Beverage and snack firm PepsiCo (PEP) is strengthening its partnership with energy drink company Celsius Holdings (CELH) through a $585 million deal that increases its ownership stake to 11%, according to Bloomberg. As part of this agreement, Celsius will take control of PepsiCo’s Rockstar Energy brand in the U.S. and Canada. In return, PepsiCo will become the main distributor for Celsius products, including Alani Nu, which is a female-focused energy drink brand that Celsius recently acquired.
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Celsius CEO John Fieldly said that adding Alani Nu to PepsiCo’s distribution network will eliminate the need for 250 independent distributors, thereby saving it money and expanding its reach. With the addition of Rockstar, Celsius can now target the entire energy drink market, from health-focused consumers with Celsius, to women with Alani Nu, to traditional energy drink buyers with Rockstar. Interestingly, PepsiCo had initially invested $550 million in Celsius back in 2022 for an 8.5% stake.
While some believe that this partnership could eventually lead to a full buyout of Celsius, Fieldly declined to speculate by saying that this type of deal is common in the beverage world. Unsurprisingly, PepsiCo, which also owns Gatorade and CytoSport, sees energy drinks as a key area for growth. It is also worth noting that PepsiCo will still own Rockstar’s international business.
Which Beverage Stock Is the Better Buy?
Turning to Wall Street, out of the two stocks mentioned above, analysts think that PEP stock has more room to run than CELH. In fact, PEP’s price target of $156.15 per share implies more than 5% upside versus CELH’s 5.6% downside risk.
