How Celsius rebranded itself to be a premium wellness energy drink

0:04Hello, everyone, and welcome to the Modern Retail Podcast. I am your host, Cale Guthrie-Weissman. This week, I am so excited. We have John Fieldley. He's the president and CEO of Celsius. Celsius, it's, you know, every so often I say, this is a product that I know well, and this is a product that I know well. I have a Celsius probably at least once a week. It's a really exciting company to be talking to, a really exciting person, John, just because it's been around for, I think over 15 years, the brand, but it's really gained new life over the last few years, becoming really big competitor to Monster, Red Bull, but they've branded it very, very differently.

0:43It's very focused on Better For You sort of being a performance-based beverage, not just a sugary energy drink. And that clearly has resonated because Celsius has just been killing it lately. I know about a year ago, Celsius had a distribution partnership with Pepsi. I think that really helped really grow things because it got into many retail doors. I want to talk about all that. I just want to talk about the state of energy drinks, especially the state of better for you. It's something we talk a lot about on the show and on modern retail. But I think Celsius is a really great example of really hitting into a zeitgeist and being able to grow with it.

1:18But John, how are you doing? Doing great. Doing great. Great opening as well. So, you know, excited to be here. You know, it's exciting what's going on in the energy category. You know, it's one of the fastest growing categories in beverage. More consumers are coming into the category than ever before. And I think you're seeing really a different perception amongst consumers about the energy category. And if you go back, you know, five, 10 years ago, it was really positioned as a need state or a specific usage occasion. And today, and Celsius is leading this fitness lifestyle position, has really broadened the usage occasion of energy.

1:55And you're seeing great flavors. I have a cosmic vibe here, which is really a refreshing, sparkling fruit punch flavor. We've got a variety of different flavors that actually pair well with, you know, meals and lunches and salads. So we've really helped expand the category within that traditional need state and energy. And the energy category is an exciting place to play in as well in the beverage category. As I said, fastest growing. Absolutely. Yeah. One flavor that you have that I'm obsessed with, and I wasn't sure how to bring it up, but you brought up the flavors. The cola one. It is so good and it's so smart.

2:28Is that as popular with others as it is with me? Yeah, the cola is really, really great cola flavor. It's that traditional cola flavor. You know, it's interesting. It does really well in the fitness community, at Vitamin Shop. It does well on Amazon and online. We do see opportunities as we grow in scale. But, you know, it's like what we're noticing when it's in main retail, mainly in convenience as well as a huge opportunity for us. It's not the first flavor that's grabbed, but love the cola flavor. It's great. Lots of fans here in the office about it as well. Yeah, it was one that the moment I tried it, I was like, oh, my God, this is great.

3:02But let's start from the beginning for in case there are any viewers or listeners who don't know what Celsius is. You've been at the company for a long time. Correct me if I'm wrong. You became CFO in 2012, became CEO in 2017, and you've been sort of leading the charge since then? That's correct. Yeah, it's been an awesome journey. Amazing journey. And so where was the company? Because Celsius, it's, you know, it's well over a decade old. It's sort of had its ups and downs. Where was the company when you joined? And in 2017, what was sort of your major mandate, I guess, for bringing it to where it is today?

3:35Yeah, I mean, I started in 2012 as a CFO as part of a turnaround team. Unfortunately, you know, the initial kind of launch that the product, the initial launch phase, It just, they weren't able to get really a loyal consumer behind it and then really connect with the masses. So unfortunately, you know, retail is very, very challenging. You got about six months to perform. Otherwise, you're out. So they had a huge opportunity. They had, it's a, it was positioned at a negative calorie drink. It did, you know, got tons of interest from retailers. And actually, Coke and Nestle partnered to create a knockoff product of it back in 2010 called Invega.

4:15So, I mean, created a lot of buzz, got a lot of distribution, but just couldn't get that connection or that conversion with consumers. And unfortunately, it was getting delisted out of a ton, almost all the distribution when I started. So it's really this was a restart in 2012. And I, like you mentioned, I took over as the CEO in 2017. And I was working very collaboratively with the prior CEO. Actually, he's the one that brought me on into the company is Jerry David. He was the prior CEO. He wound up retiring back in 2017. But he's been a great mentor of mine along the way, and I've always worked alongside him.

4:53So we just continue to execute with our strategy, kind of really understanding what's working, why it's working, especially for consumers as well as retailers. and you really need to make sure you have the right value chain proposition and that ultimate, that connection with all the partners through the value chain. Were there any tweaks to the value prop or the marketing that you made when you joined a CEO that sort of got it to the point it is now? Did you, was that when better for you, you thought was really starting to hit? So you went away from negative calories and did this other thing. Talk to me about the overall value prop evolution.

5:31Yeah, I mean, the value proposition with the consumer, It's we've learned initially we're going after that. The product does have science behind it. Product is functional. It's truly functional. It burns cal helps burn calories and body fat increases your metabolic rate. It's a great pre-workout, but really the initial branding and thesis behind the brand was really going after that calorie burning. And we learned along the journey that, you know, it's a great energy drink. The product has over seven essential vitamins. To your point, there was a new movement that was taking place. I'm better for you.

6:03So we really repositioned the brand to really move away from those pinpointed, you know, structure function claims that we were making into more of a lifestyle brand. And I think that's when we really started to connect with consumers. It's a better for you opportunity, a better for you drink that offers this essential energy for life. And that's kind of how we arrived at this live fit mantra. So prior to right around probably 16, 17, we started positioning the brand into this healthy, better for you segment within energy, which has really grown rapidly. And today, probably this year, about 50 % of all energy drinks sold are going to be sugar free for the first time.

6:40So things are really changing. And so can you talk about the lifestyle brand part? You know, I think every company I talk to in some way says we're a lifestyle brand or we want to position ourselves as a lifestyle brand. And Celsius, I do believe, is a lifestyle brand, and it makes sense. You have such ardent followers. But how did you get it to that way? Was that about partnerships? Was that about, you know, I feel like you have to do sort of a perception shift in order for that to happen. So what was the playbook for that? Yeah, I mean, we always talk internally. There are a lot of great team members that have helped Celsius along the journey and today and will continue to, the brand will be key upon the individuals that continue to build the brand.

7:18And, you know, when you look at, you know, the Better For You movement and how we positioned it. I think it was a really a aha moment. We were doing a focus group internally and we had a one individual say, you know, you know, this is like, you know, you need to really need to, this is a great energy drink, but it needs to be aspirational. And the way you guys are positioning the product, it's almost like diet and, you know, no one's ever cheered with a slim fast. And that was like an aha moment we had, to be honest. And at that point we all looked at each other and we go, Absolutely right. We all knew we had a great energy drink on our product, on our hands.

7:57That really started the change for this healthy energy, better for you energy, repositioning that we did with the brand. And building a fitness lifestyle brand can't be done overnight. So I think one thing that's amazing with the product and where we've been on our journey, we focused heavily on fitness and vitamin shop and GNC, even still today. You know, fitness is very close to the brand's DNA. It's our foundation. We go to Olympia and Arnold. Those are two massive fitness shows, largest in the country. Big contributors to that. We have big fans within the community, within fitness. So we have great partnerships as well with some of the largest fitness chains in the country.

8:40So that's really important to continue to stay relevant to your core DNA. I think also the brand being over 10 years old and almost 15, you know, I think the products actually help change people's lives. I think that's along the journey. I personally know several people that, you know, it's got them thinking about health and wellness. You know, they really say health is Celsius, you know, got them thinking, got them moving and inspired them to live, you know, an active, fit lifestyle. So I think when you have a product and you have a brand that really inspires people to live a better for you lifestyle and positioning, that's when you start to build that fitness lifestyle brand.

9:20And it all comes back to the core DNA of the product, which is, you know, it's seven essential vitamins. It is truly functional and helps you live that healthy lifestyle and promotes good health. So I think if you have those brand, those keys within the brand's DNA and you stay true to your roots, you know, you can continue to build that fitness lifestyle brand. Makes sense. So let's talk pre-Pepsi distribution partnership, because I imagine that changed the scales on a lot of things. But were you what was the makeup of your distribution before then? Was it mostly health and fitness or were you were was it a lot of individual stores or, you know, convenience stores, et cetera?

9:58Yeah. I mean, when you go, when you look back on the DNA, you know, the kind of the retail strategy of the company. So keep in mind, we were delisted out of pretty much every retailer in the country. So trying to go back in, it takes time. So we built the brand in fitness. We built it in the gyms, health clubs, vitamin shop, GNC. And then the path went to health and beauty within really the grocery channel. So because keep in mind, we were delisted as beverages. So we had to find another route to retail. So we actually built the brand and in grocery within the health and beauty sets right next to, you know, it's actually hindsight when you look at it differentiated the brand very much.

10:39So from that, those traditional energy drinks that are in the aisles today. So I think that also helped with the positioning of the better for you and also this fitness lifestyle. So, you know, that was a blessing in disguise that we weren't allowed in those traditional energy drink coolers, you know, in the earlier days. We're still there today in many retailers. How we got there is direct to retail. So we went direct to retail. We did use wholesale McLean and UNFI and Kehi later on. And then right before we went to Pepsi, we were about a year and a half, we gained distribution with a variety of great distribution partners through Anheuser-Busch.

11:20There's a lot of great independent distributors there. And we were working on flipping over the route to market from a direct to retail or a wholesale model to a DSD model. We weren't fully transitioned over, but we slowly were working on transitioning divisions of retailers and specific retailers overall to DSD. So you get that white glove service. And once the brand, especially in beverage, reaches a certain level of velocity, you really need that DSD in order to keep your brand in stock. And also within energy, you know, that cold placement is so key. Those impulse purchases are so important.

12:00and you can't get to those cold boxes really without a DSD service and direct store delivery as they call it. Got it. Got it. And so when you were beginning and you were getting those sort of health and wellness grocery direct to retailers, like I feel like a lot of the Celsius story is that you got a lot of brand evangelists sort of in the health space who were talking about it. Was that happening in tandem? Was that just an organic thing that happened because you were on those shelves and they got it and started talking about it. But like, I can think of different podcasts or I can think of different Instagram accounts where they started talking about Celsius a couple of years ago.

12:37And I imagine it was because of this placement. Would you say I'm wrong? Yeah, no, I think you're right. I think, you know, getting additional placements and availability, you know, we did some great things in the last several years, especially during COVID, you know, really big. We repositioned our sampling teams to help out first responders. So all the COVID testing sites, we partnered with a lot of doctors and nurses and hospitals and really went after, you know, when you look at trainers, when, you know, during that COVID lockdown, when all the gyms were closed, we partnered with our trainers.

13:13I mean, the world got turned upside down and we actually put them on our social platforms and we did workout Wednesday. We did a variety of midday workouts. we boosted, put money behind them and built some of their credibilities. And that really was the earlier start of, you know, the zoom personal training classes, you know, that wasn't even in existence prior to that, and really worked with a lot of these trainers to really showcase them and also show them how they can leverage the platform for their own benefit and, and change the way people work out. I mean, even today, you can still, they still offer zoom classes.

13:45And really, that was the formation of that whole new industry. So I think being a leader and a thought individuals and those individuals that you help that are in health and wellness. I mean, that goes a long way with brand credibility. Someone that helped you succeed in your life and help you move forward. Brands that stand by that, I think that's important. So those are some of the tactics we did. We did a variety of other tactics, but I think that gave us really great credibility within these core communities within health and wellness and lifestyle. And there was a lot of podcasts. And I think a lot of people were looking for something differentiated and better and wanted some functional energy and, you know, fitness is on trend, hip, cool, sexy, premium, the ingredients, the products clean.

14:30It's got, it kind of hits on all these mega trends within food and beverage. And it's really, it's been a phenomenal success. We're going to take a quick break and we'll be right back. So were you just kind of waiting in the wings for all of these trends to become like a confluence and then you could suddenly hit it. It feels like you've been around for a decade and then suddenly it all came together and now you're able to really accelerate from there. Do you think that's the case? No, no. The team's been working hard along the way. It's definitely not waiting in the wings. The team has been really...

15:09We have a great team. We have passionate team members all through the organization. Everyone's been working really, really hard. I think, you know, the Pepsi partnership has provided us a great opportunity to gain national distribution. So pretty much we're in almost every single retailer in the country now. And that has allowed us to have more resources to further invest in sales and marketing and operations and finance and all the things that you have to invest in when you're growing and scaling a business. But by no means were we sitting back. I think you always got to be nimble. You got to outmaneuver.

15:40You got to execute. You got to continue to A, B test, try different strategies. I think it's really a variety of tactics that has allowed us to really harness some of these trends. Because if you sit back, the train leaves the station. So you've got to be able to tactically see the opportunity, put strategies to grab the opportunity, and leverage it to your benefit. And I think our team did an amazing job really doing that from retailer strategies to shopper marketing programs to really further leveraging the brand as well. Some brand further enhancing and refining our communication and our positionings as well as some of the tools that we use internally.

16:26We're very sophisticated with data now. We continue to leverage data each and every day and really continue to mine the diamonds that are out there that we see in the data. Got it. Yeah. No, I didn't mean to say you guys were just waiting, but it felt like it was maybe a mixture of many things. This is nothing disparaging to you guys at all. But I want to ask about the Pepsi thing, because I'm glad you brought it up. Can you just give a general lay of the land of, you know, had you been pretty much looking for a distribution partnership like this? Did it feel like a real sort of come back to home after the delisting so many years ago?

16:57Like, what were the general feelings and how important was this to the growth strategy where we are now going forward? Yeah, I mean, we're building out a distribution network through Anheuser-Busch. So piecing together almost over 200 distributors, piecing them together to really service our retail. So that was a big initiative we had going on is building out a national distribution network. So that was about a year and a half, two years in the works as we continue to do this. So we're really excited about the opportunity we had. You know, we've spoken with Pepsi and a variety of other, you know, within the beverage community, they actually came to us.

17:37And we started talking about the opportunity for them to take over the distribution. So constantly reevaluating each opportunity. With Pepsi, you're going to have greater breadth in your distribution. It's also more centralized. So keep in mind your independent network, you're piecing together really over 200 different companies, creating a national network versus Pepsi, you really have almost four divisions. So it makes it more streamlined. You can execute more efficiently within priority periods and with executing your overarching strategy. So it's been a great, great help and really boosted us on our distribution.

18:19And now it allows us to really maximize and play at the same level as the largest energy drink brands in the category, which Monster has Coke as their distributor and Red Bull has their own distribution. So that allows us to play at that really top level performance opportunity. Did you have to, like, did you rejigger your teams once you got the Pepsi just because they were working in such a stratified way, working with so many different distributors for the same goals now that it was much more centralized? Like, how did that change the day-to-day workflow at Celsius? Well, you're constantly, you know, as you're growing and scaling a business and prior to Pepsi, we were growing really great growth rates as well.

18:58So we're constantly re-evaluating the teams and restructuring teams as we grow and scale. So this is just another, really a stepping stone to re-evaluate the teams, evaluate the structures. And when you looked at the Pepsi opportunity, we restructured it into four divisions. So our teams, our sales organization, our field marketing team is now structured to really overlay over Pepsi. So prior to that, we were doing it more regionally based. And so you got to kind of continue to alter your strategies, your structures based on your routes to market and what works best to be most efficient with your organization to execute.

19:41It all comes down to execution. So totally restructured the company. You know, ever since Pepsi restructured finance, we've added, we've probably, we're almost a thousand strong now. Prior to Pepsi, we were probably closer, maybe around 300, 280, somewhere around there. So, yeah, we've expanded quite rapidly. And it's really to further support that distribution. So, we're continually reevaluating our teams and our structures as we scale. Got it. Can you talk, you know, the Pepsi with the Pepsi distribution partnership? It's not like you were just entering retail doors. You were in thousands of retail doors, I imagine, already.

20:21But how has like have you had to change the marketing or the brand messaging as over the last five plus years as you went? You were getting more mainstream and going away from sort of the more health and wellness, but getting into these very big doors. I feel like you're telling the brand story in a much quicker fashion now if you're just in a cooler. So how have you done that and what have the changes been? Yeah, no, absolutely. I mean, over the last five years, we really moved away from the structure function claims and more of a broad, maybe to your point, more of an easier messaging. So really about Celsius provides essential energy to live fit.

21:02And that's really what we're going with. You know, that's a it's a very clear message. It's inspirational, also ties into health and wellness. And that's worked really well for us. Prior, we were talking about the features and benefits of the actual product, which when you look back, probably was needed at that point because you're not hitting that broad. Now that we have 98 percent ACV, to your point, we're in these cold, you know, cold coolers. It's more of an impulse purchase opportunity. So we really got to continue to refine the messaging. And that's something we talk about internally all the time, right?

21:37Constantly understanding A-B testing, understanding how consumers are connecting with your brand. We have bigger opportunities with larger communities as well now with this distribution. So what other communities that we're going to target and how best to communicate the brand values so you can be relevant to them. Because what's important about in the energy category or with any consumer products, you want to get, it's not about that first purchase. It's about the continuity, right? It's about becoming part of a daily lifestyle, part of a daily routine is what's critical. It's not just trying to get that first buy.

22:15It's about becoming part of the daily routine. And so what are some of those marketing initiatives that are for a more wider type of audience that you're doing? And are they on the more top of funnel level? Are you focused really on, you know, shopper marketing, end caps, that type of stuff? What are you thinking about now that you have this wide distribution and you have people who are seeing it every day? Yeah, I mean, getting more strategic with our retailers is extremely important. Shopper marketing strategies. You know, we just partnered with Ferrari with F1. So that's a big partnership for us.

22:50really leverages the pop culture, especially with the increase in awareness of F1, especially with Netflix, the Netflix series. And retailers are really excited about it. So trying to find a property that aligns with health, wellness, aligns with the brand's energy component as well, but also is a property or asset that excites retailers too. So really trying to you know, strategically almost serve the shopper, the investment in the brand asset that you're looking to leverage within retail, but also connecting that emotionally with consumers. So that was a big investment for us. And it's been a great partnership.

23:31We've Charles Leclerc, they won just most recently. We have several races coming up. So it's a great successful brand. It is a premium brand when you Ferrari and nothing's better to have Ferrari associated with Celsius as well. So we're really excited about it. Yeah. So what is like, can you just give sort of a top level what the partnership strategy is? Like, is it are you looking for sort of top tier brands like Ferrari? Are you looking for certain types of influencers or creators or celebrities, etc. that that would align like, like walk through how you what is the ideal type of partnership you would want to make in the current state that you're at now?

24:10Yeah. Well, when you look at it, we want to be a premium brand within the energy category. So it's really important we continue to partner with premium brands alongside to build that credibility. So Ferrari was a great partnership. We're looking for really top funnel awareness, but then also driving at the point of purchase as well. So that's what those targeted NCAP retail marketing programs that we have. We do a variety of programs from enter to win sweepstakes where you can get gear and ultimately, you know, win a trip to Las Vegas to the race and have a great, unique experience. And we leverage that in a variety of different ways, not only at the point of retail, but also with our distribution partners and some of our sales team members as well around that.

24:53So it's a 360 encompassing program that leverages top funnel, targeted, social media, event driven, and at the point of purchase. So you're hitting, bringing it all the way down to the funnel. Got it. Got it. I wanted to switch gears a little bit. And you're sort of talking about this, your premium brand. I feel like that's a new, you know, before you never thought of energy drinks as being a premium player. They were sort of very, you know, you bought them at the convenience store because you were tired, you were driving. Or I remember like the Red Bull people would come to my high school in the early 2000s.