industry is involved in energy and fitness drinks is not particularly surprising; after all, this is a large and fast-growing market. According to a study by Grand View Research, the global volume in 2021 was a whopping USD 86.3 billion. The analysts predict that functional drinks, which typically increase alertness and provide a physical boost, will likely grow at a compound annual growth rate (CAGR) of 8.3% between 2022 and 2030. In fact, in the U.S., which accounts for nearly a quarter of global revenues, energy drinks are the most popular dietary supplement for teens and young adults. In general, energy drinks are one of the fastest-growing categories in non-alcoholic beverages.
The fledgling Celsius Holdings also wants a big slice of this huge pie. To get the community excited about its eponymous brand, the Florida-based company focuses on different flavours and promising health benefits. The drinks are GMO-free and contain no dubious food additives such as aspartame or corn syrup. In contrast, the sparkling and non-carbonated flavours contain healthy ingredients such as ginger. In addition, according to the company, they accelerate the metabolism and the burning of body fat during workouts.
Business trends show that Celsius is hitting a nerve with these products. In the past three years alone, sales skyrocketed from USD 130.7 to USD 653.6 million in 2022, an increase averaging 124% p.a.. The excessive growth continued in the first quarter of 2023. Sales increased by 94.9% year-on-year to USD 259.94 million; analysts had only budgeted USD 218.81 million. The North American segment boosted the business, which grew by 101%. This means the now matured "newcomer" is catching up mightily in the industry. Competitor Monster Beverage grew by only 6.2% in 2022 and 11.9% at the start of the year in 2023.
On the earnings side, Celsius also performed better than market participants' forecasts. The company reported adjusted earnings of 40 cents per share for the quarter ending in March, compared with the average expectation of 11 analysts for earnings of 20 cents per share. The operating margin improved to 17.3% from 7.5% in the year-ago period. However, it is still short of competitor Monster, which posted a 28.5% return.
The beverage giant PepsiCo is partially involved in the good operating performance. The group invested USD 550 million in Celsius last August and has since held an 8.5% stake in the company. In the course of this, a long-term strategic distribution agreement was also reached. As a result, PepsiCo, which had already completely acquired competitor Rockstar in 2020, is Celsius' preferred global distribution partner. But even without the world's second-largest beverage company, the brand is well received. On Amazon in the U.S., Celsius ranks second in the energy drinks segment with a share of 19.1%, behind Monster (22.3%) and even ahead of the old stalwart Red Bull (12.8%).
However, Celsius is not only reviving the spirits of its customers with its energy drinks, the pick-me-ups are also providing plenty of momentum on the stock market. On a monthly basis alone, the share price has risen by more than 40%, and over the course of a whole year, the US small cap has even recorded more than double. During the steep upward trend, the analysts' median price target of USD 130 has now been reached.
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