Last month, energy-drinks group Celsius Holdings announced the acquisition of US Alani Nutrition (Alani Nu), home to a range of zero-sugar energy drinks, snacks, and protein shakes, for $1.8bn.
Celsius is no stranger to the functional segment within energy, but the purchase of the US-based business seems a particularly significant move for the group at a time when it is seeing a somewhat sluggish return to growth in its North America market.
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Kentucky-based Alani Nu, which targets female consumers with its health and wellness-focused energy drinks and supplements, is being bought from co-founders Katy and Haydn Schneider, as well as Congo Brands, a holding company owned by entrepreneurs Trey Steiger and Max Clemons.
Alani Nu had reportedly been mulling either a full or potential sale of the business in 2023.
Celsius expects the deal to launch a “leading better-for-you, functional lifestyle platform” that caters to the growing demand for zero-sugar alternatives.
The company says that, combined, Celsius and Alani Nu would have had pro-forma sales of $2bn in 2024.
Industry watchers have backed Celsius’ move for Alani Nu. Others however have also raised questions about distribution and the potential for cannibalisation, leading the purchase to seem like a bit of a double-edged sword.
Growth potential
Celsius announced the deal for Alani Nu alongside the publication of its 2024 results. Speaking to analysts, Celsius chairman and CEO John Fieldly said the acquisition would deliver “significant value for our company and our shareholders”.
He added the deal would “enhance Celsius position as an innovative leader” in energy, arguing it “provides complementary brand positioning and gives us expanded access to a fast-growing wellness-focused audience that is driving incremental category growth”.
In its fourth quarter, Celsius saw revenues drop 4.4% to $332.2m but above the consensus forecast among analysts.
Sales in North America, Celsius’s main market, declined 6% in the three months ended 31 December, to $311.9m.
Across 2024 as a whole, group revenue rose 3% to $1.36bn. In North America, sales increased 1% to $1.28bn.
During last year, Celsius, alongside other players in the US energy-drinks market, spoke of a slowdown amid a drop-off in consumer spending and convenience store sales.
There are signs the category is seeing some improvement but bolstering its energy presence with a brand like Alani Nu is seen as a positive move among industry watchers.
Stifel analysts have forecast a roughly 50% addition to “legacy Celsius sales” in 2026 plus EBITDA, following the deal.
Roth Capital Partners says the acquisition has the potential to “reinvigorate growth”, adding Celsius “would instantly grow its share by approximately 50% to over 15%, and could benefit from the continued expansion of Alani’s distribution to new channels”.
By adding Alani Nu to its portfolio, Celsius is also carving out a niche as one of the market leaders in better-for-you, zero-sugar, energy drinks.
“There is a growing trend within energy drinks in the US both towards lower sugar products and those that are more unisex/geared more towards female consumers, and these are sectors in which Celsius and Alani Nu do well,” Richard Wyborn, a partner at UK-based consultancy Food Strategy Associates, explains.
It’s worth noting Celsius isn’t the only major energy-drinks player developing its health-and-wellness positioning. Last year, Keurig Dr Pepper announced its acquisition of Ghost, which produces a range of sugar-free energy drinks targeted at a younger consumer.
Cannibalisation risk
While sectioning out a niche in healthier energy could present growth opportunities, analysts have pointed to the possibility of cannibalisation, with Celsius and Alani Nu targeting similar consumers.
“The disadvantage of the acquisition is that this move does present a potential risk of self-cannibalisation, with Celsius marketing campaigns being very much unisex and not heavily geared towards male demographics”, says Thomas Evans, senior beverages analyst at GlobalData, Just Drinks‘ parent.
According to a 2024 GlobalData survey conducted in the US, 67% of female consumers considered “natural” elements as “essential” or “nice to have” when deciding to buy a product. Given Alani Nu and Celsius market a zero-sugar proposition with natural flavours, they are arguably both “well aligned” to the female consumer, Evans says.
In a note sent to clients last week, TD Cowen analysts also say Celsius is “understating” how much the brand “overlaps” with its own brand in terms of how it markets itself and its target demographic of “young, affluent female consumers”.
They caution that if cannibalisation were to occur, this would result in much slower growth for “the combined entity”.
If you’re going to be cannibalised may as well be to another brand in your portfolio
Richard Wyborn, Food Strategy Associates
Others, however, argue that while similar, Alani Nu and Celsius are a good match.
William Blair analyst Jon Anderson tells clients he expects “Alani Nu to add something new”, adding the brand “appears complementary as it is female-focused (92% of the brand’s social media following) and relevant to Gen Z and millennial consumers”.
Wyborn also notes that “some cannibalisation” would be expected. “After all,” he says, “Celsius has close to 98% weighted distribution.”
He stresses, however, that cannibalisation isn’t automatically a disadvantage for Celsius.
“Several players have multiple brands in the space and, in what is a highly competitive market, if you’re going to be cannibalised may as well be to another brand in your portfolio.”
What about distribution?
Following the announcement of the acquisition, a query top of mind for some analysts was what plans Celsius has for distribution.
TD Cowen analysts describe distribution as “a big question mark”, as Celsius “offered little-to-no details” on its plans, which “makes it more difficult to fully evaluate the deal”.
Alani Nu is part of Anheuser-Busch InBev’s distribution remit and it is uncertain, for now at least, whether Celsius will keep it this way or switch over to its own US distribution partner PepsiCo.
Moving distribution to PepsiCo, if it did happen, “would really rocket growth”, according to Wyborn.
“Thinking ahead, if the combined business is able to kick on and deliver sustained share gains then it will become a really attractive acquisition target for someone (likely PepsiCo of course) looking to get a strong foothold in energy drinks.”
While switching to PepsiCo could bolster distribution quickly, not everyone is convinced the company would be so keen to take on the products.
TD Cowen analysts say they have seen “PepsiCo speaking about the energy drink category with less enthusiasm, presumably because of what has happened with Celsius’ slowing growth rate (and Bang / Rockstar before it)”.
Commenting on the advantages of maintaining Alani Nu’s partnership with AB InBev, the analysts add Celsius wouldn’t have to pay for ending the distribution agreement and could “retain higher margins” by not paying PepsiCo incentives. The caveat to maintaining such an agreement they add is “the complexity of managing a network of hundreds of distributors, rather than one” as well as it being more challenging to develop “joint promotions” with Celsius.
Uncertainties remain
The addition of Alani Nu to Celsius’s roster presents the company with an opportunity to build its presence in the competitive energy market but questions remain around the extent to which the combined entity will be able to secure long-term growth.
TD Cowen analysts argue Alani Nu sits in “a social-media-driven segment of the market with low barriers to entry and high churn rates” and therefore consumer loyalty for the brand might “not be as strong as [management] thinks”.
Another risk is whether the brand can continue to grow its sales and maintain “market share momentum”, according to Stifel analysts, with keeping the young, female demographic’s interest in Alani Nu especially “key”.
While there are a number of unknown factors with the deal that make it tricky to assess how much growth the new combined Celsius and Alani Nu business will generate, there are also some concerns around Celsius’s own ongoing performance.
Bank of America analysts have maintained their rating of Celsius’s stock as ‘underperform’, noting the deal is positive news but “does not fully change the conversation” around long-term performance of the legacy Celsius brand itself.
They note: “With timing and structure of the deal yet be disclosed, we continue to value Celsius on the performance of its legacy business, which raises valid market share concerns given the negative consumption trajectory.”
