Celsius's Acquisition Hangover

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Celsius Holdings (Nasdaq: CELH) sells roughly one in five energy drinks bought in the U.S.

It owns three brands, CELSIUS, Alani Nu, and Rockstar, and ships nearly all of them through PepsiCo's trucks.

The stock has been on my radar for a couple years. But I’ve never opened a position due to concerns on (1) competition, (2) growth, and (3) compressing margins.

I’m cautious on CPG/F&B names like Celsius to begin with, where changing consumer preferences, low brand loyalty, and limited pricing power make them inherently risky.

But over the last year Celsius has reshaped itself, acquiring Alani Nu and Rockstar to build a three-brand portfolio that now holds ~21% of the U.S. energy market. It just posted a record $783M quarter, alongside its first-ever buyback and open-market buys from the CEO, COO, and a director.

The company trades at $29.80/share, down ~38% YTD, after reported earnings were buried under one-time acquisition charges, gross margin compressed, the flagship brand slowed, and fresh regulatory scrutiny of energy-drink marketing piled on.

At a $7.6B market cap, the question is whether Celsius can compound anything like its closest competitor Monster (MNST), which was also a ~$7B company back in 2011 and is ~$96B today (13.7x return).

To answer that, I work through the three-brand portfolio and the category Celsius is winning, the PepsiCo relationship behind its distribution, the two acquisitions, the growth and margin debates, the balance sheet and insider buying, the legal and regulatory risks, and finally what the stock is worth, relative to peers and on a discounted cash flow basis.

Celsius sells functional energy drinks.

“Functional” just means the drink claims a benefit beyond caffeine, like zero sugar, added vitamins, and a fitness angle that moved CELSIUS from gyms into mainstream retail.

The company runs three brands:

One caveat: brand revenue spans every channel, while the category-share figures come from U.S. retail-scanner data, so the two don’t line up one-to-one.

Together that portfolio held 20.9% of the U.S. energy category in Q1 2026.

That makes Celsius the #3 energy player behind Monster and Red Bull, and a top-six U.S. beverage company by retail sales.

The products are mostly 12-oz and 16-oz cans, plus powder sticks and a small wellness range.

Most are made by outside co-packers, increasingly at Celsius's own plant in Huntersville, North Carolina (the former co-packer Big Beverages, bought in November 2024 for $75.3M).

Energy is one of the fastest-growing corners of the U.S. beverage market, and the growth is concentrated in zero sugar, which is exactly where CELSIUS and Alani Nu sit.

Celsius’s portfolio drove 45% of the zero-sugar U.S. energy category’s growth in Q1 2026, and 33% of the full energy category’s $3.3B of growth in 2025.

Two consumer shifts are working in Celsius’s favor:

Over 60% of energy sales run through convenience stores, and management says chains are adding shelf space and cold-door placement there faster than before.

Retailers rebuild their energy shelves each year, and in the 2026 resets Celsius is gaining about 17% more shelf space for CELSIUS and over 100% more for Alani Nu. The category grows, and retailers hand more room to the brands taking share.

There’s one caveat. Category growth has cooled from its post-2020 surge. It’s still a growth category, just not the rocket it was in 2021-2022.

You can't understand Celsius without PepsiCo (PEP)—its distributor, largest customer, a major shareholder, and the company that sold it Rockstar, one of its three brands.

Pepsi’s relationship began in August 2022, when it became Celsius’s primary U.S. distributor and invested $550M in Series A convertible preferred stock.

That put Celsius into Pepsi’s direct-store-delivery (DSD) network, the same trucks that carry Gatorade and Mountain Dew into nearly every store in the country.

DSD matters because energy is an impulse buy. Over 60% of energy-drink sales happen in convenience stores, where placement in the front cold door drives the sale.

Building that network from scratch costs billions and takes decades, which Pepsi already has.

And in August 2025, Pepsi named Celsius its first energy “category captain” in the U.S. That means Celsius now helps set the whole energy shelf across Pepsi’s stores, including placement, product priority, and promotions.

Celsius is now wired into Pepsi's systems in a way that would be slow and costly to unwind.

In 2025, sales to Pepsi were 43.2% of revenue, and Pepsi-related receivables were 46.2% of all receivables.

Pepsi's interests line up with Celsius's. It owns ~11% of the company (as-converted), holds two board seats, and earns distribution margin when these brands sell. Their agreement also runs 17 years and can't be canceled without cause until 2041.

So while the distributor concentration risk is there, the relationship looks sticky, since unwinding it would be slow and costly for both sides.

The two deals that built the portfolio both closed in 2025. Here’s what each cost and what it bought.

Celsius announced the Alani Nu deal on February 20, 2025, and closed it on April 1, 2025.

The price was $2.06B in total, made up of $1.32B in cash, ~22.45M new Celsius shares worth ~$722M, and a $25M earnout Alani Nu later hit.

The cash came from a new $900M term loan plus cash on hand.

A year in, it looks like money well spent. Alani Nu did ~$1.0B of revenue in the nine months after closing, and a record $368M in Q1 2026 alone. It’s already the biggest brand in the portfolio by sales.

On a pro forma basis (comparing to the prior year as if Celsius had owned it the whole time), Alani Nu grew ~60% in Q1 2026.

Alani Nu reaches a younger, more female buyer that CELSIUS didn't.

It runs a flavor-drop model that creates its own demand. And it had barely been pushed through a national DSD system, or sold abroad, before Celsius bought it.

Put a brand growing that fast into Pepsi’s national distribution, and the runway gets much bigger.

On August 28, 2025, Celsius bought the Rockstar Energy brand in the U.S. and Canada from PepsiCo.

In exchange, it issued Pepsi 390,000 shares of new Series B convertible preferred stock and modified the Series A. Total value: $935.8M.

But that ~$936M didn’t all buy Rockstar. Only ~$308M actually bought the brand, with most of the rest, ~$599M, an upfront payment to Pepsi for the enhanced Captaincy, which Celsius amortizes against revenue over the 17-year distribution deal.

So why would Celsius buy Rockstar, a shrinking brand with retail sales down 13% y/y in Q1 2026? Two reasons:

Management calls 2026 a "stabilization year" for Rockstar and isn't promising a turnaround.

Rockstar is the smallest brand and still shrinking, so it isn’t what the thesis rides on. If it stabilizes, that contributes to the upside.

Celsius grew fast through 2023 and early 2024. Quarterly revenue climbed from $326M in Q2 2023 to $402M in Q2 2024 as Pepsi pushed CELSIUS into more stores.

Then Q3 2024 revenue dropped to $266M, down ~34% from the prior quarter.

The cause was inventory, not demand. Pepsi had stocked up on CELSIUS, then drew those inventories down.

Celsius books revenue when product ships to Pepsi, not when a shopper buys a can. So a one-time destock at the distributor shows up as a terrible revenue quarter even while consumers keep buying.

That ship-versus-sell gap is a permanent feature of this business. Reported revenue can run ahead of or behind real demand in any quarter, depending on how Pepsi manages its warehouse.

That same gap would later run the other way, with reported sales trailing real demand during the 2026 shelf resets.

The market didn't accept "it's just inventory." Over 2024 and into early 2025, the stock fell from the low $80s to the mid-$20s.

The collapse brought lawsuits. Shareholders sued Celsius Holdings in November 2024, claiming it had overstated its Pepsi relationship and its growth, and the complaints use the phrase "channel stuffing."

That case is over. A federal judge dismissed it in April 2026.

Reported earnings look very different in 2025 versus Q1 2026, and almost all of that gap is one-time acquisition cost, not the business.

Here's where the ugly optics come from.

To move Alani Nu into Pepsi's system, Celsius had to terminate Alani Nu's old distributors and pay them off.

Those payments ran $327.5M in 2025. They hit a "distributor termination fees" line that wiped out reported operating income, including an $80M operating loss in Q3 2025.

Pepsi agreed to reimburse up to $275M of those fees. But the timing is lopsided.

Celsius expensed the full ~$328M up front. The Pepsi reimbursement gets booked as deferred revenue and bleeds back into earnings over 17 years, about $16M a year.

So 2025 swallowed a big one-time cost while the offset trickles in for nearly two decades.

Add ~$45M of acquisition costs, a new ~$47M annual interest bill, and an inventory step-up charge. The result was that 2025 net income to common fell to $63.8M from $107.5M, even as revenue grew 85.5% to $2.515B.

That's the headline the market fixed on. Revenue up 85%, earnings down 41%. But almost the entire earnings drop is one-time transition cost. Strip it out and the business grew. Pro forma revenue, with both brands owned all year, was ~$3.0B.

Cash tells the cleaner story. 2025 operating cash flow was $359M, and free cash flow (after $36M of capex) was ~$323M.

That's not what a failing company looks like.

Q1 2026 (reported May 7, 2026) is the first look at the combined company with most of the noise gone.

Revenue was a record $782.6M, up 138%. North America grew 144% to $747.3M; international grew 55% to $35.3M.

By brand, Alani Nu did $368M, CELSIUS $348M, and Rockstar $67M.

The rest of the quarter:

The SG&A line is the one I'd focus on.

Celsius cut overhead by ~700 basis points as a share of revenue while still funding a big summer marketing push. That’s the operating leverage scale is supposed to deliver, finally showing up.

Q1 still carried a $24.6M legal accrual (more on that later), so the adjusted numbers aren't spotless.

The three brands grow at very different speeds, so the blended number hides what’s actually happening underneath.

The flagship CELSIUS brand grew just ~6% in Q1 2026.

For a stock once priced for hypergrowth, that kind of growth on the original brand looks like the end of the story.

Three drivers sit under that 6%, and management was specific about each.

First, SKU cleanup. Celsius cut slower-selling items to tidy its shelf set.

Slow items leave the shelf before the new space and faster items fill in, so total distribution points (TDPs, the count of products on shelves) drop before sales pick up.

Second, cannibalization. CELSIUS and Alani Nu share some buyers, so part of the slowdown is Alani Nu taking sales that stay in the house.

Third, the ship-versus-sell gap again, in reverse. Consumer takeaway has been running ahead of shipments.

Management says CELSIUS sales-per-TDP rose 17% from January to April. CELSIUS 12-oz singles grew 11% in convenience. On Amazon, where no cleanup is dragging the data, recent weekly sales were up 27%.

So is 6% the real growth rate, or noise from a self-inflicted reset?

Mostly noise, but not entirely. Underneath the resets, the brand is still selling fast where it’s stocked.

To understand what I mean, the portfolio already sits at 99.5% ACV (all-commodity volume), meaning it's on shelves almost everywhere energy drinks are sold, weighted by each store's sales. A brand that close to full U.S. distribution was always going to slow from its early land-grab to a steadier pace.

I wouldn't model CELSIUS at 30% again. I'd model high-single digits, with the resets done by mid-2026 and new flavors (Fizz-Free, summer editions) on top.

While CELSIUS matures, Alani Nu drives the growth.

Reported scanner growth (sales rung up at retail checkouts) was ~100% in Q1 2026. That overstates it, because one flavor, Cherry Bomb, shipped in late 2025 but landed in early-2026 scanner data.

The clean figure is ~85% scanner growth, which becomes ~60% reported revenue growth after the shift toward DSD (where Celsius books revenue net of bigger distributor allowances).

What matters more is how fast it sells per store.

The bear worry was that stretching Alani Nu across the country would thin out sales per store. It didn't: sales-per-TDP rose 13% from January to April even as distribution grew.

And the runway is still long. Alani Nu's convenience-store ACV went from 65% in January to 91% by May 2026, and convenience is its biggest opening.

91% ACV means Alani Nu now reaches stores that make up 91% of convenience-channel sales, up from under two-thirds in January.

Distribution is its own growth lever. Every new store Alani Nu enters adds to its existing growth base.

International is barely started, and the market pays almost nothing for it.

International was 4.5% of revenue in Q1 2026 ($35.3M, up 55%), almost all of it CELSIUS, with little Alani Nu yet.

Celsius sized its markets in its 2026 decks. The U.S. energy category is ~$28.5B. Britain is $2.79B, Australia $2.06B, France $945M, with more behind them.

Celsius is 18-24 months into most of these markets. It runs a Suntory partnership in Europe (it just launched in Spain, with Portugal next), a Dublin headquarters, and a new international president.

Alani Nu has almost no international presence, and management has flagged entering “a few markets in 2027.”

A ~70%-female, zero-sugar, social-first brand may travel to Europe better than the old male-coded energy brands.

I wouldn't pay for international today, and it's not in my base case. But it's a real multi-year option that costs almost nothing at this price.

Gross margin is the second bear argument, and it's a fairer one than the growth concern.