PepsiCo and Celsius agree long-term distribution agreement and investment

Image from Celsius’s Facebook page

PepsiCo and Celsius Holdings, maker of fitness energy drink Celsius, have agreed a long-term strategic distribution arrangement.

The agreement initially transitions Boca Raton, Florida-based Celsius’s current US distribution to PepsiCo and covers most retail and food service channels. PepsiCo will also become the preferred distribution partner globally for Celsius.

As part of the transaction, 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, which equates to an estimated 8.5% ownership in Celsius on an as-converted basis. The preferred shares are entitled to a 5% annual dividend.

PepsiCo will also nominate a director to sit on Celsius’s board.

Kirk Tanner, chief executive of PepsiCo Beverages North America, said: “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 organisations can make together to more fully capture energy occasions.”

Celsius president, chairman and chief executive, John Fieldly, commented: “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 US 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. 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 recognise once the initial transition is completed. We look forward to partnering with PepsiCo and maximising the opportunities we see ahead for Celsius and our shareholders.”