Celsius CEO Explains How They Win in Energy Drinks

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1:14Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal. And I'm Tracy Alloway. Tracy, I have to say, I've been feeling a little lethargic this week, a little bit under the weather. Yeah, you know, sometimes you wake up on the wrong side of the bed. you. Anyway, but I'm feeling a little bit better because I've been consuming a lot of caffeine today. Yes, I'm looking at you in the studio right now and you have with you another Celsius. Yes. What's the flavor on your one? I am drinking an Arctic Vibe, which is a sparkling frozen berry edition. I don't know. I have to, I'm not sure like if in a blind taste test, I would say, oh, this is berry, but it's very flavorful and it's sugar-free and it's perked me up and I feel very keyed up and ready to go.

2:01You are also drinking a Celsius. What are you drinking? I have Cosmic Vibe, a sparkling fruit punch, and it does actually taste like carbonated Kool-Aid. It's sort of nostalgic in some way. But the thing that interests me is, you know, I'm looking at the branding and the ads on the can and we've talked about this before. We did a whole episode about Celsius. But the interesting thing to me is how this is slightly different from other energy drinks. So it talks about obviously providing energy, but also accelerating metabolism and burning body fat. And I was going through the ingredients earlier and it has biotin in it, which is something that I take for like hair and skin and nails and stuff.

2:43So I guess I don't need to take supplements anymore. I can just drink Celsius. Supposedly you could just drink Celsius. No, I'm fascinated for this for all reasons, for all kinds of reasons. I mean, we've talked about energy drinks for a while. We did a story about the incredible rise of episode about Monster a few years ago, one of the stocks that's actually outperformed Amazon over the same time period. And if you go into any local deli or bodega or 7-Eleven these days, you just see this wall and the wall just keeps getting bigger of drinks and many of them highly caffeinated energy drinks. And it's sort of fascinating to me, like there are all these energy drinks out there that exist.

3:23How is there room for more? It's like they all like, right? Like you like basically want to consume one and you get a jolt of caffeine and you go about your day. It's amazing that despite this maturity and this size and we have Red Bull and Monster and all those, that yet somehow there can still be room for another competitor to seemingly, I know it's never coming out of nowhere, but seemingly coming out of nowhere. Yeah, this is the thing that fascinates me too. So we don't just have different brands of energy drinks. Within the brands themselves, there are so many different flavors now and options.

3:55It's kind of amazing. And again, when you go into the store, you see this sort of rainbow of cans on display. The other thing that interests me is the distribution question. So I'm always curious, who makes the decisions of what ends up on the shelves in your local 7-Eleven or Circle K or Duane Reade or whatever? How do those specific flavors get chosen, much less even the brands, right? And I think this is something that's come up in a number of episodes now, just how important distribution can actually be to these particular types of products. Well, I think we should just jump right into it.

4:33We really do have the perfect guest because today we're going to be speaking with John Fieldley. He is the president and CEO of Celsius Holdings. He's been CEO since 2017, been with the company for 12 years. And we're going to ask him all these questions about how this all works, how you rise to the top in what is clearly a very competitive field. So, John, thank you so much for coming on OddLots. Glad to be here, Joe. Excited. Tracy, it's exciting. I like how you brought in our cosmic vibe. We love the flavors on that. Fruit punch, refreshing. That's what it's all about. Glad to be here. All right.

5:07I have a question. So like a year ago, I started noticing that all the fit and cool looking people at my gym were drinking Celsius. And then I was like, well, I want to be one of the fit and cool looking people at the gym. So I then bought a Celsius. What happened? Celsius has been around a long time, but suddenly over the last year, year and a half, maybe two years, I started seeing it somewhere. What happened a year and a half ago that suddenly, was that a thing that you guys did? Was it word of mouth? What suddenly happened that sort of really like I started seeing it everywhere? Yeah. I mean, when you found us at the gym, the brand's been around for over 15 years.

5:45We built it in the gyms and health clubs at Vitamin C, GNC, Golds and 24 Hour. Those are the likes. If you're going back only a year and a half ago and you were talking about your comments on the intro about distribution, we partnered with Pepsi a year ago as our distribution partner. Oh, there you go. So that really expanded the availability of Celsius to where we are today, which they call a 98 % ACV. So there's reporting stores that report sales for consumer products into IRI data, or Nielsen, they call it. And then looking at the total population of the stores reporting in, Pepsi has been able to get us to about 98 % ACV.

6:24So we still got a lot of work to do on the placements in each store. But in general, you should be able to find Celsius probably in almost every retailer in the United States or at least 98 % of them, so the data says. I have a really straightforward question before we dig into some of the specifics of this particular business. But how much caffeine do you need to consume to be CEO of Celsius? How much do you drink on a daily basis? You know, I start the morning off. I probably have two cans a day. I have a can in the morning, a Celsius in the morning, and then usually have one with my lunch. So drinking a watermelon right now, which is dynamite and a great flavor.

7:04All right. So you mentioned distribution and the deal with Pepsi. My understanding from the previous episode we did with Mark Astrakhan is that a lot of this business is about distribution, and you struck that deal with Pepsi. Monster has a deal with Coke, from what I remember. How do those distribution deals actually come into being? What are the conversations actually like? Yeah, well, you know, distribution for consumer product companies are extremely key. And beverage, Joe, I hear you talking in the beginning about, you know, how competitive the beverage industry is. And there's about 5 ,000 new brands in the beverage industry that come to market each year.

7:42About 10 % of those will make it to$100 million in sales. And then another 10 % of those will make it to like a million dollars. and very rare will any of them make it to a billion dollars in sales. So it's a highly competitive market. And when you look at the distribution, that's been a challenge. It's definitely a tough conversation because if you have a product, you need to be able to have retailers acceptance. So your distributor needs to have a place to put it, right, if they take the distribution. And then you also need to have consumers that are buying it. So it's like a chicken and the egg, which is very difficult to do.

8:17So when we go to distribution prior to Pepsi, we're in a lot of ABI, Anheuser-Busch Independent Distributors. And we had a lot of conversations with them. It was very difficult for them to take a product because they were saying, I'll take your product on. But then I just can't have it sit in my warehouse. I need a product. I need a consumer pull. I need retailers that want it. So what we had to do is we had to really build the demand at the retailer prior to going and really getting these distributors to sign up. So we actually had to what they call sell direct. So we'd sold direct to a lot of the retailers, our targeted retailers that we built scale and volume and consumers around to create that sales channel.

9:01So then we could go to the distributor and show the distributor we had there's a reason why we should be in their distribution network. And that's constantly reinforcing and then collaborating with them to build out the distribution, build the consumer awareness, and ultimately work to get a loyal consumer around the brand within that given market. Yeah, no, I mean, that makes a ton of sense, right? So that whether it's the independent Anheuser-Busch distributors, whether it's Pepsi, they're not going to pick it up unless their own and retailers are going to actually devote shelf space. They're not going to devote shelf space unless they see that there is some evidence that if they devote shelf space that someone's going to buy it.

9:37What did you do? Like, you know, different energy drinks seem to have different audiences or different, so, you know, like, I think some, like, are probably more for the gamer space. And some are more for like, sort of like Euro types who like go to clubs and listen to DJs. And some want to be associated with extreme sports. And some are associated with construction sites and maybe more blue collar workers or truck drivers, et cetera. How do you pick a lane? Well, that's the other thing. You need to pay, you really need to have a target audience. You need to have a retailer story. You need to have a distributor story.

10:13You need to have a consumer story. So that's one thing that we've been able to work on over the years. The same retailer story and your distributor story or sales pitch needs to be different than potentially the consumer pitch. When you look at it, it's really understanding your customer. You have to be customer centric. You have to understand why does your customer need your product? What is the reason? What is the void in maybe their portfolio? And at the end of the day, how can they make more money on your product? So as an example, to your point, there's different segments. So Celsius is really essential energy.

10:47So Celsius is Celsius live fit is our mantra. We have over 2.8 grams of vitamin. You mentioned biotin. Tracy's in the product and that's we have a variety. We have green tea and ginger, chromium. We have vitamin C and your B complexes. So a lot of great vitamins in there. It's almost like a multivitamin within a can. and that really positions us as this healthy, better for you energy segment. And that's really what we, when we're speaking with our distributors, they had a void because historically it's been sugary energy drinks that they've had within their portfolio. And we were offering this different offering for them to sell for this better for you consumer, which is especially coming out of a post COVID world.

11:28Everyone's thinking about health and wellness and fitness, which is a key and a DNA component of who we are. We originally started off as a pre-workout, but now we're aligned with today's health-minded consumer with our attributes of accelerating metabolism and helping burn body fat. So really help you achieve your health and wellness goals. So that allowed us to position ourselves within the distributors as a unique offering within their portfolio. And that was our go-to-market strategy with our distributors and also with our retailers to be able to carve that space out within those precious reset volts or planograms that retailers have.

12:03So it's a multifaceted approach to gain planogram approval at your retailer and then get that distributor to actually get it on the shelf. Oh, wait, what's a planogram? I've never heard that word before. So you mentioned how do your products get included on your retail shelf? So when you go to your retailer and you go to these chains, all those products are mainly orchestrated or designed based on planograms. So the products are pre-selected by a buyer at the corporate office on almost like, think of them as portfolio managers or, you know, like a mutual fund manager or so on that's picking investments within their shared space to maximize the retail, maximize revenue for that retailer.

12:45So they're picking the particular products for their consumer base to drive the highest return for that retailer. And that's all driven based on planograms. That's what buyers set. And then those get provided to the store levels to be able to set the shelves for the right strategy. And those strategies get reviewed multiple times a year. There's big annual reviews that happen usually in October and November, depending on the retailer. And then retailers will do like a mini cut-in or a reset or a review right around mid-year historically. Well, they'll make some changes to their planograms to really kind of dial in to maximize the opportunity.

13:22So example, if a certain brand or certain flavors aren't working within the initial few months, they'll maybe get cut and they'll try new opportunities that come in. So one thing in a retail space, especially in the energy category, you really only have, in some cases, up to 45 days to perform on shelf. Otherwise, you're out. So highly competitive, highly difficult, and it's really hard to compete in today's energy drink category and in beverage just because it's dominated by really strong brands that are out there. And Celsius has been able to really rise to the top as we are the third largest energy drink brand right now in the United States.

14:01So we have over a 10 share in the energy category for the first time, and just getting one share is practically near impossible. So from your perspective, how do you fight for that shelf space or that space in the planogram? And I'm looking at some images of this right now. Yeah, they're cool. They look like this. They're like a visual representation of what a deli looks like. Yeah. It's basically the rainbow wall that I mentioned before. I'm looking at one for detergent and it's extremely colorful. But how do you convince companies that you deserve that space? And going back to the chicken and egg issue that you kind of described before and the idea that you only have 45 days or so to prove yourself, how do you actually go about demonstrating that there is demand, especially when you're unveiling something that's still relatively new in the market?

14:49Yeah, that's the highly difficult thing to do. Usually it starts off, certain retailers are able to make regionalized or localized buying decisions. So those planograms you're looking at for the Clorox or the detergent set that you're looking at, those will be mandated down from corporate. But then on a localized level, let's say maybe 10%, maybe 15 % of those planograms can be adjusted for local store manager level customization. So what we did is we were able to work locally with a few managers at some of these key retailers to really focus on building a story. So, you know, gaining trial, working with the retailers, building a loyal consumer in that outlet, and then kind of scaling that to two to three stores, then eventually going to a region.

15:37And so you start to build a sales story on why you need to be in that retailer and why you warrant maybe a larger regional or national rollout within the retailer. So it's really starting those grassroots stories and then being able to get that buyer meeting, which is so difficult to do at the corporate headquarters for their annual reviews, and then convincing the buyer why they need to bet on your product. I mean, ultimately, at the end of the day, you're trying to get the buyer at these retailers to invest in you as a brand, as a company. So it's those type of strategies. And you're going to have to convince a lot of its emotion, too, right?

16:15So in your early brand, the argument is, well, the brand doesn't travel. Maybe it's a certain community segment, certain income level, demographics. So there's a lot of negativity, but you have to convince that buyer to believe. once you convince that buyer to believe you get the opportunity, then it's on you to perform. And if you can perform, then you continue to build the brand based on data that shows results. It shows that you need to get better placement in that planogram, shows that you need to get additional flavors because you're offering a variety and opportunity. And the billboard effect is super critical.

16:50You need to get a billboard effect. So when we started, I'll take a target as an example, when we first got listed nationally in Target, we only had two flavors authorized. That was on the warm shelf. And almost every year after that, we were able to, because of the increase in sales and working with local managers, we were able to build that and get authorized for an additional flavor to be added into the Target sets. But once we got to about five flavors at Target, we were able to create this like a billboard or Celsius brand on shelf, which started to be incremental. So when we added another flavor, it didn't cannibalize our sales.

17:28It actually increased our sales because more consumers can see the product because you create the billboard. Just think last time and just think last week, how many new brands you tried in the last seven days and the last 14 days and 30 days. It's really difficult to get a consumer to try a new product. You really only have about 30 seconds at best at retail, at that retail shelf to convince that consumer to try your product for the first time. Wait, you mentioned you started at Target on the warm shelf. I assume now you're in the refrigerated section of Target. Yeah. Today we have a warm availability in the energy set and a variety of stores around the country are in the front checkout coolers and additional cold placements throughout the store.

18:11Yeah. I noticed at my local deli, I think I said this last time we talked about you guys, I remember I was looking for the Celsius and I didn't see you. And then it was only because I I realized that my local bodega now has an entire Celsius devoted refrigerator that is just Celsius. So well done on that. Let's talk about the distribution relationship. I have to imagine if Tracy and I were starting an energy drink, we would be desperate to get on part of Pepsi's distribution network early on. But then if we grew really big and the Avlats energy drink were huge, then I imagine that power relationship between us and Pepsi might change.

18:49And maybe in a few years, we say, hey, Pepsi, you know what? Maybe we want to change the terms of our contract. I'm sure you have a great relationship with Pepsi, so I don't want to say anything. I'm not trying to cause any trouble. But can you talk to us about how that relationship with the distributor changes or evolves as you grow bigger and have your own form of leverage? Yeah, I think that's, we're still in the early phases. So call it the honeymoon with Pepsi, because really, we're only one year in. So we gained distribution. We're gaining additional displays. We're working with them collaboratively for the first time this year because it's really our first time that we've had a full year of planning.

19:28You can imagine Pepsi, a company so large as that, their planning cycles. You know, they're planning like two years in advance versus, you know, at Celsius, we're very nimble and quick. We've had to adjust our planning cycles to really align with their planning cycle on execution, innovation, and retailer marketing programs. Those are the likes. But what we've been able to do this year, we're really excited for the first time to really be able to harness Pepsi's resources and strategic planning so we can be included on national priorities and national execution programs. So I would say we're still in the early phase.

20:02We're really excited about the opportunities. We're gaining cold placements. You mentioned the deli that you went to and saw a Celsius dedicated coolers. We've placed over 10 ,000 coolers together, did the amount of displays together. So we're really excited. This partnership's just getting started. You know, what we say in the beverage industry, especially in energy, you know, if it's cold, it's sold and then stack it high and watch it fly with this place. So we say that all the time internally. And it's been great with our Pepsi partnership.

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22:11Choosing Toyota means having more options and less compromise. So visit buyatoyota.com for a great deal on an efficient Toyota today. Vehicle's projected resale value is specific to the 2025 model year. For more information, visit Kelly Blue Book's KBB.com. Toyota. Let's go places. Do beverage brands, however, like dream of owning more of their distribution over time? Like, I mean, eventually, again, I understand you're in the honeymoon phase. You're probably going to be working with Pepsi for a long time, but just conceptually, does a beverage company eventually try to own more as much of their own distribution capacity as they can?

22:55Well, that's an interesting question. And it's like, when you go to think about that, what type of business are you? And what type of business do you want to become? So there has been a successful company that's did it on their own, which is Red Bull. I mean, Red Bull owns their own distribution. They're phenomenal. They do a great job, great executors, and it's worked extremely well. There's been other regional brands that have tried that. And if you don't have the right amount of scale until they get that scaling point, It could be an extremely costly strategy. If you think about all the trucks and warehouses and people and resources, you're going to need to manage that.

23:34So when you look at Monster as an example, they use the back end of Coke. And they're really focused on what they do best is portfolio management within sales and marketing teams. So, you know, that's our strategy. Our strategy is to leverage the PepsiCo distribution network and their resources and team members to further bring our brand to more people and more consumers and do what we do best, which is the sales and marketing component, really bringing great tasting, innovative energy drinks to market. Tracy's drinking that cosmic vibe, which is out of this world. And we're launching a trilogy and going intergalactic with Galaxy Vibe and Astro Vibe as two new flavors this year.

24:12Oh, man. I have a slightly different distribution question, which is if I go on Amazon right now and I type in Celsius, the second result I get is a sponsored ad for Monster Energy. How annoyed does that make you? I think we're flattered. I think that's quite flattering that we've gotten to the point that Monster's buying ads against our consumers and fans searching for Celsius. So we do not see our consumers really trading between brands. So Monster's a great brand. Red Bull's a great brand. But that's really flattering. It's a highly competitive environment. The category continues to grow. Celsius is actually bringing new consumers into the category.

24:58So we're one of the true growth drivers, largest growth drivers, not only in dollars, but units to the category. So highly competitive, highly competitive. Yeah, that's right. First, it's the Celsius, and then it's that Swedish fish flavored energy drink. That's like the transition. But actually, on a more serious note, the thing I'm really getting at is like, how much does the algorithm of something like an Amazon affect your sales? And how much control do you have over something like the results that actually show up? I think the algorithm is based on the user preferences. But one thing, we're the number one selling energy drink on Amazon, the most recent read.

25:40And we've been roughly around 20 share of the whole energy category on Amazon and perform extremely well. I think when you look at Amazon, that's a really, really loyal consumer base. You know, it's someone that's spending, you know, over$20 to purchase a 12-pack of warm beverage that's going to take it home, have it shipped to their house, put it in a refrigerator, chill it, and then drink it as a daily routine or daily lifestyle. So I think that's a really loyal consumer base that's on there. And it really just shows you the loyalty that we have with the Celsius portfolio, that even with the distribution gains and the increased availability with our Pepsi partnership, we've been pretty much able to maintain our share numbers and growth trajectory on the Amazon.

26:26So it's like all tides are rising as we're distribution gains, showing that Celsius is aligned with today's health-minded consumer that continues to evolve, looking for better for you, wants more out of their lives. And most importantly about Celsius, our DNA is all about helping you accomplish your goals and objectives. Let's talk about the branding element some more. So obviously you want to continue to grow and find new consumers of the beverage, but also you have this lane, you have this sleek, pretty well-defined can, the fit people at the gym. How do you think about growing the brand? I looked in your recent quarterly call and you're talking about something with the Jake Paul fight, something with the MLS, an F1 partnership.