Pershing Square Challenge 2026 第3名：Celsius $CELH

Today we have one of my passion projects. Do not tell my wife or my mother, but one of my true passions is energy drinks. Team Celsius from the Pershing Square Challenge is joining us; they came in third in the contest, and we're going to talk about their pitch on Celsius and all of the interesting work they did.

They conducted a really interesting proprietary survey of more than 500 consumers, looking at their willingness to switch, what happens if the product is out of stock, and all that sort of stuff. We're going to talk about the Alani Nu acquisition and the upside. It's really interesting because this is a company that's growing, let's call it, 10% per year, and is forecast to continue growing. It's trading at a 20x P/E, and that growth is in line with Monster, its best peer, which is trading at a 35x P/E.

Its growth is much higher than peers like Pepsi or Coke, which are trading at similar or better P/Es despite much more growth. It's an interesting story in terms of a product I love, a product everyone can understand, and a company with acquisition and integration risk, the risk of new entrants, and all sorts of other risks.

Before we get there, a word from our sponsor. This podcast is sponsored by Trada, that's t-r-a-t-a.com. You've heard me mention it multiple times on the podcast over the past few months. Trada is a product that I really have come to love and enjoy. It is buy-siders interviewing each other. So, you get a bull and a bear on a stock, a bear and a bear, or a bull and a bull. They come together and say, "Hey, I want to talk about Celsius," and they talk about it. If you are an investor and have access to this network, it is by far the best way I know of to ramp up on a stock. Reading the company's 10-K is one thing, but seeing two investors who have actually thought about, invested in, or followed a stock talk about all the risks, rewards, opportunities, and what the market might be missing in real time is the best way I know to think about a stock. If you are a journalist like me and come into a company, they're going to point out 15 different things you've never thought of or 15 industry-specific things that are really going to trigger your memory. If you are interested, go to Tratta, t-r-a-t-a.com/celh. That's the Celsius ticker. If you go there, you're going to see part of an interview that I read to prep for this podcast between two buy-siders who are a little skeptical of the Celsius story. They're buy-siders who are really good at CPG, and they're going to tell you all the reasons why, including that energy drinks right now are just like protein three to four years ago, when there were a lot of new entrants that really disrupted incumbents. So, I'm rambling. Tratta.com, t-r-a-t-a.com. I think you're going to like it. I know I love it. And if you like this podcast, I think you'll like it. So, thank you, Tratta, for sponsoring this episode, and let's get to the Celsius podcast. Today I'm happy to have Team Celsius from the Pershing Square Challenge. I believe you placed third in the challenge, so congratulations. Before we begin, a reminder that nothing on this podcast is investing advice. There's a disclaimer in the show notes and a full disclaimer at the end of the podcast.

You guys might have been at a disadvantage because most of the other teams had three or maybe even four members. You're a team of two, but I'd love it if you could take a second to introduce yourselves and give us a little background.

Thanks so much, Andrew, for having us on the podcast. I'm a big fan of the podcast, and it's a pleasure to be on. I'm Jas Tolani. I'm originally from Mumbai, India. I spent about three years in private credit, venture debt, and private equity back home, focusing on financial services and consumer products in general. I came to Columbia Business School with the aim of working in the public-markets space going forward.

Thank you again for having us. My name is Hideo Okada. I'm originally from Tokyo, Japan. Before coming to CBS, I worked at a Japanese commercial bank as a credit analyst. I'm here at CBS as a company-sponsored student.

At CBS, I've been taking a range of investing classes to broaden my understanding across asset classes. I joined the Pershing Square Challenge mainly as a learning opportunity, and I was fortunate to team up with Jas. He is such a strong analyst.

That's awesome. Jas, by the way, I've got to congratulate you on the timing. You mentioned private credit, and if Columbia's first year starts around August, leaving private credit to get your MBA around August 2025 is, in hindsight, about as good a trade as you can make.

Let's dive into it. The Pershing Square Challenge is about pitching a value idea, and picking the stock is one of the critical strategic choices. You could pick pretty much any stock in the world above a certain size. What made you guys zero in on Celsius as your choice?

Let me quickly walk you through our initial thought process. We wanted to do something in a domain that we were comfortable with. Given that my background was more in consumer investing, the three main sectors we were looking at were internet companies, financial services, and consumer discretionary.

We evaluated two companies from each of those sectors, but we landed on Celsius because there was so much noise on both sides of the field in terms of it being a potential short as well as a potential long. We felt that, as a company, there was an avenue for us to do research and figure out which way we should go based on our proprietary understanding as students.

The survey we did, for example, which we can talk about later in the podcast as part of our pitch, gave us some great insights. If it had come out negative, you could have easily gone short on the company. That was the main idea, and we also wanted to do something fun, so I think it ticked both boxes.

In terms of tactics, I think the great thing about Celsius is that you say “Celsius energy drink,” and any American consumer—I know international listeners may be less familiar with it—can say, “Oh, I've walked by it.” They've got an idea of what it is.

As you mentioned, the first thing that jumped out at me when I was reading the deck—and listeners can find a link to the deck in the show notes—was the proprietary survey. I believe it starts on page 8. In terms of tactics, you want to pick something you can really contest, something completely unique, something that shows you did the work and really drives the thesis home. I thought that was great. Hideo, did you want to add anything to that?

The reason why I would choose an energy drink is that I'm probably one of the most experienced energy-drink consumers, as you can see in the S-1. That's another reason.

Yeah, you and me both, my friend. I'm tempted to go run to my backpack. In preparation for this podcast, I bought an Alani Nu, and I will admit, I like it. They've got the little Celsius packets now, so instead of buying these cans every morning, I just get some cold water out of the fridge, take a Celsius packet, and strawberry coconut is my go-to.

I've got a few flavors, and I get them auto-ordered from Amazon. Longtime listeners will know I'm a big fan of energy drinks, so it's good to meet a fellow brethren there.

I don't think we need to talk about what Celsius is. It would be shocking to me if there's anyone who doesn't know what Celsius is. Why don't we go to the more important question? We've talked about why you chose it, and people know what it is. What makes Celsius interesting as a stock right now?

I think I could take that, and Hideo can add on. What we found pretty interesting about the stock was that Celsius recently acquired a brand called Alani Nu, but the market is not really valuing its growth prospects going forward.

What we found is that the company continues on its growth trajectory, primarily from the Alani Nu acquisition. The first-quarter results have come in, and the brand has grown about 60% year over year in that quarter. If it continues on this plan, then it's really looking at 18% three-year-forward growth, which the market is just not valuing today, given that its forward multiple is only 20x.

That's below the market multiple for a company that's growing way above market expectations, way above the overall market in general, as well as expanding operating margins.

So, I think a mix of both of them is what makes this company really cheap today. Monster today is at a 34x forward multiple. Coca-Cola today is also at a 25x or 24x forward multiple. So, it's way lower than both of these companies, in spite of having growth estimates. Even if you just trust the analysts and don't look at us, they believe this is going to grow in terms of earnings as much as Monster. So, that's just a clear arbitrage opportunity from our perspective.

So, what you're also saying is, look, you've got this company that's trading below the Coke multiple, below the Monster multiple. It's growing faster, so the market is clearly missing it. Why do you think the market is discounting the Celsius story? Again, I don't think you're unique in saying this, right? This is the type of thing you pull up on Bloomberg and can see in 5 seconds: Monster's got X% growth and trades at 30x; Celsius has X plus 6% growth and trades for 25x.

So, I think there are 2 main factors. One is, like we mentioned, maybe the market is not focusing so much on the newly acquired brand, Alani, and is focusing more on the core Celsius brand, which has only grown about 6% over the last year and has continued to do so this quarter. Celsius on its own is sort of a legacy brand now, with market-level type of growth going forward. So, maybe the market is pricing that in without focusing too much on the newly acquired brand.

Number 2 might be a terminal value-type problem. There's a lot of competition in the space. You have a lot of new competitors coming in, like Bloom, which is on the rise. You have KIMADE, for example, the new Kim Kardashian brand that's on the rise. You have Ghost with the tie-up with KDP, so a lot of incumbents are coming in. Maybe Kirkland Energy, for example, and the private-label launch, which crashed the Celsius stock quite a bit, could pose questions about terminal value.

We don't believe so, and our survey found strong brand recall. Like you said, everyone knows Celsius today, so we don't think it's a product that's really going to go away in the next 5 years. We think about it as a consumer discretionary. But maybe that's what the market is pricing in.

Did you want to add anything there?

No, I think the thesis with pricing is all right.

You're actually hitting on a lot of things that I wanted to build on. So, let's start with what I don't think is the biggest one, but the stock did crash in February or March, about 15%, when Costco's Kirkland brand rolled out. It's never, “Hey, this is the Celsius knockoff,” but it is like, “Hey, this is Celsius.” Back in my college days, I liked 5-hour Energy, and Kirkland comes out and it was like a 5-hour Energy; they just didn't call it that.

You guys have an interesting rebuttal to the Costco-as-a-bear-case thesis, so why don't we go into that? Again, I don't think that's the biggest bear thesis, but it is the most proximate one, so why don't we start there?

I agree with you, and when that came out, we were in the middle of our pitch. We were like, “Okay, we've got to do some work about this for sure to try and see whether we're long or not.” I think the work we did showed that we're on the right track.

Basically, there are 2 main reasons why we believe Kirkland Energy is not going to pose a medium- to long-term threat. Number 1 is that most consumers typically buy energy drinks as an impulse purchase. 70% of what you buy in convenience stores, like you said—you’re driving around, you're going to go to the gym, or you're a construction worker heading to work—they pick up an energy drink. They want to just drink it, get their energy burst, and go on, right?

You're not going to order this in bulk. You ain't going to go to Costco and buy this in bulk unless you're a die-hard fan in general. So, for this to work, you're going to have to see a big change in consumer habits kick in.

Number 2 is, if you look at private labels on their own, they typically work pretty well for staple products, which are very price-sensitive in nature, like toilet paper or packaged water. Not so much when brand value is in effect. We saw this play out with Kirkland sodas; Coke and Pepsi do pretty well against it. We also saw this with light beers. So, we think this is going to continue for energy drinks as well.

And like you said, if they decide to copy Celsius now, and not Monster and Red Bull, then Celsius is on the right path, right? Why would you copy something that's not working?

So, on the one hand, I have a pushback to that and an agreement with that. My pushback would be, if you're a real energy drink user, you order these things in bulk and you're drinking them. I like to have one cold in the morning if I'm drinking it out of the can, and I'll get an Amazon 24-pack.

For me, I was reading the most recent conference calls to prep for this, and they talk about how Celsius and Alani skew much more heavily female. They were talking about Celsius as a millennial target. A lot of times, it's a working woman, and instead of drinking coffee in the morning, she wakes up and has one. They talk about how they over-index on Amazon because the person buys a 12-pack of Celsius, gets it delivered, and has it daily in the morning.

When you start thinking about that consumer, whether it's me power-chugging these things or the more professional working woman, that is somebody who is buying them in bulk. I kind of order bulk Monsters. Most Monsters are much more of a convenience-store purchase. I don't know about Celsius. I don't know about that.

I'll pause there because I do have support for what you said, but when I was reading it, I kept hearing them say, “Costco is not a big deal.” They were even pushing back on credit-card data, saying, “Hey, ignore the credit-card data because a lot of our people are ordering from Amazon.” When I hear “order from Amazon,” I am hearing “we order in bulk,” and that Costco is a risk. I'll pause there, and then I have positive support.

For sure, we do agree that, compared to other energy drinks, I think Celsius's revenue—10% of that comes from Costco. The industry average is 5%. So, you're not incorrect to say that, but 10% on its own is still a very small number if you look at the entire pie.

Number 2 is just to say that, as a habit, usually what we found from our survey also is that this is more impulsive in nature. And again, Celsius and Alani are still sold at Costco today. So, it's not that the customer, if they really are brand-loyal—which is again what our survey said—is going to pick up another drink because it's going to be cheaper. They want that flavor profile that Celsius gives them and the feel that a Celsius will give them.

That's what we believe will go forward, and I think Q1 data has shown that growth has not really fallen. Q2 will be super strong again because the sellout has not happened as much. I think that will be a great indicator for that thesis, for sure.

Yeah. And then, on the support side of this, to what you're saying, there is a long history of private-label brands, whether you go back to Sam's Club, Costco, or whatever it is. Even if you have the exact same flavor—which it's not, but even if it was the exact same flavor—there is something about when you're eating something, when you're consuming, and especially when it's a drink. There just is something about the brand that the store brand doesn't match.

Whereas, if it's something like a paper towel, whether it's the P&G brand or the Costco brand, you don't even know once it's on the roller, for the most part. So, I think history does suggest that these private-label brands, particularly with drinks, are very difficult. I think you guys did a great job of pointing that out in your rebuttal.

Anything else on the Costco risk or the private-label risk you want to talk about? There are plenty of other things I want to talk about here.

No, you're spot on. Do you want to add something?

Well, adding some data points regarding the energy-drink private-label brands, they have about a 0.5% share overall. So, as we discussed, I think the customer nature is pretty different from other consumer products. So, we're comfortable that, so far, the private-label brands are not a huge risk for our thesis.

We've mentioned the proprietary survey that you guys did a few times. Again, I thought this was great, and it was so interesting reading it and seeing the difference. Why don't we talk a little bit about the proprietary survey you did? I want to talk about all the pieces of it.

What was the proprietary data? What were the learnings? And how did you guys—let's talk about the methodology. How did you go about structuring this, getting it commissioned, and all this sort of stuff? I'd love to talk about the whole overview, kind of from soup to nuts, if that makes sense.

Yeah, so let me talk about the overall characteristics of the survey.

We run a proprietary survey through the professional research panel Prolific. Three findings stood out for us. Alani had the highest repurchase score in the entire category. Second, Celsius’s score was broadly in line with Monster and Red Bull. Celsius is not a fad brand; it’s just with the established incumbents on loyalty.

Third—and this was an interesting one—newer brands like Bloom and Ghost show weak loyalty. Their own buyers rate established brands higher. That tells us entrants in the female segment are struggling to build real loyalty, while Alani already has it.

We also looked at repeat behavior—repurchase behavior. For Alani, a meaningful share of consumers said they expect to buy the brand more often over the next 6 months. Celsius also showed positive signs, although it is already a more mature brand than Alani.

Another important point from our survey is what consumers do when their favorite energy drink is not available. I think we discussed this already, but it matters because it tells us whether energy drinks are a planned purchase or an impulse purchase. The results were very clear: 63% of consumers said they would switch brands and buy their second preference. Another 8% said they would just buy whatever drink is available.

More than 70% of buyers are willing to switch on the spot rather than walk out empty-handed. The main point is that availability matters a lot. If the product is not on the shelf, many consumers will not wait; they will switch. That’s why distribution and shelf presence are so important in this category. Strong brands matter, but the brands also need to be available at the moment of purchase.

This will bleed into Celsius. For those who don’t know, Celsius is distributed by Pepsi, and Monster is distributed by Coke. I’ll talk about that later, but this will kind of bleed into it.

I thought it was interesting when you’re reading it and you read the first line in the proprietary survey, which is, “Look how strong the survey says Celsius and Alani are in terms of retention and brand loyalty versus others.” You read that and you’re like, “Oh, that’s Nirvana for a brand,” right? If your people are more loyal, you grab more share all the time. It’s just a really great thing.

But then I read Slide 10. As you mentioned, I’ll just kind of round it. If you really break it down, you’ve got 5 different things that people can do. If somebody goes in and their preferred flavor is unavailable, it kind of rounds to 90% of people buying another energy drink right there and then, and 10% of the people will—actually, it’s 12%. 8% of them will go to another store to find the brand they want.

That’s where you’re really talking, right? I’m going across the street to find it. Then 4% of them will skip buying an energy drink altogether. You guys were using this as kind of a bull case, and when I read it, I was actually thinking, “Oh, this is an example of distribution being much more powerful.”

If somebody goes in saying, “I want a Celsius,” and there are no Celsiuses—there are just Ghosts and Monsters, just picking 2 off the top of my head—there’s a 9-in-10 chance they’re going to buy one of those. If I’m a Ghost or Monster brand, I can go to 7-Eleven and say, “Hey, we’re going to buy you out, right? No Celsius for you. We’re going to give you advantaged pricing.”

7-Eleven might say, “Oh, but we’re going to lose sales.” And they’ll say, “No, the survey says 9 out of 10 people are going to drink it and still buy the Monster.” I was kind of looking at that as a bear case: people are less sticky.

Just to ramble for one more second, I’m sure we’ve all gone to dinner with friends, gone to a restaurant, and a friend says, “I want a Diet Coke.” The waitress says, “I’m sorry, sir. We only have Diet Pepsi. Can I bring you back Diet Pepsi?” I will tell you, way more than 1 in 10 people are saying no. It’s probably 2/3 saying no and 1/3 saying yes.

That was just an example to me of, hey, I don’t know if these brands are as strong. I rambled a lot, but I’d love to toss those thoughts over to you because you called it a bull case, and I was kind of seeing a bear case there.

That’s a good point. I’m glad you brought that up. The reason why we put that as a bull case is to highlight that brand loyalty is super important if all options are available to you, right?

Through Pepsi’s distribution network, our research found that Pepsi has one of the most penetrated distribution networks in the U.S. and North America today. You’re way more likely to find a product distributed by them, which is going to be Celsius and Alani, on your shelves today.

To your example, if Ghost were to go to a 7-Eleven and say, “I want to buy out everything,” they’re going to be like, “Hey, we have relationships with Monster, Red Bull, and Celsius through Pepsi, and they’re not going to let us do that.” Those companies will just come and say, “Hey, you know what? We’ll give you a better discount. We’ll give you a better promotion.”

This is what we got when we spoke to a current sales rep who used to work at Alani and now works at Monster. This is their sales strategy in general: when they need to move a product or when they want more shelf space, they simply lower prices, put out promotions, and get that done.

Having that distribution is super important. Like we said, when the main competitors over here—Ghost or Bloom, for example—are more likely to go to Alani, then that strengthens Alani’s own brand standing.

Another bear-case point is that Alani’s just a fad: it was just a fad, and they’re going to lose to the incumbents. Consumers like Alani almost as much, if not more. That was our thinking on this.

He did it to Alani, didn’t he?

I think so. His question is thorough, but our point is that Celsius has both the brand and the distribution network. If you look at the other competitors, somebody who has both is pretty rare. We thought this was the moat.

Let’s build out distribution, then. Celsius is distributed by Pepsi, and Pepsi and Celsius—I mean, they’re intertwined. Why? I think in 2025, Pepsi has Rockstar, which I don’t think it’s crazy to say they mismanaged.

Rockstar was a burgeoning brand in the 2008 to 2012 range, if I remember correctly, and never took off. It kind of sold out as soon as Rockstar got added. It never took off, and they sold it to Celsius.

Pepsi has an equity investment in Celsius. They’re really tied up. There is a parallel: Monster and Coke have had a similar type of relationship for a while, where Monster’s independent, but Coke owns a bunch of equity. Coke has basically said, “Monster is our energy portfolio.” That’s basically where Pepsi and Celsius are.

It does strike you, based on my bear case, where I say, “Hey, it seems like distribution matters more than brand.” Right now, Celsius is their brand, but we’re talking about a 20× multiple, right? You kind of need 20 years plus of earnings just to get your money back. Twenty years is a long time. Pepsi might change its strategy 7 years from now.

How do you think about the dynamics and the risks of the Pepsi relationship when you’re relying so heavily on that distribution? The last thing I’ll say there is, if you lose Pepsi, there’s no one else. Coke’s locked up with Monster, so you don’t have Coke. There’s Keurig Dr Pepper, but they’ve got Ghost, and they don’t have great distribution. I think they lean on the Coke and Pepsi distribution lines. If you lose Pepsi, there’s kind of no one else. It feels like all the power’s over there. How did you all think about that?

I think you did hit the nail on the head: it is super important for an energy drink brand to have that distribution network in place, and Pepsi is literally everywhere in North America today.

There are 2 main reasons why we believe Pepsi is not going to start its own energy drink brand. Number 1 is that, when we spoke to a former EVP, he said that innovation is typically very tough to come by with existing legacy brands. That’s a reason why Monster could not capture the market Celsius was in.

Given it was a duopoly for so long and Celsius became so big, Monster could have easily copied it. They’ve tried to put out products competing against it, but they haven’t done as well because you need that DNA, you need an understanding of the consumer, and you need the team to be at it in order to get that done. That’s been difficult.

Similarly, Pepsi and Coca-Cola have also faced the same issues. If you look at what they’ve done over the last 10 years, with the soda business going down as much as it has, Coca-Cola has focused a lot more on acquisitions. Not all have worked out; some have worked out brilliantly well, but it’s all been acquisition-focused.

It hasn’t been, “We’re going to start our own division,” or, “We’re going to start our own product vertical targeting this,” mainly because of this issue. That’s what we’ve noticed, and that’s why we believe it’s not likely that Pepsi is going to do this.

Number 2 is the equity stake as well. Pepsi has an 11% stake in Celsius. For it to start its own energy drink company would be for it to devalue its own equity stake in this company. Even though it’s easier for them to rely on saying, “Hey, we have a great distribution network today. Let’s continue backing the product and ensure it gets everywhere.”

These guys seem to be doing something correctly in that they’re the largest sugar-free company there is in the space today, so I don’t see a reason why they’d want to compete against us.

No, look, I certainly hear you, though. It’s an 11% stake. Let’s just round it and say it’s worth $1 billion. Celsius has a $10 billion market cap, right? I definitely hear you, but it always jumps out to me as, “Hey, they’ve got the equity stake. They’re not incentivized to compete with us.” It’s like, “Well, yeah, but would they rather build their own thing and own 100% of something, or would they rather own 11% of this thing that they still won’t control the brand?” It’s just a tough one.

Let me go to 2 other recent topics. If I go back to earlier in the presentation, you guys seem really bullish on the Alani acquisition. I think your bullishness—I think a lot of people are worried that Alani grew and the Pepsi distribution will help them, right? But I think a lot of people are worried that the growth is—it’s funny to say this about Celsius, because they’re a sugar-free company and Alani is a sugar-free company—I think they’re worried it’s a sugar-high-type growth, right? They were doing a lot of LTOs, or limited-time offers, a lot of special flavors, and maybe a lot of discounting. I think people are worried that the growth there is temporary, that it’s a sugar high.

The other worry I’d add is, Jess, I believe you mentioned that Celsius is kind of hitting the mature phase. A lot of bears would say, “Hey, Celsius is supposed to be this great growth product. There are still a lot of shares to capture, whether it’s domestically or particularly internationally.” They went out and bought Alani. People generally do bolt-on acquisitions not when there’s a lot of growth left in the core product. They do it when the growth is starting to stall and say, “We need a new vector.” I think those are the 2 bear points I’d make on the Alani acquisition. I’ll toss it over to you guys to address either one, in whichever way you want to.

So, just before answering that question, I think another point that struck me about the previous topic of conversation was that Pepsi did have Rockstar, right? If it wanted to grow an energy drink brand, it would have had the option to do so, but it chose not to, and it didn’t work out very well. There you go.

I think that’s more than enough for maybe the next 5 years. Of course, you can’t predict the future, like you said, 20 years out, but I think that’s the case for the next 5 years. Monster’s multiple has never reflected this risk, right? Monster has faced the same risk for the last 10 or 15 years and has never faced that issue, so I think it would be unfair just to penalize Celsius on that.

If I can add on, I think once or twice—I can’t remember, because I haven’t brushed up on my notes on Monster—Monster and Coke went to the brink. No, Coke owns more of Monster, but I think your real bull point would be both what you said—Pepsi got out of the game and gave Rockstar over to Celsius—and the fact that Monster and Coke got to the brink. Every time, both of them came back to the table, and Monster stock has been a rockstar, to use an energy drink analogy.

Even though I look at it and say, “Hey, it seems like the distribution is way more important,” the brand has been able to pull through here. So, if there were no Monster-Coke relationship, I would think this was a much bigger risk. But you had stressed the Celsius piece, so let’s talk about what I was hitting on with the Alani acquisition: both the sugar-high piece of it and the Celsius piece starting to mature. I’d love to hear what you all’s thoughts are on that.

Hey, Danny, do you want to go first on this?

Jess, please go ahead first for me.

Okay, sure. Basically, I think, first, on the acquisition, what Celsius management realized was that their product, as you said, was targeting mostly millennial women as well as Gen Z males. They realized there was a big hole in terms of targeting Gen Z women. Alani was the biggest brand in that space, and that’s a growing sector in general.

We had a couple of slides detailing where growth in sugar-free is coming from, and it was this area. So, getting an asset for $1.8 billion for a brand that went on to do $1.3 billion of sales the same year was a pretty effective use of capital at that point. It was more about addressing a market where they weren’t winning—a market that was growing significantly—and recognizing a brand that had the potential to supplement its own offerings very well. So, it was pretty efficient capital allocation.

Second is the international growth piece. Company management has also had a lot of messaging about how they want to go about this in a very cautious manner. International expansion has never been a major part of their plans recently. They did enter into a lot of partnership agreements; they’re sponsoring the Aston Martin F1 team, for example, similar to what Red Bull and Monster have been doing. They also have distribution agreements with Suntory in place.

It’s not going to be super big, and I think it’s going to be a 3- to 5-year-forward type of vision, given that international revenues are only 5% of the business today. Their main focus is going to be the U.S. domestic market.

Number 3 would just be that, if you look at Celsius on its own, 6% is broadly market-level growth. They would achieve a standalone brand share of about 10% of the total market. They’ve also got another brand that is going to continue to grow, and they’re focusing on more of a portfolio-of-brands approach rather than a one-brand-company approach. So, that’s what we think is going to be the main key aspect of this going forward.

Let me switch a little bit. I’ve got 2 final questions, then we can maybe talk about international for a second and wrap things up. I was preparing for this call and reading a trade call, and there was one thing in it that really jumped out at me. An analyst who had followed consumer for a while said, “Hey, energy drinks right now remind me of protein a few years ago.”

He mentioned that there were the old incumbents, like Ensure, which your parents or grandparents used when they couldn’t eat, and Muscle Milk, which I took a lot of in college. I was a big Muscle Milk guy—the cookies-and-cream flavor. What they said was, “Look, they all got disrupted by newcomers, and then over the past 3 years, because the pace is accelerating and the brand is easier to build than ever with Instagram, influencers, and all of that, the newcomers got disrupted by the new newcomers.”

I’ll give a brief anecdote. When I was in college, which was 20 years ago—which actually works nicely for the story—I worked at a Vitamin World, selling vitamins. A Vitamin World just opened up underneath the little shoebox office that I have in New York City, and I go there once or twice a week to get an energy drink. But when I walk by the protein section, I don’t recognize 95% of the brands.

Twenty years is a long time, but we’ve mentioned Celsius trading at a 20x multiple. You’re underwriting 20-plus years of terminal value. To bring it back to the topic, they were saying, “Look, energy drinks right now remind me of that. You had Red Bull and Monster, and then you had Celsius come along. But now we’ve got Alani, and we’ve got Ghost. And guess what? There are a lot of brands coming underneath that.”

Liquid Death is coming out with an energy drink. If they can sell freaking bottled water in a can, what can they not sell? Liquid Death is coming out with one. You guys mentioned Bloom. C4 has been pretty popular; I think that’s been around for a while. There’s Form, which I thought was a 7-Eleven house brand because I only saw it at 7-Eleven. I guess it’s an energy drink.

There are a lot of others, and if you Google it, you’ll see a lot of others coming out. Bucked Up is out there. There’s Bomb Energy. I think Bucked Up is Jaco. I don’t really know him, but all these influencers are starting to come out. I think Jake Paul had one.

So, I worry that we talked about the distribution moat, but I do worry that there are just a lot of brands coming out here and that it’s going to get really competitive, like that protein thing. Protein is a different thing—protein’s a lot lighter and easier to ship, but it’s a lot easier to put in a small space. I really worry that there’s a lot of competition coming. Again, I rambled a lot, but I’d love to hear what you all’s thoughts are on that.

For sure. In a nutshell, what you’re trying to say is that there are a lot of fads going on right now: are Alani and Celsius just fads? We had a slide to cover this because it was also a point we considered when we were thinking, “Hey, should we go short the stock?” It’s just a fad, it could go to zero, and 20x is way too high for something like this.

But we had 2 main data points that contradicted the fad view. Number 1 is that both the Celsius and Alani brands have reached some sort of escape velocity in terms of revenue. They’re both about $1.5 billion today. No energy drink company has gotten to that size and failed, right? All of them have gone on to become bigger.

I know you're saying that if you look at it from a forward perspective, let's take Prime Energy, for example. You mentioned that it was Jake Paul's brand. It had a huge upsell; they had insanely loyal customers for a short period of time. They were the number-one Google-trending brand, even above Monster, in that pool at some point, but they fell equally as fast because there was no real market for them, and because customers got to a point where it was like, “Okay, we tried it once because the influencer told us to, but not so much anymore.”

Can I just—it’s so funny, man, because Prime is just the perfect example. I remember I walked in and I was like, “What is this brand?” I had no idea. Then I saw it was Logan Paul, and 3 weeks later at CVS, it was like, “Buy 1, get 5 free. Please take all the Prime drinks from us.”

So it is a great example. Another one I would throw in is Bang Energy Drink. They did a lot of viral marketing on Instagram. There was a crazy article detailing it: it was girls in bikinis selling these things. It was very hot for a while; it was not sustainable, and that's gone.

But to your point, Monster, Red Bull, and probably Celsius—once you hit over $1 billion, it's probably sustainable. I'm sorry for interrupting. Please continue.

You're spot-on with that. The core aspect is, like you said, it's pretty easy to get locked into action early on. But what differentiates a fad from actual loyalty is continuous repeat customer purchases without spending marketing dollars on that, right? Now we're seeing early signs of that. This quarter, for example, SG&A as a percentage of revenue has fallen by about 500 bps for the company, so they're not throwing money at marketing to get the sales they're getting right now.

The loyalty survey that we did shows that customers really want to buy this product, and increased frequency was what they indicated. They said, “Hey, you know what? We're going to continue buying this stuff.” You wouldn't really do that for something that's just a fad. Or when you have so many options available, they may say, “Hey, you know what? We're going to try something else,” or maybe there's an alternative flavor you're going to try, or things like that.

There was not a lot of negative sentiment, per se, especially toward Alani. So that's why we thought that this brand has proven to be a company that has come up from a community base, just in how they're building themselves. They've always put community first. A lot of their flavor offerings, for example, have come out from the community itself.

The cotton candy flavor, which is one of Alani's top-selling SKUs, came from the community because a lot of people were commenting on TikTok, saying, “Hey, you know what? Let's try cotton candy.” They put that to the test, and they've actually gone ahead and done it. So they focus time on community building. They have enough scale. The Pepsi distribution is going to get them into more places.

And that's why we think this one is not going to be a fad in general, but is going to be one of the companies to stay for quite a bit. So, yeah.

Yedi, I ask this as my fellow energy brethren: do you like Celsius or Alani?

Well, I'm almost addicted to Celsius and Alani.

Okay.

I'm really jealous because I'm from Japan, and so far Celsius and Alani aren't available in Japan. I'm waiting for their international expansion.

Look, one of the bull cases for Celsius is, in part, Monster's international sales at 40%. So you're just laying out why the bull case exists.

I don't know—the one thing is, Alani and Celsius, their flavor profiles are so different from everything else on the market. Alani is really effing sweet, and Celsius—I don't even know how to describe the flavor. It's weird fruit flavors for the most part. They're very strange.

I'm not a big fan compared to all of them, but I just think it's interesting how a Ghost versus a Reign versus a Monster—I couldn't really tell the difference. I hate Red Bull. I could obviously tell the difference when I drink Red Bull. But when I drink a Celsius or Alani, there's something about it. I would instantly know that it was that. So I don't know. It's probably neither here nor there for the stock, but it's interesting.

Last question. Let's talk valuation real quick. This is—I call it a 10. It's actually, I think, a $7.5 billion market cap right now. EV rounds to about $10 billion. Looking at forward estimates, they're probably high single digits to low single-digit revenue growth. Bloomberg has $2 per share of EPS in 2027. So, on a $30 stock, that's like 2 years forward. Let's just call it 15 times EPS.

It's not expensive. That's cheaper than the market multiple. But when I look at those numbers and talk about the distribution risk from Pepsi that might rerate at some point, the risk that the market is getting more competitive, and particularly the Alani fad risk, it's not screaming at me, “Hey, this is smashing me in the face: alpha opportunity.”

So let's just ask you guys: How do you think about valuation here?

Yeah. Interesting point on the consensus numbers. A lot of the consensus numbers are going to change given how the next couple of quarters play out, because there's going to be an effect from how they account for the Alani acquisition and how that's coming along. There's going to be an effect from private label, like you said—the biggest risk that they're facing. Is that really working? Is it really not? So I think there are a lot of triggers or catalysts that can really push the stock upward or change the earnings estimates.

If you look at how we've built our model, we basically said, “Hey, operating margin will expand by about 200 bps over the next 3 years.” Sales are going to grow by about 18% CAGR over the next few years, mainly led by Alani. We don't think those numbers are really insane. One quarter is all that's gone by, but Alani has met that number, and so has Celsius.

And then we get to a scenario—I think it's $2.60 in terms of where the 2028 number is going to be, not the 2027 number, so slightly higher. But that's basically how we've done it, more in terms of a fundamental approach.

Then we're like, “Okay, if you were to give it the multiple it had before the Kirkland-associated crash, it would then give you the yield that we had of about 25%.” And that multiple, I guess, is pretty much everything, saying, “Okay, why would that company get that multiple?”

I think that's when the bull case starts to come in, saying, “If 2 years down the line this company is going to have about $4 billion to $5 billion of total sales, it can then start looking at international expansion.” And then the Monster story starts kicking in, in our opinion, saying, “Hey, Monster went from about 5% to 10% international to 40% in 10 years. Can this company also do the same thing?”

Pretty much. I don't see any reason why Asia wouldn't be a very low-hanging fruit. As you said, Japan loves energy drinks, and a lot of Asian countries do. It's a great avenue to enter. The flavor profiles are very similar. So it's just a matter of finding a good distribution partner, and I think that's where we came from, per se.

So, yeah, it's basically divergence from these estimated numbers where we're coming from.

No, in many ways, look, I think you guys—I mean, this is a one-stock pitch—but in many ways I think the more interesting thing about Celsius is the arbitrage play now, right? Like, hey, this is trading at, let's just say, 20 times P/E, and Coke, which is much slower growth, is trading at probably—you know, GLP-1, sugar headwinds, maybe a sugar tax. I'd love it if we taxed sugar in the future, but Coke is forecasting 8% forward growth.

So Coke trades at a bigger multiple, and it's growing slower. Now, Coke also has the Lindy effect of 100 years of the Coke brand and international, but Monster, I think, has a similar revenue estimate growth, and it's trading for 35 times P/E, while Celsius is trading at 20.

So even if you said, “Hey, Andrew, I'm with you. There are distribution worries here. There's competition.” Well, guess what? The competition concerns play double for Monster because Monster's got more of the market.

So if this is fragmenting, and Monster's probably a little less differentiated—as I said, Monster and Reign taste the same. Now, Monster and Reign are owned by the same people, but Monster might be a little less differentiated than Celsius. So the competition concerns might hit them harder.

To me, it makes sense as long as you see this. But unfortunately, you can almost approach it from the long-short side, because it seems like, in the basket of any CPG, it's a completely different animal. But let's see. Do we have anything else on valuation to talk about?

Anything? I think you hit the nail on the head on the relative part. I spoke a little bit more about where we came from, but, yeah, on a relative scale, 20x P/E—if you look at just the broader market, like we said, you have this, but so does the broader market in general today, especially at these valuations.

Even if you were to discount growth a little bit, you look at the operating margin expansion component, and you’re still looking at a double-digit earnings growth profile of 12–15% at a lower-than-market multiple, which is still pretty fair. So, it’s still a unique opportunity to enter this company.

Perfect. Well, guys, unless you have anything else you want to talk about, I think we can go ahead and wrap it up here. Is there anything else we should have hit?

Anything from your side?

Yeah, nothing from me.

Well, I want to tell you guys congratulations again. I’ve said it in some of the other pods, but every judge has told me this is by far the best set of entrants—not just the finalists, but even before the finalists. Congratulations on third place. That’s awesome. Thank you guys so much for coming on.

Josh, this is awesome. Thank you guys so much for coming on, and we’ll talk soon.

Okay, Andrew, I appreciate it.

Thank you so much, Andrew.

A quick disclaimer: Nothing on this podcast should be considered investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. Thanks.