Celsius Holdings Inc. and PepsiCo Inc. announced an agreement to strengthen their long-term strategic partnership. As part of the agreement, Celsius Holdings’ Alani Nu brand will move into the PepsiCo distribution system in the U.S. and Canada, PepsiCo has acquired $585 million in newly issued convertible 5% preferred stock while extending its existing preferred stock to the same conversion period and Celsius Holdings has acquired the Rockstar Energy brand in the U.S. and Canada from PepsiCo. 

PepsiCo will continue to own the Rockstar Energy brand internationally. Celsius Holdings will become the PepsiCo strategic energy lead in the U.S., managing the CELSIUS, Alani Nu and Rockstar Energy brands, while PepsiCo will lead distribution for the Celsius Holdings portfolio in the U.S. and Canada.

PepsiCo’s ownership in Celsius Holdings increased to approximately 11% on an as-converted basis, and PepsiCo will nominate an additional director to serve on Celsius Holdings’ board of directors, further strategically aligning both companies for the long-term. This agreement leverages the respective strengths of Celsius Holdings and PepsiCo to scale the combined energy drink portfolio with a more unified commercial strategy.

As a fast growing brand in modern energy, Alani Nu complements PepsiCo’s energy distribution portfolio, appealing to new female consumers focused on fitness and lifestyle. Alani Nu’s move into the PepsiCo system is expected to increase the brand’s retail availability in the U.S. and Canada, including within foodservice and other growth channels, the company says. For Celsius Holdings, the Rockstar Energy brand will be additive to its portfolio, attracting incremental consumers who prefer classic energy drink flavors and formats. PepsiCo will continue to distribute Rockstar Energy in the U.S. and Canada for Celsius Holdings.

In a statement, John Fieldly, Chairman and CEO of Celsius Holdings, said: “Stepping into the role of PepsiCo’s strategic energy drink captain in the U.S. is expected to be a pivotal milestone in our journey to shape the future of modern energy and grow our brands within a leading beverage distribution system. With a proven functional beverage portfolio and a stronger long-term partnership with PepsiCo, we believe that Celsius Holdings is well-positioned to deliver greater innovation, sharper execution and sustained brand growth. Together, we will reach more people, in more places, more often, with a total energy portfolio that offers options for every consumer and creates greater value for all our stakeholders.”

Ram Krishnan, CEO PepsiCo Beverages U.S., added: “This agreement marks the next step in PepsiCo reshaping its brand portfolio to position us for long-term growth. Energy is an important growth category, and we believe this move with our partner Celsius creates a stronger multi-brand energy portfolio that is better positioned to serve different consumer cohorts. This transaction creates an aligned incentive structure for both parties to bring their individual expertise to better compete in the energy category.”

The companies shared the Strategic Rationale for the updated partnership

•    Increased strategic alignment: By becoming PepsiCo’s strategic energy drink captain in the U.S., Celsius Holdings will have the opportunity to drive the strategic direction of a unified energy portfolio through seamless planogram design, SKU prioritization and promotional execution. PepsiCo will lead distribution for all three energy drink brands in the U.S. and Canada ― CELSIUS, Alani Nu and Rockstar Energy ― allowing PepsiCo to further scale and expand distribution, streamline commercial strategy, reach different consumer cohorts and better serve customers.

•    Expanded distribution of Alani Nu: Integrating the female-focused Alani Nu brand into PepsiCo’s leading distribution system is expected to unlock greater growth potential through expanded geographic reach, enhanced foodservice penetration and access to new channels.

•    Addition of Rockstar Energy broadens Celsius Holdings’ total energy portfolio: The addition of Rockstar Energy to Celsius Holdings’ portfolio adds classic energy to complement its performance-forward and modern energy offerings. This will contribute to a total energy portfolio approach that appeals to a broader range of consumers with varied tastes and lifestyles.

•    Financial benefits driving shareholder value creation: This enhanced strategic partnership further aligns incentives between PepsiCo and Celsius Holdings and is expected to accelerate the partnership’s performance, driving value for shareholders of both companies.

UBS Investment Bank and Goldman Sachs & Co. LLC are serving as co-financial advisers to Celsius Holdings and Freshfields US LLP and Greenberg Traurig, P.A. are serving as legal counsel to Celsius Holdings. Centerview Partners LLC is acting as lead financial adviser to PepsiCo. BofA Securities also is serving as a financial adviser, Cravath, Swaine & Moore LLP is acting as legal counsel to PepsiCo, and McCarthy Tétrault LLP is acting as Canadian legal adviser to PepsiCo.