Dive Brief:
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Celsius Holdings spent $75 million to acquire Big Beverages Contract Manufacturing, a long-time co-packing partner. The deal closed on Nov. 1
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The purchase will provide it with more control over its supply chain, allow for quicker innovation cycles and expand production flexibility.
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This deal comes as the energy drink sector as a whole has seen a slowdown as consumers cut back on spending and make fewer visits to convenience stores, a popular channel for purchasing the beverage.
Dive Insight:
Despite challenges currently facing the energy drink sector, Celsius is laying the groundwork for a more promising future.
The transaction provides Celsius with a 170,000-square-foot, modern manufacturing and warehouse facility that provides it will great flexibility in its business.
Celsius can expand the location if it needs additional capacity as its business grows. It can more easily change production depending on consumer demand for a specific product or if Celsius wants to launch a limited-time offering. Unique flavors have proven to be key in attracting and retaining consumers, especially younger individuals, in the ultra-competitive space led by Monster and Red Bull.
Celsius also noted that controlling more of its supply chain provides an opportunity to improve margins and profitability.
“We believe that this acquisition gives Celsius fantastic leverage to accelerate our product innovation and production capabilities so we can continue growing the energy drink category with our great tasting, functional and better-for-you performance energy drinks,” John Fieldly, Celsius’ CEO, said in a statement.
Big Beverages, which is based in Charlotte, is a longtime Celsius co-packer, and the facility will continue to be principally dedicated to the manufacture of Celsius products. The Big Beverages management team and workforce are expected to remain with the operation.
Celsius is scheduled to report its third-quarter results on Nov. 6. Even as the $19 billion energy drink space struggles with headwinds affecting the broader economy, Celsius needs to prepare for future growth in the category. Mintel estimated that energy drinks are on track to be a $30 billion business in the next five years. Once relegated to gyms, the research firm noted that nearly half of consumers drink energy drinks multiple times per week.
Celsius has posted strong growth in recent years as consumer interest in better-for-you and functional offerings — a trend that intensified during the pandemic — has accelerated. Celsius fits squarely into these categories with a drink that lacks sugar and calories but comes loaded with ingredients it claims provide workout and energy benefits without the crash. Revenue last year was $1.3 billion compared to $131 million in 2020.
