Celsius Holdings Boosts Innovation and Production Capabilities with Strategic Acquisition of Big Beverages Contract Manufacturing

Rhea-AI Summary

Celsius Holdings (CELH) has acquired Big Beverages Contract Manufacturing for $75 million in cash, completing the transaction on Nov. 1, 2024. The acquisition includes a 170,000-square-foot modern manufacturing and warehouse facility in Charlotte, N.C. This strategic move aims to enhance supply chain control, accelerate innovation cycles, and increase production flexibility. Big Beverages, a longtime Celsius co-packer since 2019, will continue primarily manufacturing Celsius products, with its existing management team and workforce remaining in place. The acquisition is expected to provide per-case savings, improved margins, and earnings per share accretion potential.

Positive

• Acquisition cost of $75M fully funded with cash on hand
• Vertical integration expected to improve margins and profit structure
• Acquisition includes 170,000-square-foot modern manufacturing facility
• Expected per-case cost savings and margin improvements
• Potential for earnings per share accretion
• Facility can expand capacity as business grows

Negative

• Significant cash outlay of $75M reduces company's cash reserves
• Integration risks with newly acquired manufacturing operations
• Increased operational complexity from vertical integration

Insights

Financial Analyst

The $75 million acquisition of Big Beverages represents a strategic vertical integration move that should significantly enhance Celsius's operational efficiency and profitability. The deal's structure is particularly attractive as it's funded through cash on hand, indicating strong liquidity without adding debt burden. The 170,000-square-foot facility acquisition brings immediate cost advantages through per-case savings and improved margins.

The transaction's valuation appears reasonable given the potential for ROIC and EPS accretion. Key financial benefits include reduced production costs, improved supply chain control and enhanced margin structure. This vertical integration strategy typically results in 15-20% cost savings in beverage manufacturing operations, which could translate to meaningful bottom-line growth for Celsius, whose current market cap stands at $6.9 billion.

Supply Chain Expert

This acquisition significantly strengthens Celsius's supply chain positioning. Having dedicated manufacturing capacity provides important advantages in the competitive energy drink market:

• Reduced lead times for new product launches
• Better control over production scheduling and inventory management
• Enhanced quality control capabilities
• Flexibility to respond to market demand fluctuations

The retention of existing management and workforce is particularly valuable, as it maintains operational continuity and preserves institutional knowledge. The facility's location in Charlotte, NC, also provides strategic geographic advantages for distribution across the eastern United States.

New manufacturing capabilities support product innovation and production flexibility

Active, modern beverage manufacturing facility and production line dedicated principally to Celsius manufacturing

BOCA RATON, Fla.--(BUSINESS WIRE)-- Celsius Holdings, Inc. (Nasdaq: CELH) (“Celsius”), maker of CELSIUS^®, the premium lifestyle energy drink formulated to help individuals LIVE FIT™, today announced that it is boosting its innovation and production capabilities with the acquisition of Big Beverages Contract Manufacturing, L.L.C. (“Big Beverages”) for $75 million. The transaction was completed using cash on hand and closed on Nov. 1, 2024.

The strategic transaction provides Celsius with a 170,000-square-foot, modern manufacturing and warehouse facility that is expected to provide greater supply chain control, quicker innovation cycles and greater production flexibility. Charlotte, N.C.-based Big Beverages 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.

Strategic Rationale

• Vertical integration of a plant primarily dedicated to Celsius provides incremental research and development and LTO (limited time offer) product opportunities, as well as a turnkey facility.
• Future expansion opportunities with ability to add additional capacity as the business scales and grows
• Per-case savings and improved leverage and margins expected
• Solid ROIC (return on invested capital) opportunity
• Earnings per share accretion potential

“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,” said John Fieldly, Chairman and CEO of Celsius. “The experienced team and modern facilities at Big Beverages are best-in-class, and we’re proud to continue working with these dedicated men and women to inspire even more consumers to live fit!”

Fieldly continued, “Vertical integration is a capital efficient growth lever that supports our vision to become the nation’s leading energy drink brand and unlocks shareholder value potential through better margin and profit structure.”

Founded in 2019, Big Beverages has been a trusted partner of leading beverage brands, known for its commitment to high-quality beverage production across the mid-Atlantic. It is one of the partners Celsius employs to manufacture quality beverages.

“The Big Beverages team has worked closely with Celsius for over four years, and we have always felt like we have been part of the Celsius family. We are proud of what we have accomplished, and we are very excited to join the most exciting and best tasting energy drink brand in the world,” said Ryan Goff, CEO of Big Beverages.

Forward-Looking Statements

This press release contains statements that are not historical facts and are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements contain projections of Celsius’ future results of operations or financial position, or state other forward-looking information. You can identify these statements by the use of words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “will,” “would,” “could,” “project,” “plan,” “potential,” “designed,” “seek,” “target,” and variations of these terms, the negatives of such terms and similar expressions. You should not rely on forward-looking statements because Celsius’ actual results may differ materially from those indicated by forward-looking statements as a result of a number of important factors. These factors include but are not limited to: our ability to realize the benefits anticipated from acquisitions, such as the acquisition of Big Beverages, our ability to successfully manage and integrate the operations, internal controls, procedures, financial reporting and accounting systems of acquisitions, and other factors related to the operational challenges and risks of acquisitions, including (i) increased costs, indebtedness, contractual obligations and/or other liabilities; (ii) the expense of integrating acquired businesses; (iii) the ability to retain or hire the personnel required for the successful operation of the acquired business and expanded business operations, in general; (iv) the ability to retain the business relationships of the acquired businesses; (v) diversion of management’s attention; and (vi) the availability of funding sufficient to meet increased capital needs, among others; the strategic investment by and long term partnership with PepsiCo, Inc.; management’s plans and objectives for international expansion and future operations globally; general economic and business conditions; our business strategy for expanding our presence in our industry; our expectations of revenue; operating costs and profitability; our expectations regarding our strategy and investments; our expectations regarding our business, including market opportunity, consumer demand and our competitive advantage; anticipated trends in our financial condition and results of operation; the impact of competition and technology change; existing and future regulations affecting our business; our ability to satisfy, in a timely manner, all Securities and Exchange Commission (the “SEC”) required filings and the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the rules and regulations adopted under that Section; and other risks and uncertainties discussed in the reports Celsius has filed previously with the SEC, such as its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. Forward-looking statements speak only as of the date the statements were made. Celsius does not undertake any obligation to update forward-looking information, except to the extent required by applicable law.

About Celsius Holdings, Inc.

Celsius Holdings, Inc. (Nasdaq: CELH) is the maker of energy drink brand CELSIUS®, a lifestyle energy drink born in fitness and a pioneer in the rapidly growing energy category. For more information, please visit www.celsiusholdingsinc.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241031010681/en/

Paul Wiseman

Press: press@celsius.com

Investors: investorrelations@celsius.com

Source: Celsius Holdings, Inc.

FAQ

How much did Celsius Holdings (CELH) pay for Big Beverages acquisition?

Celsius Holdings paid $75 million in cash for the acquisition of Big Beverages Contract Manufacturing.

When did Celsius Holdings (CELH) complete the Big Beverages acquisition?

The acquisition was completed on November 1, 2024.

What are the expected benefits of CELH's Big Beverages acquisition?

The acquisition is expected to provide greater supply chain control, quicker innovation cycles, production flexibility, per-case savings, and improved margins.

How large is the manufacturing facility acquired by CELH?

The acquired facility is 170,000 square feet and includes modern manufacturing and warehouse capabilities.